The Federal Reserve released a report Thursday showing that the U.S. household net worth reached its highest level ever with about $83 trillion reported for the fourth quarter. Analysts currently hope that the good news may boost consumer spending and strengthen economic growth this year.
According to the Federal Reserve, the current level of the US household wealth – the value of all assets, including house value and stocks, minus debts – stems from the gains in stock exchange, as well as from the prices on the real-estate market.
Additionally, the federal report also showed that the combined wealth of all Americans rose by about 2 percent to $82.9 trillion in the last three months of 2014. However, the report wasn’t adjusted for demographic growth and inflation.
In the last quarter, the values of the stocks and other financial assets owned by the U.S. households rose by $742 billion, while the S&P index gained 4.4 percent. Over the last year, the index rose by 11.4 percent. Unfortunately, much of the stock gains belong to a selected few who tend to save, rather than reinvest.
Still, the second-best asset for Americans – the real estate value – jumped $356 billion during the forth quarter.
“More people are participating in the wealth creation in America,”
said Joseph Carson, an analysts at a major asset management firm.
Economists also hope that the current figures, the low unemployment rates, and the saving Americans get from lower gas prices may motivate U.S. buyers spend more and fuel the current economic growth.
Also, the news is good for other economies since China heavily relies on the U.S. for its exports, while the E.U. experienced hard times since the emergence of the current economic crisis, but it is slowly recovering as weak Euro greatly helps its exports.
But other reports show that the wealth gains do not benefit all Americans, many of whom still have a hard time in supporting their families or get rid of their debts. Recently, retail-funded research revealed quite disappointing facts, and a consumer profile that tends to be more cautious and save more.
The consumer confidence index stalled early this year, while retailers reported weak sales. Moreover, if we gauge the current level of the Americans’ wealth for inflation, productivity, and population growth, we’ll see that the real figures are well bellow the levels before the economic crisis emergence, analysts estimate. For instance, in 2014 the wealth-to-income ratio was 630 percent, while nine years ago it stood at 651 percent, economists explained.
Other good news is that Americans cut their debt burdens by a great deal as compared to pre-recession levels. Also the levels of home equity slightly improved from 54 percent in the third quarter to 54.5 percent in Q4.
Economists claim that this improvement in the balance sheets of Americans may be the most important triggers to “big-ticket item spending” this year. Additionally, better finances may boost the consumer confidence once more and U.S. residents will start borrowing and spending more.
But Americans seem to get loans more, since analysts reported a 6 percent increase for the last year in consumer credits.