U.S. consumer credit posted its largest decline in more than a year in August, according to a Federal Reserve report on Friday that suggested consumers were reluctant to hold more debt amid a shaky economic recovery.
Consumer credit fell a surprising $9.50 billion in August after rising $11.92 billion in July, the report said. That was well below economists' expectations of a $7.75 billion increase.
Consumers are extraordinarily sensitive to economic conditions and as things started to look a bit more sour, they stopped using their credit card, said Steve Blitz, a senior economist with ITG Investment Research in New York.
The U.S. credit rating downgrade and Europe's debt problems triggered wild swings in global equity markets in August. That combined with higher unemployment to hold consumers back, economists suggested.
Revolving credit, which mostly measures credit card use, dropped $2.27 billion in August after falling $3.56 billion in July.
Non-revolving credit, which includes mostly auto loans, fell $7.23 billion, the largest decline since August 2008, after rising $15.48 billion in July.
(Reporting by Rachelle Younglai, editing by Andrea Ricci and Dan Grebler)