Households Continue To Cut Debt

Washington, DC, Nov. 10, 2010 -- U.S. household debt fell last quarter, according to a survey by the Federal Reserve Bank of New York.

Consumer indebtedness totaled $11.6 trillion at the end of September, down $110 billion, or 0.9% from the end of June, according to the New York Fed’s quarterly report on household debt and credit.

Households have slashed about $1 trillion from outstanding consumer debts since the peak in the third quarter of 2008, the New York Fed said.

U.S. households have cut debt and increased savings following the worst financial crisis since the Great Depression. That’s pared consumer spending and slowed the economic recovery, helping to prompt the Fed’s decision last week to start another round of unconventional monetary stimulus.

Individuals paying off their debt crimped their cash flow by about $150 billion in 2009, the New York Fed said. Between 2000 and 2007 borrowing increased consumers’ cash flow by $300 billion a year, according to the district bank.