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US Household Net Worth Falls Most on Record on Slump in Stocks

·2 min read

(Bloomberg) -- US household net worth declined in the second quarter by the most on record as aggressive action by the Federal Reserve to tame rapid inflation sent stocks plunging.

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Household net worth decreased by $6.1 trillion in the April-June period, or 4.1%, after falling about $147 billion in the first quarter, a Fed report showed Friday. The back-to-back quarterly declines pushed the the total down to $143.8 trillion, the lowest in a year.

The value of equity holdings slumped $7.7 trillion, while the value of real estate held by households rose by $1.4 trillion.

Recession fears multiplied in the April-June period as inflation worsened, gasoline prices surged to record-highs and the Fed deployed back-to-back historically large rate hikes. That sent the S&P 500 Index tumbling more than 16% in the second quarter.

While the housing market -- a key source of wealth for Americans -- has rapidly deteriorated, home values continue to rise. That said, a closely-watched national home-price measure grew in June at the softest pace in over a year as higher borrowing costs stifled demand.

Deposits Increase

The Fed’s report also showed household checkable deposits, or the money Americans have in checking, savings and money market accounts, soared to a fresh record of nearly $4.9 trillion.

Checkable deposits have swelled as a variety of pandemic-era support -- like stimulus payments -- as well as restrictions on activity led many Americans to save more. More recently, the tight labor market has also driven solid wage growth for people across industries and incomes.

That financial cushion, while concentrated among wealthier households, will help underpin consumer spending in the months ahead. High inflation, however, is forcing families to dole out more for necessities like food.

Consumer credit not including mortgages grew at an 8.51% annual rate in the second quarter, the fastest pace since the end of 2001. Business debt outstanding rose an annualized 7.67%.

Federal debt grew 5.56%, about half the pace of the prior quarter.

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