U.S. motorists reduced driving by the most in 66 years in 2008 and auto dealerships closed in record numbers, reflecting a deepening recession that's causing consumers to pull back.

Vehicle-miles traveled last year fell by 107.9 billion, or 3.6 percent, the Federal Highway Administration said in a report today. The Detroit-based consultant Urban Science said 881 dealers closed, with most coming the fourth quarter.

The figures illustrate the toll on companies such as automaker General Motors Corp. and hotel-chain Marriott International Inc. from the falloff in household spending, which accounts for about 70 percent of the economy. The deterioration in miles began in November 2007, a month before the start of the current economic slump.

"Recession and the worst job losses in a generation have turned anything on wheels into road kill," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. "Americans are sticking closer to home and saving not spending, which is just the sort of consumer behavior that can turn a recession into a depression."

Vehicle-miles traveled fell in December by 3.8 billion, or 1.6 percent, from the same month a year earlier, the 14th straight drop, the government said. The U.S. began collecting the data in 1942.

The cumulative driving decline for the 14 months was 115 billion vehicle miles, more than double a drop during the 1970s, the Federal Highway Administration said. During that period, the U.S. faced oil embargoes and soaring gasoline prices.


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Driving slipped in four of five regions in December, led by a 4.8 percent drop in the West, which includes California. Miles in the Northeast rose 0.5 percent, the first increase for any region since April.

The increase is unlikely to be an early sign of an economic turnaround, said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.

Driving to and from jobs "lags a little bit behind because if firms see demand picking up, the first thing they'll do is increase the hours of people already working before hiring new people," he said.

The economy will contract 2 percent this year, the biggest U.S. economic decline since 1946, according to the median of 50 projections in a Bloomberg survey of economists taken Feb. 2 to Feb. 10. Even as President Barack Obama aims to save or create more than 3 million jobs with a stimulus plan, economists foresee an unemployment rate exceeding 8 percent through next year.

Economic Forecast

Further shrinking in the economy may dim prospects for GM and Chrysler LLC, which are seeking additional loans from the government.

GM, which has received $13.4 billion in aid, said this week it needs as much as $16.6 billion more, including $2 billion next month to keep operating. Chrysler LLC, which has gotten $4 billion, said it needs $5 billion more.

U.S. auto sales plunged 18 percent last year. The decline in auto dealerships was the biggest in annual recordkeeping that began in 1991, Urban Science said.

"We'll see even more contraction in the next several years as the Detroit Three strategically rethink their retail counts," John Frith, vice president of Urban Science, said in a statement.

Hotels are also feeling the pinch. Marriott, the biggest U.S. hotel chain, reported an unexpected fourth-quarter loss last week and forecast more weakness for the travel industry in 2009.

For Related News and Information: U.S. travel: TNI US TRAVEL

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News on U.S. Economy: NI USECO

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--With reporting by Timothy R. Homan and Carol Wolf in Washington. Editors: Joe Richter, Christopher Wellisz

To contact the reporter on this story: Angela Greiling Keane in Washington at +1-202-654-1287 or agreilingkea@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at +1-202-624-1936 or lliebert@bloomberg.net

-0- Feb/19/2009 20:00 GMT