Borrowing decline is greatest since '92

Borrowing by U.S. households declined in October by the most in more than a decade as demand for auto loans cooled from the previous month, a Federal Reserve report showed.

Consumer credit, or nonmortgage loans to individuals, fell $1.24 billion, the biggest monthly decline since 1992, to $2.378 trillion, the Fed announced Thursday. Consumer credit fell 0.6 percent at an annual rate after rising 2 percent in September.

"People are saying, 'Yikes, I've got too much debt and have to cut down on spending,' " said Bill Hampel, chief economist at the Credit Union National Association in Washington, D.C.

Economic growth slowed to 2.2 percent in the quarter ended Sept. 30, less than half the first quarter's 5.6 percent pace, as the housing market weakened.

Nonrevolving debt, such as auto loans and mobile-home loans, fell $4.16 billion for the month, the biggest decline since October 1991, after rising $516 million a month earlier. Revolving debt, such as credit cards, rose $2.92 billion for the month after rising $3.47 billion a month earlier, according to the Fed's statistics.

"Car and light-truck sales were weaker in October and dealers pulled the favorable financing they had provided their customers this summer when gasoline prices were high," said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi UFJ in New York. "But consumers continued to use their credit cards at the shops and malls this month."

Consumer credit fell at an annual rate of 0.6 percent in October, the largest decline since October 1992, the Fed said. Before the Fed's report, a Bloomberg News survey of economists forecast a median increase of $4 billion in consumer borrowing for October after September's initially reported decline of $1.2 billion. Consumer debt for September was revised to an increase of $3.99 billion in today's report.

During the quarter ended Sept. 30, consumer borrowing, including loans backed by real estate, increased at the slowest pace in eight years, according to another report issued by the Fed.

Borrowing rose at an annual rate of 6.8 percent last quarter, the smallest increase since the third quarter of 1998, reflecting a slowdown in mortgage borrowing.

American Express, the fourth-biggest credit-card issuer in the country, announced in October that earnings rose 11 percent in the third quarter after the company added more than 2 million new cardholders. American Express ended the third quarter with 76.5 million cardholders.

In another report Thursday, the Labor Department said fewer workers filed first-time applications for jobless benefits, retreating from a 13-month high.

Jobless claims fell by 34,000 to 324,000 in the week that ended Dec. 2. Still, the four-week average, a less volatile measure, is the highest since May.