Uh-oh: Credit-card spending falls again. Consumers aren't confident in the economy.

By Jeffry Bartash

Yet auto loans rise as buyers seek to beat tariffs

Americans aren't pulling out their credit cards as much as they were last year.

Americans cut back on the use of credit cards in August in another sign of caution, as households grapple with stubborn inflation, a tougher job market and lingering economic uncertainty tied to U.S. tariffs.

The use of revolving credit - mainly credit cards - fell in August for the third time this year. The decline was offset by a small rise in nonrevolving credit such as car loans and student loans.

As a result, the amount of overall consumer credit outstanding in August was basically flat, Federal Reserve data showed Tuesday. Wall Street had been expecting a sizable increase.

Although the credit data is a couple of months old, the report lends credence to the idea that consumers grew more skittish as fall approached. It's harder to find a job, interest rates are still relatively high and the cost of some consumer goods and services have risen in response to tariffs.

The report on consumer credit takes on more importance than usual in light of the federal shutdown. Government closures have delayed critical information about the health of the labor market and other parts of the economy.

Key data: Credit-card spending has declined 2.5% in the past 12 months, the largest drop since the height of the pandemic in 2020.

As recently as August 2024, credit-card spending was rising at a 5% rate.

Perhaps more worrisome: The last time credit-card usage fell excluding the pandemic was in 2010, at the tail end of the Great Recession.

Meanwhile, car loans and student loans, or what's known as non-revolving credit, rose 2% in August.

Car sales have surged since the spring as buyers sought to purchase autos before tariff-related price increases took effect. At some point these sales are expected to slow as demand is whetted and prices rise.

Student loans, for their part, tend to be grow at a stable rate.

The Fed report on consumer credit does not include mortgages, the largest category of household debt.

Big picture: The decline in credit-card use over the past year signals Americans are being more careful with their money given the stress on the economy.

The U.S. is unlikely to grow much faster until consumers gain more confidence. That would require an end to trade wars, slowing inflation and a pickup in hiring and employment.

Market reaction: The Dow Jones Industrial Average DJIA and the S&P 500 SPX index fell in Tuesday trading.

-Jeffry Bartash

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