Americans, anxious over a slowing economy, kept avoiding debt in the second quarter, while their financial value receded as stock market wealth fell.Expect a further decline in household net worth for Q3 because home prices started to roll over in July. With a falling net worth, no wonder consumer confidence is at the lowest level since Aug 2009. Consumers will continue to retrench by reducing debt and saving more money (invested in Treasuries not stocks). Hard to have a real recovery under these conditions.
In its "Flow of Funds" data, the Federal Reserve on Friday said U.S. household debt tumbled by 2.3%. It also showed that U.S. households' total net worth fell 2.8% during April through June, to $53.50 trillion.
The Fed data showed corporate equity and mutual fund assets of households dropped in the second quarter. Those three months were painful for the U.S. stock market. The Standard & Poor's 500 index lost 12%. Investors, unnerved by the Greece debt crisis and uncertain about the U.S. economy, fled to the safety of Treasury notes and bonds.
The "Flow of Funds" said household net worth fell to about 4.72 times disposable personal income in the second quarter from a first-quarter level of about 4.91 times income.
Black Swan Insights