Household wealth in the U.S. climbed in the second quarter, reflecting stock-market gains that are mostly benefiting upper-income Americans.
Net worth for households and non-profit groups increased by $1.39 trillion from April through June, or 1.7 percent from the previous three months, to $81.5 trillion, the Federal Reserve’s financial accounts report in Washington.
The Standard & Poor’s 500 Index’s longest streak of quarterly gains since 1998 combined with home-price appreciation helped to bolster Americans’ finances last quarter. A strengthening job market also is giving households the means to sustain their purchases, which make up about 70 percent of the economy.
“Americans’ balance sheets are in good shape,” Jennifer Lee, a senior economist at BMO Capital Markets in Toronto, said before the report. “The stock market did extremely well over the second quarter, home prices are rising and companies are hiring. All these things create a good backdrop for the U.S. consumer.”
The value of financial assets owned by American households, including stocks and pension-fund holdings, increased by $1.27 trillion in the second quarter, the Fed report showed.
The S&P 500 index completed a sixth quarterly gain in the April through June period, climbing 4.7 percent. The gauge has advanced further since then.
Household real-estate assets climbed by $202 billion, according to the flow of funds data. Owners’ equity as a share of total household real-estate holdings increased to 53.6 percent last quarter from 53.2 percent in the previous three months.
A cooling housing market may limit the gains in household wealth. The S&P/Case-Shiller index of property values rose 8.1 percent in the year ended in June, the smallest 12-month increase since January 2013, an Aug. 26 report from the group showed.
A strengthening labor market will help provide an offset. Unemployment in August fell to 6.1 percent, matching the lowest level since September 2008. Monthly payrolls have grown an average 215,000 so far this year, up from 197,000 for the same period in 2013.
Gains in household wealth are giving Americans more confidence to borrow, the flow of funds report showed. Household debt increased at a 3.6 percent annualized rate from April through June. Consumer credit, including auto and student loans, climbed at an 8.1 percent pace, while mortgage borrowing increased at a 0.4 percent rate.
Some of the wealth is going toward vehicle purchases. Sales of cars and light trucks rose to a 17.5 million annualized rate in August, the highest since January 2006, from a 16.4 million pace a month earlier, according to data from Ward’s Automotive Group.
The report also showed that total non-financial debt advanced at a 3.8 percent annualized pace last quarter, with a 6.3 percent gain in business borrowing. State and local government debt increased at a 1.2 percent pace and obligations of federal agencies climbed 2.5 percent.
Household net worth also is getting help from the Federal Reserve’s accommodative stance. Policy makers, who finished a two-day meeting Wednesday, maintained a commitment to keep interest rates near zero for a “considerable time” after asset purchases are completed, saying the economy is expanding at a moderate pace and inflation is below its goal.
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