US household wealth hits record high of $154 trillion
U.S. household wealth surged to a record high of more than $154 trillion in the second quarter, boosted by a rebound in stock prices and property values.
The Fed’s quarterly snapshot of the balance sheets of households, businesses and governments showed that household net worth rose 3.7% to $154.28 trillion in the period from April through June from $148.79 trillion at the end of the first quarter.
The data showed that households have fully recouped the wealth losses generated by a bear market for stocks and weaker real estate values through much of last year.
The rally in the stock market added $2.6 trillion to household net worth, accounting for nearly half of the overall wealth gain in the quarter. Real estate was the other large driver, with property values rising for the first time since the second quarter of 2021, contributing $2.5 trillion to the increase in net worth.
The Fed’s data also showed that household cash holdings continued to dwindle, declining for a record fifth straight quarter to $17.7 trillion.
Debt levels for households, businesses and governments kept rising in the second quarter, though the pace of increase varied widely by sector.
Total nonfinancial debt increased at an annualized rate of 6.3% – the fastest since the first quarter of 2021 – to $71.2 trillion, with households and businesses each accounting for roughly $20 trillion and government $31.3 trillion.
The main driver of the increase was the 12.7% annualized increase in federal government debt, the largest since the record increase in the second quarter of 2020 that had fueled the first round of pandemic relief spending.
Business debt growth, meanwhile, moderated substantially, climbing at just a 1.9% annualized rate in the second quarter, its slowest growth since the final three months of 2020.
Here are some of the key takeaways from the Fed’s data:
- Household wealth is at a record high, thanks to the rally in the stock market and a rebound in property values.
- Household cash holdings are continuing to dwindle, as consumers shift their savings away from banks.
- Debt levels for households, businesses and governments are all rising, but the pace of increase is slowing.
- The main driver of the increase in debt is the federal government, which is ramping up borrowing to finance its budget deficit.
- Business debt growth is moderating, as businesses become more cautious about borrowing in the face of rising interest rates.
The Fed’s data is the latest sign that the US economy is recovering from the pandemic. However, the rising debt levels are a cause for concern, as they could weigh on economic growth in the future.
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