Credit crunch alive and well

By Amy Sahba, CNN

NEW YORK ( -- Two years after the credit squeeze began, Americans are still pulling back.

A government report released Thursday showed that consumer credit fell at an annual rate of 4.5% in May, making it the fourth consecutive month of declining credit.

Total consumer credit fell a seasonally adjusted $9.1 billion to $2.4 trillion, the Federal Reserve reported.

Economists had predicted a decline in total borrowing of $3 billion, according to a consensus estimate from

"No one is shocked to see another decrease," said Tim Quinlan, an economist with Wells Fargo. "This report, combined with disappointing May retail sales report, is the latest indication of weakness in consumer spending."

The decline was led by a 10.5% drop in revolving credit, which includes credit card debt.

Non-revolving credit -- car, personal and student loans, among other things -- also decreased. It declined by $1.82 billion, or 1.5%.

The Fed on Thursday also revised its April figures. After originally reporting that credit had gone up by $1 billion, it now says credit decreased by $14.9 billion.

Quinlan expects consumer credit to continue to decline "as consumers try to gradually repair their balance sheets."

And consumers are being more conservative.

"We look to a modest growth in personal income, but now expect consumers to split that increase between spending and saving," Quinlan added. To top of page

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