WASHINGTON — Consumers slashed their borrowing in July by the largest amount on record as job losses and uncertainty about the economic recovery prompted Americans to rein in their debt.
Economists expect consumers to continue to spend less, save more and trim debt to get household finances into better shape after being decimated by the recession. However, such action is a recipe for a lethargic revival, as consumer spending accounts for 70 percent of economic activity.
The Federal Reserve reported Tuesday that consumers ratcheted back their credit by a larger-than-anticipated $21.6 billion from June, the most on records dating to 1943. Economists expected credit to drop by $4 billion.
Wary consumers and hard-to-get credit factor into the scaled-back borrowing.
