Reports reflect the worst times for borrowing in the U.S.

In November consumer borrowing in the United States decreased by a record $7.9 billion. Americans are trying to increase savings in light of the worsening downturn environment. The Federal Reserve said this week that the recession brought consumer credit down to $2.57 trillion, and capped the first back-to-back monthly decline since 1992. The biggest drop came in securitized assets, an area where Fed policy makers are creating a new $200 billion lending program to support credit. Borrowing secured by real estate fell by $2.8 billion in October.

Labor Department reported that the number of Americans applying for unemployment benefits climbed to 4.6 million two weeks ago which was a 26-year high. Still, jobless claims that were prompted by the efforts to prepare for the holidays surprisingly fell by 24,000 to 467,000 in the week that ended Jan. 3, the lowest level in almost three months. The Federal Reserve reports that total consumer borrowing dropped at a 3.7% annual rate in November, the biggest percentage decline since January 1998. The decline in dollar terms was the biggest since records began in 1943. Revolving debt such as credit cards decreased by $2.8 billion. Non-revolving debt, including auto loans, dropped $5.2 billion for the month.

While consumers are tightening their belts Wal-Mart Stores Inc., Macy’s Inc. and Gap Inc. decrease their earnings forecasts after the worst holiday-shopping season in at least four decades. Car sales fell 36% in December marking the industry’s worst year since 1992. The rate of delinquencies on indirect auto loans, which are made through third parties such as car dealerships, reached a record 3.25% in the third quarter according to the American Bankers Association. The group also adds that late payments on eight different types of loans, including auto lending and personal loans, rose 8% from the previous quarter to a 29-year high.

Source: Bloomberg