Consumer credit falls for 11th straight month

NEW YORK (CNNMoney.com) -- Consumer credit declined in December for the 11th straight month, but the pace slowed considerably, according to a government report released Friday.

Total consumer borrowing fell a seasonally adjusted $1.8 billion, an annual rate of 0.8%, to $2.456 trillion in December, according to the Federal Reserve.

"The data have been pretty volatile recently, so this month was a lot steadier than people were expecting," said Sean Maher, associate economist at Moody's Economy.com.

Economists predicted a decline in total borrowing of $10 billion in December, according to a consensus survey from Briefing.com. November saw a downwardly revised 10.6% decrease, or $21.8 billion, in total consumer borrowing.

Maher said he expected November to be revised upward, but instead it was even more negative -- so December's more upbeat data "doesn't mean we're out of the woods."

For all of 2009, consumer debt dropped by 4% to $2.46 trillion from $2.56 trillion in 2008.

Revolving credit, which includes credit card debt, fell in December by $8.5 billion, or an 11.7% annual rate, to $866 billion.

But nonrevolving credit, which includes car and student loans, bucked the trend. It rose by $6.8 billion, or a 5.2% annual rate, to $1.59 trillion.

The data's recent volatility and large revisions make it difficult to make predictions, Maher noted, but he expects revolving credit will fall substantially in the coming months but will start to taper off around June.

"Consumers are still finding it tough to get credit, but there are some signs we've reached a bottom," Maher said.

The credit crunch should begin easing now, he said, "with breakeven around the middle of the year -- and we're looking for a pretty quick rebound by the second half of 2010."

Earlier Friday, a separate report showed the national unemployment rate fell unexpectedly in January to 9.7%. Economists had predicted the rate would hold at 10%. Businesses shed 20,000 jobs for the month, far fewer than the 150,000 jobs that were lost in December.