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Economy in Brief

Households' Net Worth A Record in 4Q04, But Not Versus IncomeĀ 
by Tom Moeller March 10, 2005

The net worth of the US household sector rose 8.8% last quarter versus 4Q03 to a record $48.5 trillion. The gain failed, however, to lift net worth to a new high versus income. In fact the increase lagged the 12.5% rise in net worth during 2003 and the ratio versus disposable income rose only slightly y/y to 5.5 times versus a peak of 6.2 times in 1999.

Household sector asset values rose 9.4% y/y as the value of real estate holdings jumped 12.9%. Financial asset values rose 7.8%, half the gain in 2003 and held back by higher interest rates which reduced the growth in treasury issues to 0.6%. Money market share values fell 9.3% but foreign deposits, checkable deposits and time & savings deposits all soared. Higher prices in the stock market helped lift the value of mutual fund shares by 18.7% and the value of corporate equities held directly rose 2.3%.

Foreign sector holdings of total US assets rose 20.7% y/y raising the foreign sector's ownership share of total US financial assets to a record 12.7% versus 7.0% ten years ago.

Growth in total credit market debt outstanding was steady at 8.2% y/y. The federal government and US households continued growing debt at or about a double digit rate and non-financial corporations' debt grew a lesser 4.8% y/y though it sped up in 4Q.

Individuals' total liabilities rose 10.7% last year, the fastest since 2000, as mortgage debt grew 13.6% and consumer credit rose 4.9%.

Flow of Funds  % of Total 4Q04 
(%, AR)
3Q04
  (%, AR)
2004
  (%, Y/Y)
2003
  (%, Y/Y)
2002
  (%, Y/Y)
Total Credit Market Debt Outstanding 9.8% 8.9% 8.2% 8.8% 7.5%
    Federal Government 12% 9.9% 8.2% 9.0% 10.9% 7.6%
    Households 28% 11.7% 14.0% 11.2% 10.3% 9.6%
    Nonfinancial Corporate Business 14% 9.2% 4.8% 4.8% 3.5% 0.6%
  Financial Sectors 33% 7.9% 7.6% 7.3% 10.4% 9.3%
Total Credit Market Assets 9.8% 8.9% 8.2% 8.8% 7.5%
  Household Sector 6% 9.8% 11.7% 1.0% 8.1% -4.7%
  Rest of World 13% 21.5% 14.9% 20.7% 14.8% 16.4%
  US Financial Sectors 76% 8.1% 7.9% 7.1% 8.2% 7.8%
Net Worth: Households & Nonprofit Organizations (Trillions) $48.5 $46.6 $48.5 $44.6 $39.6
  Tangible Assets $22.5 $22.0 $22.5 $20.1 $18.4
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