WASHINGTON, Dec. 11 (UPI) -- Household debt fell in the United States for the first time on record, the U.S. Federal Reserve reported Thursday.
Consumer debt declined 0.8 percent in the third quarter to $13.91 trillion, shedding $30 billion CNNMoney.com reported.
Less debt sounds promising, but lack of spending slows the U.S. economy, two-thirds of which is made up of consumer spending.
"Interest rates have shot rapidly higher in the last few months, and people are borrowing less because they don't want expensive credit hanging over their heads," Michael Englund, chief economist for Action Economics told CNNMoney.com. "The other component is the credit crunch, where qualified borrowers are unable to get credit."
While debt fell, vehicle purchases have declined sharply and millions of U.S. homeowners have been forced from their homes due to foreclosures since the middle of 2007.
Foreclosures transfer debt from households to financial firms.
"American households are pulling back on spending in the face of strong headwinds in the job market, and it highlights the reduced willingness of a still-stretched financial sector to extend credit," Economic Policy Institute economist Josh Bivens said in a statement.