WASHINGTON — Consumers slashed their borrowing in August by the most in 16 months. The drop suggests many worried about taking on new debt while the economy slumped and the stock market fluctuated wildly.
Fewer people used their credit cards. And a measure of demand for auto and student loans fell.
Total borrowing dropped $9.5 billion in August, the Federal Reserve said Friday. In July, borrowing increased $11.9 billion.
Americans have been struggling all year with high unemployment, meager pay raises and pricier goods and gas. That has depressed consumer spending, which fuels 70 percent of economic growth.
In August, consumer confidence tumbled to a two-year low, and retail sales were flat. The weak economy, along with gridlock in Washington and heightened concerns over Europe’s debt crisis, rattled financial markets.
The August drop in borrowing was the largest since April 2010. Prior to that, consumers had increased their borrowing for 10 straight months.
Borrowing for auto and student loans plunged $7.2 billion in August. A category that includes credit cards fell $2.3 billion.
The Commerce Department also said Friday that wholesale businesses increased their stockpiles of autos, computer equipment and heavy machinery in August, boosting inventories for a 20th straight month as their sales rose at the fastest pace in five months.
Wholesale inventories rose 0.4 percent in August. The Associated Press
