Thursday, December 8, 2011

Household Net Worth Fell $2.4 Trillion In Third Quarter

Household net worth fell $2.4 trillion to $57.4 trillion in the third quarter, its lowest level in a year, according to the Z1 report (Flow of Funds Accounts of the United States) released by the Federal Reserve this afternoon. This decline marks two consecutive quarters of declining household net worth following three straight quarters of growth. Household net worth remains well short of the 2007 high of $65.6 trillion.

Household net worth fell in relation to disposable personal income as well, totaling 496%, down from 517% reported in the second quarter.

The decline in net worth was due primarily to a fall in the value of financial assets, which fell 5.2% in the third quarter. Also driving the decline was a slight fall in home values (0.6%).

Although the third quarter was poor for equities, they saw a significant rebound in October with the Dow Jones Industrial Average rising 1,042 points, or 9.5%, its best performance since October 2002. As a result of this we are likely to see a slight improvement in fourth quarter household net worth, barring any unforeseen declines in market values.

The savings rate fell drastically in the third quarter to an average of 3.8%, down from 5.3% in the second quarter. This is its lowest quarterly average since the fourth quarter of 2007. Consumers have faced falling real incomes and have had to decrease savings rates in order to keep consumption steady.

Read the report.

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