WASHINGTON, Feb 6 (Reuters) - U.S. consumer borrowing fell for the third straight month in December, the longest decline since 1991, while November's record contraction was revised sharply lower, a Federal Reserve report showed on Friday.
December consumer credit fell by $6.6 billion to $2.562 trillion, as banks tightened credit and consumers burdened by debt avoided borrowing in the holiday season.
The decline was larger than expected as analysts polled by Reuters forecast a $3 billion drop in consumer borrowing for December.
In addition, the November contraction -- the largest since the government began keeping records in 1943 -- was revised to $11.04 billion, much wider than the originally reported decline of $7.94 billion.
'What that decline in consumer spending reflected was the intensity of concern over the credit crisis. (The figures) were dismal because people were catatonic in November and December,' said Marshall Front, chairman of investment firm Front Barnett Associates.
Non-revolving credit, which includes closed-end loans for big-ticket items like cars, boats, college education and holidays, fell $287.7 million, or at a 0.2 percent rate to $1.598 trillion in December.
Revolving credit, made up of credit and charge cards, fell $6.32 billion, or 7.8 percent, to $963.55 billion in December. This compares with a revised $6.90 billion drop in November.
Banks from Citigroup Inc to J.P.Morgan Chase & Co have suffered increasing consumer-credit related losses, as Americans default on credit cards and other borrowing at higher rates after losing their jobs and homes.
The outlook for consumer lending is gloomy as banks are tightening credit standards to cushion further losses, and consumers are cutting spending with some increasing their savings or paying off debts.
'In general, the trend will be shrinkage, the trend will be higher levels of bankruptcies, and less credit extended by banks to consumers,' said James Ellman, president of hedge fund Seacliff Capital.
The trend will translate into more losses for lenders, he added, as consumers are expected to keep defaulting on their debts if they can not refinance them.
To revive the battered economy, the U.S. government is pushing for a huge stimulus package of over $937 billion. The plan, under discussion in the U.S. Senate, includes tax cuts and increased spending.
In addition, the Obama administration is developing proposals to reinvigorate the financial system and push banks to use the $700 billion from the taxpayer-funded Troubled Assets Relief Program to increase lending.
'Much of what happens now is not going to depend on business, not on consumer spending, not on business spending, not on exports, but on what the government does. We are very dependent now on the government and the actions that they take. It's crucial,' said Front.
(Additional reporting by Juan Lagorio; editing by Gary Crosse) Keywords: USA ECONOMY/CREDIT (e-mail: corbett.daly@thomsonreuters.com; +1-202-310-5487) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
December consumer credit fell by $6.6 billion to $2.562 trillion, as banks tightened credit and consumers burdened by debt avoided borrowing in the holiday season.
The decline was larger than expected as analysts polled by Reuters forecast a $3 billion drop in consumer borrowing for December.
In addition, the November contraction -- the largest since the government began keeping records in 1943 -- was revised to $11.04 billion, much wider than the originally reported decline of $7.94 billion.
'What that decline in consumer spending reflected was the intensity of concern over the credit crisis. (The figures) were dismal because people were catatonic in November and December,' said Marshall Front, chairman of investment firm Front Barnett Associates.
Non-revolving credit, which includes closed-end loans for big-ticket items like cars, boats, college education and holidays, fell $287.7 million, or at a 0.2 percent rate to $1.598 trillion in December.
Revolving credit, made up of credit and charge cards, fell $6.32 billion, or 7.8 percent, to $963.55 billion in December. This compares with a revised $6.90 billion drop in November.
Banks from Citigroup Inc to J.P.Morgan Chase & Co have suffered increasing consumer-credit related losses, as Americans default on credit cards and other borrowing at higher rates after losing their jobs and homes.
The outlook for consumer lending is gloomy as banks are tightening credit standards to cushion further losses, and consumers are cutting spending with some increasing their savings or paying off debts.
'In general, the trend will be shrinkage, the trend will be higher levels of bankruptcies, and less credit extended by banks to consumers,' said James Ellman, president of hedge fund Seacliff Capital.
The trend will translate into more losses for lenders, he added, as consumers are expected to keep defaulting on their debts if they can not refinance them.
To revive the battered economy, the U.S. government is pushing for a huge stimulus package of over $937 billion. The plan, under discussion in the U.S. Senate, includes tax cuts and increased spending.
In addition, the Obama administration is developing proposals to reinvigorate the financial system and push banks to use the $700 billion from the taxpayer-funded Troubled Assets Relief Program to increase lending.
'Much of what happens now is not going to depend on business, not on consumer spending, not on business spending, not on exports, but on what the government does. We are very dependent now on the government and the actions that they take. It's crucial,' said Front.
(Additional reporting by Juan Lagorio; editing by Gary Crosse) Keywords: USA ECONOMY/CREDIT (e-mail: corbett.daly@thomsonreuters.com; +1-202-310-5487) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.