Consumer borrowing plummets in August

Data released by the Federal Reserve late last week showed a sharp drop in consumer borrowing during the month of August.

Consumer credit fell by $9.5 billion during the month, counteracting much of an $11.9 billion increase during the previous month. Poor confidence and a desire to pay down existing debts may have been a factor in the drop, which was the largest in a year.

"Consumers were cautious over taking on additional debt at the end of the summer after the volatility in the stock markets and the uncertainty caused by the failure of Congress to work together to bring down these trillion-dollar deficits," Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York, told Bloomberg.

The decrease caught many analysts by surprise. All of the 33 economists surveyed by Bloomberg predicted an increase in consumer credit, with estimated jumps ranging up to $10.9 billion.

Consumers who pay off their existing debt obligations may be able to see improvements in their credit scores over time, which can help them when they look to apply for other loans or lines of credit.