US Household Net Worth Climbs $2.19 Trillion in Second Quarter
- Net worth increase is markedly higher than the first quarter increase of $1.3 trillion
- Total household wealth is now $123 trillion while debt is $15.7 trillion and government debt is $21 trillion
- The largest contributor to net worth increase was corporate equity, adding $850 billion in Q2
US household net worth climbed $2.19 trillion in the second quarter propelled by corporate equity gains as the S&P 500 looks to retake record levels. Second quarter growth is notably higher compared to the first quarter where household wealth grew $1.3 trillion. The growth is likely driven by tax cuts enacted by the Trump administration and the strong performance of US equities.
Real estate contributed $560 billion in the second quarter while the ‘other’ category added $780 billion. ‘Other’ consists of wages, pension entitlements, and assets like durable goods. Together, profits were enough to outpace the growth in liabilities which grew 2.3% in the quarter to total $15.7 trillion.
Corporate profits should continue to drive household wealth in the third quarter as tax cuts continue to impact profit margins and share prices. Similarly, wage growth and high employment levels should pick up any slack in other sectors as jobless claims fell to a multi-year low on Thursday.
Headwinds for household wealth are present in the ongoing trade wars and tightening monetary policy but their impact will be modest in the third quarter which ends September 30th. To see when the report for the third quarter is due, consult our economic calendar.
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As expected, the Dollar offered little reaction to the report as the figure falls in line with other indicators we have seen in recent weeks. First with small business confidence hitting 35-year high and then with ISM manufacturing at the highest levels since 2004. Further, a leading indicator in consumer confidence also hit an 18-year high in August.
US Dollar Basket Price Chart 5-Minute, September 20th
Much like the Dollar basket, the S&P 500 had reacted to other news and was firmly in the green before the report crossed the wires.
S&P 500 Price Chart 1-Minute, September 20th
Given the robust data and confidence readings, it seems the US is becoming further disjointed from global standards. As US equities continue to press higher, how much more room they have to run?
--Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
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