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Debt shrinks as consumers pull back

Aug 18, 2010 10:21:00 PM - thestate.com

The debts of American households shrank for a seventh straight quarter, the Federal Reserve said in a new report documenting how the easy-money boom has given way to a powerful contraction in borrowing.

Total household debt has tumbled 6.5 percent from its peak in 2008, reflecting a retrenchment that has been both voluntary and involuntary.

Credit card balances, for example, have declined in the past two years, but lenders slashed card limits even more sharply.

Although the decline in indebtedness has improved Americans’ personal balance sheets overall, it also has contributed to weak consumer spending, putting a drag on the economic recovery.