Consumers are reducing their use of credit as the economy becomes increasingly sour.

Consumer borrowing declined in August for the first time in about 10 years as households reduced their use of credit, the Federal Reserve says, and fell at an annual rate of 3.7%. Borrowing increased 2.4% in July and fell $7.88 billion in August to $2.58 trillion.

Most of August's decline was non-revolving credit, including loans for cars and other major purchases, but not real estate. It was the first decline in non-revolving credit since January 2005.

Revolving credit, including credit cards, fell at an annual rate of 0.76%, or by $612.1 million, the largest decline since May 2005.

The decline in consumer borrowing was the first time that total borrowing had fallen since a 4.3% drop in January 1998.

Consumer spending accounts for nearly 70% of the US' GDP. The cutback in the use of credit suggests that consumer spending will drop in the July-September quarter, signaling an economic slowdown.

Major automakers, including Toyota (TM), General Motors (GM), Ford (F), Honda (HMC) and Chrysler, reported sales declines in September. Toyota will offer 0% financing on 11 models in an effort to boost sagging sales.

US auto sales fell below 1 million in September, the lowest figure since February 1993.