Report: Consumer attempts to reduce debt could be hampering economic recovery

Debt down, but consumer spending still sluggish While a slow but steady upturn in many economic indicators has painted a somewhat rosier picture of the future of the American economy, the Wall Street Journal reports that many U.S. consumers have been focusing on getting rid of debt rather than making new purchases.

This trend has slowed the re-growth of consumer spending, which is widely regarded as one of the most important bellwethers of a resurgent economy. The Journal says that "the Fed’s quarterly ‘flow of funds’ report, due out on Thursday, is likely to show the household sector’s debt level, which includes both consumer credit and mortgage loans, remained at about 20 percent of total assets in the first quarter."

The newspaper says that the recent news that consumer debt fell by $1 billion in April – the 17th consecutive month in which that figure has fallen – is in stark contrast to the behavior of this market sector over the 67-year history of the index.

Experts say, nevertheless, that the economy’s continued improvement will soon bring the looked-for growth in consumer spending.