Fed: Stocks And Real Estate Boost Household Net Worth (For The Rich) In Q2

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The Fed’s latest statistical release on Financial Accounts of the United States observes that the aggregate net worth of households and non-profits during the second quarter of 2014 reached $81.5 trillion. The rise of $1.4 trillion was accounted mostly by higher equities (up $1.0 trillion) and real estate (higher by $ 230 billion).

The chart below, constructed from Fed figures, shows that household net worth has expanded at a steady pace since the great financial crisis.

Household net worth – The picture on the liabilities side

Statistics showed that domestic borrowings, other than from the financial sector, rose only 3.8% on a seasonally adjusted basis. The growth was down from 4.4% in 2013Q4 and 4.3% in 2014Q1. In the graph below constructed from Fed figures we observe that domestic non-financial borrowings (blue line) have run mostly flat since 2010.

Within domestic non-financial debt, household debt (red line) has been rising since the last three quarters. During the latest reported quarter it climbed 3.6%, up from 0.7% growth in 2013Q4 and 2.2% in 2014Q1.

The bright spot is consumer credit which grew a sharp 8.1% in the second quarter, up from 5.4% in 2013Q4 and 6.5% in 2014Q1. The purple line in the chart below marks the growth in consumer credit after 2009.

However, the weakness in the off-take of mortgage credit is a matter for concern, as shown by the green line in the chart below. Negative growth was the norm upto Q2 of 2010, and growth in recent quarters is struggling to stay above the zero line.

chart-debt-sector Household Net Worth

Total non-financial outstanding domestic debt

On a sectoral basis the break-up of the total non-financial outstanding domestic debt of $40.5T is shown in the pie-chart below:

chart-pie-dom-nf-debt Household Net Worth

Of special note in the statistics of growth of the various debt components is the sharp fall in the debt of the federal government since 2009 (the light blue line in the chart below).

chart-non-fin-debt Household Net Worth

“Nonfinancial business debt rose at an annual rate of 6.3 percent in the second quarter, about in line with the increase in the first quarter. As in recent years, corporate bonds accounted for most of the increase,” observed the Fed in its release.

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