American consumer debt shrank for the first time in six years because of lackluster consumer spending during the COVID-19 pandemic and resulting lockdowns, according to data gathered by the Federal Reserve Bank of New York.
From April to June, total household debt declined 0.2% to about $34 billion, marking the first decline in the second quarter since 2014, the New York Fed said. The drop is the largest since 2013.
Credit card balances alone contracted by $76 billion, the steepest decline in the history of the data, according to the New York Fed, which linked the drop to the pandemic.
In total, non-housing balances, which include credit card debt, auto loans, and student loans, declined $86 billion, the largest in the report's history.
The news, however, isn't necessarily a good thing as consumers are the driving force behind the U.S. economy, accounting for about 70 percent. Virus lockdowns paralyzed spending in March, when lockdown orders began, and have begun tightening their hold again as an initial slowdown in infections wanes.
Many businesses have had to pause their re-openings or close a second time and cut jobs, putting consumers under renewed pressure.
Auto loans remained mostly flat and student loans increased by $2 billion, the New York Fed said. The trend in student debt reflects a "wide application of forbearances on federal student loans and interest waivers," the New York Fed said.
The Associated Press contributed to this report.