One not-so-hidden factor in the sluggishness of the recovery continues to be the lack of consumer credit. The Fed estimates that revolving debt, which consists primarily of credit card, declined by $4.4 billion in July. That's $4.4 billion in consumer spending that was basically taken out of the economy in one month.
Paradoxically, this is mostly good news for individual consumers. Delinquencies are way down, with write-offs falling below 10 percent for the first time in a year. People are being much more responsible about the availability of easy credit.
But the lack of credit card use harms the economy as a whole, since credit can multiply money. On the other hand, non-revolving debt, which includes things such as loans for cars and mobile homes (but not for real estate), was up very slightly in July, rising by $758 million. That was the third straight monthly gain for that category.
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