U.S. Household Wealth Falls for Second Straight Quarter, but Analysts See Stronger Q4

U.S. Economy and Society
The United States is, in many ways, a mystical and enchanting place: the creation of (largely) Protestants in the 18th century, in the 19th and 20th centuries it became a sanctuary for Catholics and Jews, and now, for just about everyone else. Pictured: the Statue of Liberty (left) in New York Harbor greets all; the Empire State Building in Midtown Manhattan is in the background, with the Freedom Tower (1 World Trade Center) in Lower Manhattan, under construction, in the foreground. REUTERS

U.S. household wealth fell for the second straight quarter from July to September, dropping by $2.2 trillion (4.1 percent) to $57.4 trillion, the Federal Reserve stated in its flow of funds report. The decline comes to about $7,800 for every U.S. resident.

A comparison between the reports of the two straight quarters suggests that the non-financial debt of the U.S. is on the rise.

At the end of the third quarter of 2011, domestic non-financial debt outstanding was $37.8 trillion, of which household debt was $13.2 trillion, non-financial business debt was $11.5 trillion, and total government debt was $13.1 trillion.

At the end of the second quarter of 2011, domestic non-financial debt outstanding was $36.5 trillion, household debt $13.3 trillion, non-financial business debt just over $11 trillion, and total government debt was $12.2 trillion.

In last three months, the domestic non-financial debt outstanding increased by $1.3 trillion in the last three months.

Non-financial business debt rose at an annual rate of 3.5 percent in the third quarter, 1 percent slower than the pace registered in the second quarter. Corporate bonds outstanding and business loans increased while commercial mortgage debt continued to decline.

In the last quarter, non-financial business debt increased at an annual rate of 4 percent.

Analysts are hoping for a better fourth quarter for the household net worth as the U.S. stocks have performed well at the end of the third quarter.

IHS expects a strong fourth-quarter rebound in household net worth resulting mostly from a rally in stock prices, Gregory Daco, principal U.S. economist for IHS Global Insight, wrote in a note Thursday.

This should provide some support to consumer spending as employment growth continues to make progress and consumers cheer up ahead of the holidays, he added.

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