Surprise drop in credit use worrisome

Borrowing » Shaky economy making some less willing to build debt.

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The economy is growing too slowly to boost business and consumer confidence and spur sustained gains in spending and hiring. Overall economic growth slowed to an annual rate of just 1.7 percent in the April-June quarter and analysts don’t expect much of a pick-up for the rest of the year.

Overall, Americans have been steadily paring debt since the financial crisis. Household debt, including mortgages and home equity lines of credit, has declined for 16 straight quarters to $12.9 trillion in March, according to a separate Fed survey on consumer finances. That’s down from $13.8 trillion in March 2008.

Some of that debt has been removed by defaults, such as foreclosures. But Americans are also repairing their finances by paying down debts.

The Fed’s monthly consumer credit report covers auto loans, student loans and credit cards. Unlike the quarterly Fed report, it excludes mortgages, home equity loans and other loans tied to real estate.

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