US consumer credit dropped at an annual rate of 3.7 percent in November, the biggest decline in percentage terms since January 1998, the Federal Reserve reported on Thursday.

In dollar terms, consumer credit fell by US$7.94 billion at an annual rate in November, the biggest decline in 65 years of record keeping. That was much larger than the economists' estimate.

The November drop followed a revised 1.3 percent decline logged in October and left total consumer borrowing, which the Federal Reserve defines as all loans not secured by real estate, at US$2.57 trillion at an annual rate at the end of November.

For November, consumer borrowing in revolving loans, a category that includes primarily credit card debt, declined by 3.4 percent at an annual rate. Borrowing in this category was flat in October.

Demand for non-revolving credit used to finance cars, vacations, education and other things, meanwhile, plunged by 3.9 percent, steeper than the 2.1 percent decline in October.

Consumer credit reflects the situation of consumer spending, which accounts for two thirds of overall US economic activity and is a major force driving the economy to grow.

Squeezed by rising job layoffs, falling home prices and a severe credit crunch, Americans cut their spending in the third quarter by 3.7 percent, the biggest quarterly drop since the second quarter of 1980.

Consumer borrowing is unlikely to rebound anytime soon, economists say. They expect the economy to decline further in the final quarter of last year and early this year.

(Xinhua News Agency January 9, 2009)