American households pared their debts last quarter, closing credit card accounts and taking out fewer mortgages as unemployment persisted near a 26-year high, a survey by the Federal Reserve Bank of New York showed.
Consumer indebtedness totaled $11.7 trillion at the end of June, a decline of 1.5 percent from the previous three months and down 6.5 percent from its peak in the third quarter of 2008, according to the New York Fed’s first quarterly report on household debt and credit.
The report reinforces forecasts for a slowing economy in the second half of 2010 as consumers hold back on spending and rebuild savings. The Fed last week said the recovery would be “more modest” than it had anticipated and announced it would keep its securities holdings at $2.05 trillion to prevent money from draining out of the financial system.
Consider the following charts:
Debt service payments are decreasing as a percentage of disposable income.
Total household debt outstanding is decreasing,
Largely as a result of a decrease in revolving debt.
While non-revolving debt has been stagnant.
