Consumers trim borrowing

NEW YORK (CNNMoney.com) -- Consumer debt fell in May, for the fourth straight month, a government report said Wednesday.

The reduced borrowing comes as job losses and pay cuts have limited consumer spending power. At the same time, banks have tightened lending standards due to growing concerns about default risks in a battered economy.

Total consumer borrowing fell by a seasonally adjusted $3.22 billion, or a 1.5% annual rate, to $2.52 trillion in May, according to the Federal Reserve. The report measures how much debt consumers have outstanding.

But economists had expected total borrowing to decline by $8.8 billion in May, according to a consensus survey from Briefing.com.

April saw a revised drop of $16.5 billion in total consumer borrowing -- a larger decline than originally reported, and the biggest dip in dollar terms since record-keeping began in 1943.

May's much smaller drop could be partially attributed to the one-time $250 rebate check that was mailed to retirees that month, said Yasmine Kamaruddin, economist at Wachovia. Through the stimulus package, checks were mailed in May to retirees who receive money under social programs like Social Security and veteran's disability.

Revolving credit, which includes credit card debt, fell by $2.9 billion to $928 billion for the month. That's down 3.7% from the previous year.

These days, more consumers are opting to pay for purchases in cash, Kamaruddin said.

"With less spending power, consumers are tending to buy smaller items and not big-ticket products that require financing," she added.

Nonrevolving credit -- which includes auto and student loans -- decreased by $400 million, or 0.3%, to $1.59 trillion.

Last August, consumer credit contracted for the first time since January 1998. It rebounded in September before contracting again, falling for three consecutive months to close out 2008.

A separate report released Tuesday showed delinquencies on credit card debt and other consumer debt hit record highs in the first quarter of 2009.

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