NEW YORK (CNNMoney.com) -- Consumer borrowing dropped in February, after increasing for the first time in a year during the previous month, according to a government report released Wednesday.
Total consumer credit fell a seasonally adjusted $11.5 billion, at an annual rate of 5.6%, to $2.448 trillion in February, the Federal Reserve reported.
Economists predicted a decline in total borrowing of $0.7 billion in February, according to a consensus estimate from Briefing.com.
"February's decline reflects on the still dire state of the economy," said Yasmine Kamaruddin, an economic analyst at Wells Fargo.
"Even if we have seen retail sales and personal expenditure increase in past months, we haven't seen these gains translate into the use of credit because consumers faced with unemployment and slow wage and salary growth are still shying away from taking on credit," she added.
The decline was led by a 13% annual rate drop in revolving credit, which includes credit card debt.
"It looks as though the credit card market is still in the doldrums," said Kamaruddin. "Commercial banks significantly decreased their holding of revolving credit in February, indicating a charge-off on their parts."
Nonrevolving credit, which includes car, student and personal loans, also fell. It declined by $2 billion, or a 1.6% annual rate, to $1.59 trillion.
January's figure was upwardly revised to show an increase of $10.6 billion in total consumer borrowing from December. The Fed had previously reported a $5 billion rise in January, the first increase in a year.
"The pop last month didn't really reflect the consumer," said Kamaruddin. "It was really due to the federal government's holding of nonrevolving credit, since they were buying up more student loans from private lenders."
Therefore, Kamaruddin expects consumer credit to return to its downward trend and continue to edge lower throughout the year.
"I expect more declines, but smaller declines, as we progress throught the recovery," she said. "We'll have to wait for employment prospects to improve and be sustained before consumers will feel confident enough to build up credit and purchase more."
Last week, a report from the Labor Department showed that the U.S. added 162,000 jobs in March, while the national unemployment rate remained unchanged at 9.7%.
McDonald's may be liable for worker lawsuits, not just franchisees, in a government ruling that could change the fast-food business. More
Amgen is the latest to continue corporate America's cost cutting strategy, even as the economy is supposedly on the mend More
Things are looking up for Twitter -- or at least, for its stock price. More
Bunch o Balloons allows multiple water balloons to be filled at once. Parents are loving it -- to the tune of $645,000. More
Steve Mason, a pastor from California, inherited more than $100,000 in student loan debt when his 27-year-old daughter died suddenly in 2009. With interest and late penalties, the debt has since ballooned to $200,000. More