Bloombergreprots that U.S. consumer credit fell $21.6 billion in July.
Consumer credit fell by a record $21.6 billion, or 10 percent at an annual rate, to $2.5 trillion, according to a Federal Reserve report released today in Washington. Credit dropped by $15.5 billion in June, more than previously estimated. Credit fell for a sixth month, the longest series of declines since 1991.
The credit crunch, stagnant incomes and declines in household wealth are casting doubt on the strength of the economic recovery. The arrival of the government's "cash for clunkers" program in late July wasn’t enough to keep credit that covers car loans from plummeting by a record amount, as consumers delayed other purchases.
Richard DeKaser, chief economist at Woodley Park Research in Washington, told Bloomberg, that, "Lenders are restricting access to credit because risk has increased and that is intersecting with households reducing their leverage."
Daily Financereports that a second quarter Fed bank survey found that most banks "tightened lending standards in the second quarter of this yeaar." Consumers that need loans for buying homes, buying cars and funding college tuition are likely finding it increasingly more difficult than before the economic crisis.
