The stirrings of trouble in the stock market this summer helped sap U.S. households of their wealth in the second quarter.
Household net worth — the difference between value of the assets and liabilities of U.S. households — fell by $150 billion during the quarter to $58.5 trillion, according to a new report from the Federal Reserve. Household assets fell 0.2 percent and total liabilities were flat versus the first quarter.
Gregory Daco, U.S. economist at IHS Global Insight, said the stock market collapse during August would help drive household wealth down another nearly $1.5 trillion in the third quarter.
“With the housing market still familiarizing with the abyss, a stock market loss was the last thing consumers needed,” Daco said in an analysis. “The third quarter will likely be one to remember as the steepest household net worth decline since the early days of the 2007-2009 recession. Indeed the steep stock market losses incurred since early August will combine with the poor housing market for a lethal mix. This is not good news for consumers.”
Although sales have not been as strong as expected earlier in the year, retailers, and particularly those in the mid and upper tiers, have largely not reported a sharp pull back by consumers. Regardless of expectations, companies across the price spectrum have freshened up their battle plans and say they are prepared to react if consumers pull back dramatically.
Markets have been gaining ground in recent days as European policy makers try to find a way to keep the Euro zone’s debt crisis from spiraling completely out of control.
On Friday it was the Asian markets leading the way up and the Nikkei 225 gained 2.3 percent in Tokyo as the Hang Seng Index rose 1.4 percent in Hong Kong.
In Europe, the DAX gained 1.2 percent in Frankfurt and the FTSE 100 rose 0.6 percent in London. And on Wall Street, the S&P Retail Index increased 1.7 percent, or 9.07 points, to 533.17, as the Dow Jones Industrial Average orse 0.7 percent, or 75.91 points, to 11,509.99.