Household Net Worth Increases $1.8 Trillion

U.S. household wealth kept rising in the second quarter, though at a slower pace than at the start of the year, as the stock market hit fresh highs and home-price gains remained intact.

Net worth for households and non-profit groups increased $1.83 trillion, or 1.6%, to $113.5 trillion after an upwardly revised 5% gain in the prior period, Federal Reserve data showed. Household debt growth accelerated to a 4.3% annual pace, the fastest since 2017, from a downwardly revised 2.1% rate in the prior quarter.

Key Insights

• U.S. stocks rose at a slower pace in the second quarter following a sharp rebound in the prior three months, amid increasing calls for the Fed to cut interest rates and then-cooling trade tensions with China. Property values, a key source of wealth, also decelerated but kept rising amid a shortage of inventory and lower mortgage rates.
• The value of equities directly and indirectly held by households and nonprofit groups increased $893.7 billion from the prior quarter. The value of real estate rose $257 billion.
• Total business debt climbed at a 4.4% annual pace, to $15.7 trillion. Such obligations are the equivalent of almost three-quarters of gross domestic product.
• Fed Chairman Jerome Powell said in a press conference this week that business-sector debt relative to GDP is high, though companies have also grown. “That’s a real issue, but what it really represents is a potential amplifier of a macroeconomic downturn,” though it wouldn’t be the cause a downturn. He added that “households are in very strong shape.”
• Consumer debt growth accelerated, with mortgages rising at a 3.2% pace and other credit rising 4.6%. That lifted the total household debt pile to $15.8 trillion with non-mortgage credit edging up to $4.1 trillion.
• Federal government debt increased at a 2.1% annual rate after jumping 9.8% the previous quarter. The federal deficit is projected to widen to $1 trillion by fiscal year 2020. State and local government debt was down 2.5%, the sixth straight decline and biggest drop since the first three months of 2018.