Consumers borrow less than expected
The Federal Reserve says borrowing by consumers fell by $8 billion in November, falling at a much faster rate than economists had expected.
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NEW YORK (CNNMoney.com) -- Consumer borrowing decreased sharply in November as the weak economy continued to weigh on household budgets.
The Federal Reserve said Thursday that consumer borrowing fell by $8 billion in November to $2.571 trillion from an upwardly revised $2.579 trillion in October.
The annual rate of consumer borrowing fell by 3.7% in the month. In October, the annual rate fell by only 1.3%.
Credit card borrowing, or revolving debt, declined at an annual rate of 3.4%. Non-revolving borrowing, including student and auto loans, fell $5.2 billion, or 2.1% on an annual basis.
Economists were expecting consumer credit to have remained unchanged in November, according to a consensus of economists' estimates gathered by Briefing.com.
November's decline "signals that the tight credit markets are starting to affect consumers, and that consumers are becoming less willing to use credit to sustain spending," said Sean Maher, associate economist at Moody's Economy.com.
Banks have tightened lending standards for a variety of consumer loans in recent months as worsening economic conditions threaten to increase the likelihood of defaults.
The Fed's October survey of senior loan officers showed that nearly 60% of respondents had tightened lending standards on credit card loans, while nearly 65% indicated that they had tightened lending standards on other consumer loans over the past three months.
Meanwhile, consumers have been saving more and have become wary of purchasing items with borrowed money.
"The savings rate has been expanding over recent months," said Maher. "Consumers are being forced to save more to offset lost wealth and to prepare for possible job losses."
A report from the Labor Department showed Thursday that the number of Americans filing for initial jobless claims fell sharply versus last week.
The decline in weekly jobless claims comes one day before the government's closely watched monthly jobs report.
Friday's report is expected to show that the economy lost 500,000 jobs in December, versus a loss of 533,000 jobs in November. The unemployment rate is forecast to rise to 7% from 6.7%.
The movement away from spending on credit and toward more savings has mixed implications for the overall economy.
"It's a good thing for long-term credit quality of consumers," said Maher. "Over the near term, it's troubling because there's a risk that the recession could be deeper and more protracted if consumers continue to cut back on spending." 
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