Americans cut back on using their credit cards in July for the second straight month, while taking on more debt to buy cars and attend school. The decline in credit card use suggests consumers remain cautious, a trend that could hold back economic growth.
Consumers increased their borrowing US$10.4 billion in July from June to a record high of US$2.85 trillion, the US Federal Reserve said on Monday. That followed a gain of US$11.9 billion in June.
A category that includes auto loans and student loans increased US$12.3 billion in July to a record US$2 trillion. However, a measure consumers’ credit card debt fell US$1.8 billion to roughly US$850 billion. That followed an even larger US$3.7 billion decline in the credit card category in June.
July’s pattern of consumers’ borrowing habits illustrated trends that have surfaced in the post-recession economy: Americans are using credit for their most urgent needs, while foregoing debt for discretionary purchases.
The auto and student loan category is up 8.1 percent from a year ago and has risen in every month but one since May 2010.
However, credit card debt has barely changed in the past year and is nearly 17 percent below its peak hit in July 2008 — seven months after the Great Recession began.
Slow but steady job growth and small wage gains have made many Americans more reluctant to charge goods and services to their plastic. That could hold back consumer spending, which accounts for 70 percent of economic activity. Americans may also be hesitant to take on more high-interest debt because of higher Social Security taxes.
At the same time, the weak economy is sending more people back to school. The US Federal Reserve’s consumer credit report does not separate student loans and auto loans.
However, the Federal Reserve Bank of New York quarterly report on consumer credit shows student loan debt has been the biggest driver of borrowing since the Great Recession officially ended in June 2009.
Economists are hoping that as the impact of those higher taxes fades, consumer spending will strengthen in the second half of this year. That forecast is also counting on steady job growth to bolster income growth and support higher spending.
However, there are forces still working to dampen growth, including thousands of federal furloughs which depressed income growth in July. And job growth has been weaker than first thought.
The government reported that employers added 169,000 jobs last month, but 74,000 fewer jobs in June and July than previously reported.
The unemployment rate dropped to 7.3 percent, but lowest in nearly five years. However, the rate fell because more Americans stopped looking for work and were no longer counted as unemployed.
The overall economy grew at an annual rate of 2.5 percent in the April-June quarter. However, recent data has economists predicting that growth may be slowing in the July-to-September quarter to an annual rate of 2 percent.
The Fed’s borrowing report tracks credit card debt, auto loans and student loans, but not mortgages, home equity loans or other loans secured by real estate.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last
US CONSCULTANT: The US Department of Commerce’s Ursula Burns is a rarely seen US government consultant to be put forward to sit on the board, nominated as an independent director Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday nominated 10 candidates for its new board of directors, including Ursula Burns from the US Department of Commerce. It is rare that TSMC has nominated a US government consultant to sit on its board. Burns was nominated as one of seven independent directors. She is vice chair of the department’s Advisory Council on Supply Chain Competitiveness. Burns is to stand for election at TSMC’s annual shareholders’ meeting on June 4 along with the rest of the candidates. TSMC chairman Mark Liu (劉德音) was not on the list after in December last