Consumer credit fell at an annual rate of $3.51 billion in October, the Federal Reserve said Monday. Economists expected a $9.3 billion decline.
Demand for revolving credit, the category that includes credit cards, fell 9.3 percent, while borrowing in the category that includes auto loans rose at an annual rate of 2.6 percent.
Americans are borrowing less as they try to replenish depleted investments. Many are finding it hard to get credit as banks, hit by the worst financial crisis since the 1930s, have tightened lending standards.
The 2.6 percent rise in the category that includes car loans reflected a rebound in auto sales in October after a sharp September drop. That decline followed a surge in August auto sales as consumers rushed to take advantage of the government's Cash for Clunkers incentives before they expired.
Some analysts said the smaller-than-expected decline in borrowing could be a sign that consumers are cautiously moving toward increased spending in some areas, which would be a good sign for the economy going forward.
"Consumers appear to be willing to go out and make big-ticket purchases such as for cars and that is better than things were looking this summer," said David Wyss, chief economist at Standard & Poor's in New York.
While economists have worried for years about the low rate of U.S. savings, the concern is that consumers could derail the recovery if they start saving too much of their incomes. Consumer spending accounts for 70 percent of total economic activity.
Mr. Wyss still expects growth in consumer spending to remain modest, meaning that the overall economy will grow at subpar rates in coming quarters. He sees the overall economy, as measured by the gross domestic product, growing at a lackluster 1.9 percent rate in the current quarter, down from the 2.8 percent rate in the July-September period.
That's largely because he expects consumer spending to slow from the third-quarter pace.
Consumers have been reluctant to spend in large part because the labor market has been so weak. The government reported Friday that the unemployment rate actually improved slightly in November, dropping to 10 percent, after hitting a 26-year high of 10.2 percent in October.
But some analysts think the unemployment rate will resume rising in coming months, hitting a peak of around 10.5 percent by next summer before starting to improve.