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.
The magnitude of the drop surprised analysts. Some thought the Cash for Clunkers program – which began in July and aided auto sales and car loans which would have hurt cutbacks in other lending areas.
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.