Households still wealthy
Fall in assets not yet a major worry
HOUSEHOLD ASSETS in the United States had fallen a massive US$6,66 trillion by third quarter 2008 from a record level of $77,7 trillion reached in third quarter 2007, figures released by the US Federal Reserve show.
However, Stanlib economist Kevin Lings says US consumers remain wealthy on a net basis (that is, excluding debt). He says their net worth totalled $56,5 trillion at the end of third quarter 2008. That was $7 trillion below the all-time high achieved in third quarter 2007. Despite that decline Lings says the net worth of the US consumer equates to a respectable 529% of disposable income – that is, 5,29 times annual income after tax.
“That actually means the average US consumer is still extremely wealthy, despite the high level of debt and falling asset prices. The long-term average ratio (since 1960) of net wealth to disposable income has been 490% – which implies that, on average, US consumers are still wealthier now than during most of the past 50 years.”
The Fed figures also showed consumers are starting to reduce debt levels. Consumer debt fell by $7,9bn in November last year.