(Updated to add analyst comment in the fifth and 10th paragraphs.)
By Jeff Bater Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- Americans afraid for their jobs and heavily laden with debt cut their borrowing for the second time in three months during October, a Federal Reserve report said Friday.
Consumer credit outstanding decreased at a seasonally adjusted annual rate of 1.6%, or $3.5 billion, to $2.578 trillion, the Fed report.
Credit in September rose $6.7 billion, revised down from a previously estimated increase of $6.9 billion. Borrowing fell $6.4 billion during August.
The October credit drop was worse than what Wall Street expected, which was a decline of $2.3 billion.
"As the credit crisis has intensified, consumers have hunkered down, sharply reducing their spending and, consequently, slowing their use of credit," Insight Economics analyst Steven Wood said.
Consumers have slashed spending drastically. Once the driving force of the economy, spending tumbled by the most in 28 years during the third quarter, recent government data on gross domestic product showed.
GDP is the government's broad measure of U.S. economic activity. It fell 0.5% in the third quarter and experts see a far bigger drop in the current, fourth quarter, which ends Dec. 31. The nation is in recession, according to the National Bureau of Economic Research, a group considered the arbiter of such things.
Driving the point home earlier Friday were U.S. Labor Department data showing non-farm payrolls plunged by 533,000 jobs in November, the largest decline since December 1974. Analysts think the decrease will chill spending by consumers even more.
People have gotten into debt after years of spending. Recent data show the savings rate is going up as consumers turn cautious. Assets have shrunk - stock prices are way down from a year ago; and home values keep eroding, preventing consumers from using home-equity loans. And lenders have tightened their loan standards, causing rigid credit conditions.
"Consumers are deleveraging along with the rest of the economy," Wood said. "This does not bode well for real consumer spending in the months ahead."
The consumer credit data exclude home mortgages and other real estate-secured loans. These tend to be highly volatile from month to month and are frequently revised.
Revolving debt, which mostly reflects credit-card financing, slipped by $181.6 million to $976.1 billion in October, or 0.2%. Credit in September rose 3.1%, or $2.5 billion. It also rose 2.5% in August, when overall credit fell 3.0%. Some people have had to rely on credit cards to pay bills.
Non-revolving credit, which is mainly automobile loans, decreased in October 2.5%, or $3.4 billion to $1.602 trillion. Credit in September climbed 3.2%, or $4.2 billion. Car sales have dropped as consumers shy away from big purchases.
-By Jeff Bater, Dow Jones Newswires; 202-862-9249; jeff.bater@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=B8Ivi3kcr48MG8t2c5SWHw%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
December 05, 2008 16:27 ET (21:27 GMT)

Publié le 05 Décembre 2008 Copyright © 2008 Dowjones