US household worth up $1.63t in Q1
washington — Household wealth in the US climbed in the first quarter as home values increased and stock prices continued to advance.
Net worth for households and non-profit groups increased by $1.63 trillion from January through March, or two per cent from the previous three months, to $84.9 trillion, the Federal Reserve said from Washington in its financial accounts report, previously known as the flow of funds survey.
Gains in stock portfolios and higher property values helped fortify household balance sheets during first three months of 2015 even as the broader economy stumbled. Sustained progress in the labour market that is starting to spark faster wage growth will give American consumers the wherewithal to boost spending.
“Now that real estate assets are increasing as well, household net worth is broadening out,” Dana Saporta, an economist at Credit Suisse Securities in New York, said before the report.
“The recovery in general is getting deeper and broader, and that’s a good sign.”
The value of financial assets owned by American households and non-profit groups, including stocks and pension-fund holdings, increased by $1.07 trillion in the first quarter, the Fed report showed. The Standard & Poor’s 500 Index climbed 0.4 per cent from December 31 through March 31.
Household real-estate assets climbed by $472.5 billion, according to the data. Owners’ equity as a share of total household real-estate holdings increased to 55.6 per cent last quarter from 54.6 per cent in the previous three months.
A pickup in the industry during its busier warm-weather selling seasons should help underpin household wealth. New-home sales rose in April to their thirdstrongest pace in more than seven years, according to Commerce Department data. Purchases of existing homes that month showed a 5.04 million annual rate, beating the 4.97 million average pace in the first quarter.
The rise in household balance sheets may be starting to translate to stronger consumer spending. Retail purchases climbed 1.2 per cent in May, according to a Commerce Department report.
The gain was broad-based with 11 of 13 major categories showing increases.
Household debt increased at a 2.2 per cent annual rate in the first quarter, the Fed report showed. Mortgage borrowing rose at a 0.4 per cent pace. Other forms of consumer credit, including auto and student loans, climbed at a seven per cent pace.
Fed policy
Federal Reserve policy makers will be looking for signs that household purchases that make up the largest part of the economy don’t take away from prospects for growth in the months ahead. The central bankers, who next meet June 16 and 17 in Washington, are weighing when to raise the benchmark interest rate for the first time since 2006.
Persistent job gains might help Americans feel wealthy enough to spend. Employers added 280,000 jobs in May, the most in five months, after a 221,000 April advance. An increase in the number of people entering the labour force caused the jobless rate to creep up to 5.5 per cent from 5.4 per cent, which was the lowest since May 2008.
Wage growth also has begun to show signs of life. Average pay for all civilian workers climbed 4.2 per cent in the first quarter from the same period in 2014 to $22.88 an hour, Labour Department figures showed on Wednesday. That compares with a four per cent year-over-year gain in the fourth quarter and is the strongest since July-September 2006.
Average hourly earnings reported with the Labour Department’s monthly jobs figures accelerated in May to a 2.3 per cent year-overyear pace, the fastest since August 2013.
Total non-financial debt increased at a 2.8 per cent annual pace last quarter, Thursday’s Fed report also showed. Federal government obligations fell 0.4 per cent, while business borrowing increased 6.6 per cent. State and local government debt advanced at a 4.8 per cent pace. —