Can US economy based on debt recover without consumers’ borrowing?

 For the 7th consecutive month American consumers reduced their borrowing in August as US families have been working hard to pay off their previous debts and banks have cut credit card limits.

The fact that Americans are saving more and borrowing less may be a positive factor for the national economy in a long term but it hampers economic recovery as consumer spending makes up 70% of the US economy.

According to the figures presented by the Federal Reserve on Wednesday total consumer debt outstanding fell in August by $12 billion, a 5.8% annual rate. Wall Street economists expected a $10 billion decline. In comparison, in July the drop was $19 billion, or 9.1%, the largest decline in dollar terms on records dating from 1943.

"Consumers are clearly becoming much more conservative about their spending habits (and) paying down debts," said Zach Pandl, an economist at Nomura Securities. "This is likely to continue."

Thus, at present total consumer credit outstanding $2.46 trillion, down about 4.6% from its peak in July. Credit consumption contracted in August in spite of the fact consumer spending grew by 1.3%. In this regard Pandl noted that consumers are increasingly using more cash for making their purchases instead of credit.