The Federal Reserve released their G.19 Consumer Credit Report on December 7, 2006.  The Fed reported that borrowing declined at an annual rate of 0.6 percent in October following a revised 2 percent increase in September. It was the biggest drop since a 1 percent plunge in October 1992.

www.federalreserve.gov/releases/g19/current/default.htm

The decline last month was attributed to a huge falloff in demand for auto loans and other types of nonrevolving credit, which declined at a rate of 3.3 percent in October, following a 0.4 percent gain in September.

The drop in the category that includes auto loans was the largest one-month decline in this area since a 3.6 percent fall in May 1993.

The 0.6 percent overall drop was the first dip in consumer borrowing since a 0.2 percent decrease back in March.

Analysts cautioned against reading too much into the one-month change, noting that the consumer credit figures can be subject to major revisions. The 2 percent rate of increase in borrowing in September had originally been reported as a 0.6 percent decline.

However, economists said they are forecasting a slowdown in the rapid pace of borrowing of the past two years as consumers start to feel less wealthy now that housing prices are no longer surging to record levels.  The overall economy has slowed significantly this year as consumers have trimmed the growth in their spending and the housing market has been battered by slowing sales and weaker home prices.

The Fed report showed the category that includes credit cards saw an increase in borrowing of 4.1 percent at an annual rate in October, down from a 4.9 percent rise in September.

The overall drop in borrowing trimmed $1.24-billion from total consumer credit outstanding in October, pushing it down to $2.38-trillion.