E Shrinking Household Debts Provides Further Evidence Of A Normalization Of The U.S. Economy

“Americans are richer than ever. According to latest flow of funds data from the Federal Reserve, households and non-profit organizations had a record net worth of $96.9 trillion at the end of the third quarter. Assets grew much faster than liabilities in Q3 thanks to the stock market rally and a buoyant housing market which lifted values of corporate equities and real estate held by households. So much so that households and non-profit organizations saw their debt fall relative to their net worth. As today’s Hot Chart shows, the debt to net worth ratio is now at a 17-year low. Similarly, financial obligations as a share of disposable income ? a ratio of flows as opposed to the above-mentioned ratio of stock variables ? is also low by historic standards. Those favourable ratios explain the healthy contribution of consumption spending to U.S. real GDP growth this year and also bode well for 2018.” (Krishen Rangasamy, Hot Charts, NBF, Dec. 2007)

The wealth of American households (defined as household net worth) continued to expand in 2017. According to the latest flow of funds data published by the Federal Reserve, the net worth of American household and non-profit organizations rose to $96.9 trillion during the third quarter of 2017.

The value of directly and indirectly held corporate equities increased $1.1 trillion and the value of real estate increased $0.4 trillion.

Household debt also increased in the third quarter (at an annual rate of 3.7%) which was a slower pace than the growth in household assets.

Domestic nonfinancial debt outstanding was $48.6 trillion at the end of the third quarter of 2017, of which household debt was $15.1 trillion, nonfinancial business debt was $14.1 trillion, and total government debt was $19.5 trillion.

Domestic nonfinancial debt expanded 6.2 percent at a seasonally adjusted annual rate in the third quarter of 2017, up from an annual rate of 3.8 percent in the previous quarter.

Although lower- and middle-income families experienced overall gains in wealth in recent years, they were not large enough to make up for the losses these families sustained during the Great Recession.