Consumer Credit Falls By Record Amount in November
Friday, January 9, 2009
Consumers cut back on their borrowing by a record amount in dollar terms in November, another sign of trouble for the rapidly weakening economy.
The Federal Reserve reported yesterday that borrowing through credit cards and other consumer loans dropped $7.94 billion in November, the biggest decline in 65 years of record-keeping. That also was much larger than the $500 million decline economists expected, and left total consumer credit outstanding at $2.57 trillion.
The drop represented a decline of 3.7 percent at an annual rate from October, the biggest fall in percentage terms since a 4.3 percent plunge in January 1998.
Analysts are worried the economy's troubles could trigger a major retrenchment by consumers that will make the current recession, already the longest in a quarter-century, even worse. Consumer spending accounts for about two-thirds of total economic output.
The 3.7 percent drop in total borrowing in November followed a 1.3 percent decline in October.
The weakness in November was led by a 3.9 percent annual rate plunge in the category that includes auto loans. Borrowing in the category that includes credit cards was down by 3.4 percent.
The Fed's report on consumer credit does not cover mortgage loans or other borrowing secured by real estate.