US Household Wealth Down In Q2--Fed Data Shows

It seems Zimbabwe Ben's attempt to re-inflate asset prices is not having the desired effect. According the Fed's flow of funds, US household net worth declined in Q2. More importantly debt deleveraging in the household sector continues. The only entity increasing debt is the federal government. From Dow Jones:
Americans, anxious over a slowing economy, kept avoiding debt in the second quarter, while their financial value receded as stock market wealth fell.

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.
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.

Black Swan Insights


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