UPDATE 1-US total consumer credit falls $11.98 bln in Aug

(Adds details, analyst comments)

WASHINGTON Oct 7 (Reuters) - Total U.S. consumer credit fell by a bigger-than expected $11.98 billion in August, according to Federal Reserve data on Wednesday that suggested consumers are opting to cut their debt rather than spend.

Analysts said the drop, the seventh consecutive monthly decline, was unsurprising given the high level of unemployment, and was further confirmation that consumers would not be leading the economy's recovery from the worst recession in 70 years.

August consumer credit outstanding dropped at a 5.81 percent annual rate to $2.46 trillion, the U.S. central bank said. July's figures were revised to show an $18.98 billion drop, previously reported as a record $21.6 billion decline.

Analysts polled by Reuters had forecast consumer credit dropping by $10.0 billion in August.

"This is the clearest evidence of consumer deleveraging that we have. Consumers are actively saving more, borrowing less and paying back their credit card balances and other debt," said Zach Pandl, an economist at Nomura Securities International in New York.

"This is a positive thing in the long run, but in the short term it is negative for growth. People spending less means demand will be weaker and employment will be weaker."

While data indicate the economy started growing again in the third quarter after a recession that started in December 2007, consumer spending and a weak labor market remain the missing link to a sustained recovery.

Though the pace of job losses has slowed markedly from early this year, the unemployment rate climbed to 9.8 percent in September.

Nonrevolving credit, which includes closed-end loans for big-ticket items such as cars, boats, college education and holidays, slipped $2.07 billion, or at a 1.59 percent annual rate, to $1.56 trillion.

This component's decline was probably cushioned by consumers taking advantage of the government's "cash for clunkers program" that gave discounts on some vehicle purchases. That scheme ended in August.

Revolving credit, made up of credit and charge cards, tumbled $9.91 billion, or at a 13.08 percent rate, to $899.4 billion, the data showed. That was the biggest drop in six months.

"The consumer has turned into a saver. I think we are going to see a change in the consumer profile among the retailers," said Robert Lutts, president and chief investment officer at Cabot Money Manager. "It's going to be a more conservative customer using less credit, using more cash and debit." (Reporting by Lucia Mutikani, additional reporting by Juan Lagorio; Editing by Padraic Cassidy)