Jan. 8 (Bloomberg) -- Consumer borrowing dropped by a record $7.9 billion in November as Americans scrambled to boost savings in face of the deepening recession and amid an investor exodus from securities backed by credit-card and other loans.

The slump brought consumer credit down to $2.57 trillion, and capped the first back-to-back monthly decline since 1992, the Federal Reserve said today in Washington. The biggest decrease came in securitized assets, an area where Fed policy makers are creating a new $200 billion lending program to shore up credit.

Today’s figures foreshadow a prolonged drop in consumer spending as households try to reduce debt with their net worth declining and job losses accelerating, analysts said.

“Consumers have clammed up,” said Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio, who forecast a decline. “The reduction in consumer credit doesn’t stop here, and will spill over into 2009. Households are bolstering their balance sheets.”

The Fed’s figures don’t cover borrowing secured by real estate. In October, credit fell by $2.8 billion, previously reported as a drop of $3.5 billion.

Economists had forecast credit would be little changed, according to the median of 28 estimates in a survey conducted by Bloomberg News. Projections ranged from a gain of $6.9 billion to a decline of $5 billion.

Jobless Claims

A report from the Labor Department showed the number of Americans collecting unemployment benefits surged to 4.6 million two weeks ago, a 26-year high, as the labor market worsened. Initial jobless claims, which have been plagued by efforts to adjust the figures for the holidays, unexpectedly fell by 24,000 to 467,000 in the week that ended Jan. 3, the lowest level in almost three months.

Total consumer borrowing fell at a 3.7 percent annual rate in November, the biggest percentage decline since January 1998, the Fed said today. 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.

Fed Actions

Fed policy makers last month cut the benchmark interest rate target to as low as zero for the first time to prevent the recession from worsening. They also are taking steps to ease the flow of credit and reduce borrowing costs.

“Credit conditions continued to tighten for both households and businesses, and ongoing declines in equity prices further reduced household wealth,” according to minutes of the Fed’s December meeting. Policy makers also “expected economic activity to contract sharply in the fourth quarter of 2008 and in early 2009.”

The drop in wealth and lack of credit are forcing consumers to cut back. Wal-Mart Stores Inc., Macy’s Inc. and Gap Inc. slashed earnings forecasts after the worst holiday-shopping season in at least four decades, industry figures showed today.

Automakers are also struggling. Car sales fell 36 percent in December, capping the industry’s worst year since 1992. General Motors Corp. and Chrysler LLC, which got emergency federal loans to help stay in business, this month broadened incentive programs to boost sales.

Credit-card companies, facing rising defaults, are taking steps to get government funds and retail deposits. Discover Financial Services in December won approval to become a bank holding company, and rival American Express Co. also is converting into a bank, allowing it to obtain capital under the Treasury’s bailout plan.

The rate of delinquencies on indirect auto loans, which are made through third parties such as car dealerships, reached a record 3.25 percent in the third quarter, the American Bankers Association reported yesterday.

Late payments on eight different types of loans, including auto lending and personal loans, rose 8 percent from the previous quarter to a 29-year high, the group said.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

Last Updated: January 8, 2009 16:19 EST