Consumer Debt Drops in June; Fifth Straight Month

The Federal Reserve report showed that in June, total seasonally adjusted consumer debt fell $10.29 billion, or at a 4.9% annual rate, to $2.502 trillion. Not only is this the fifth consecutive month that consumer debt has fallen, it's the eight out of the last nine months in which consumers saved more than they spent.

While consumer debt dropped, the savings rate for Americans has risen to 5.2 percent in the April-June period, the highest since 1998. This is a major change for Americans, and probably a major shock to the global economy, who expect the U.S. to buy stuff. After all, we don't manufacture anything, right?

Consumer confidence might rise; the Labor Deprt. reported that the unemployment rate fell in July. This is the first drop in 15 months, to 9.4 percent. Employers cut 247,000 jobs, fewer than analysts expected. In comparison, job cuts averaged almost 700,000 a month in the first quarter.

It would take such a surge in consumer confidence to convince people to buy. Some economists, however, wonder if the change in Americans' habits from being a debt-ridden nation to a nation of savers might be a long-term change.