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Economy in Brief

US Flow of Funds: Households' Net Worth Stable
by Tom Moeller September 19, 2006

The net worth of the US household sector inched up just 0.1% last quarter versus 1Q'06 to $53.3 trillion. The gain totaled, however, 7.9% versus the second quarter of last year.

On the asset side of the ledger, total assets of households and nonprofit organizations rose 8.4% y/y. Households' ownership of real estate rose 10.5% in value to over $20 trillion. Mutual fund share holdings rose 18.0% though the value of corporate equities held directly by households fell 1.5%. The value of money market shares rose 14.6% after a 6.0% gain last year and Treasury security holdings rose 20.6% y/y in value after a 2.2% decline during 2005.

Credit market debt outstanding held by all sectors of the economy grew 8.9%, about steady with last year's pace. The federal government's debt grew 5.9% y/y but U.S. households increased their borrowing at nearly twice that rate, 11.0%. Home mortgage liabilities grew 12.6% y/y after 14% gains during the prior three years. Consumer credit increased 3.9% y/y, the same as last year's growth rate, but households' obligations in the form of bank loans more than doubled versus 2Q of last year and also doubled during all of 2005.

Borrowing by nonfinancial corporations continued strong, up 11.9%, following double digit growth during 2004 & 2005. During the last forty years there has been a 40% correlation between the y/y growth in corporate borrowing and the growth in nonresidential fixed investment.

Foreign sector holdings of US assets continued to surge, by 13.3% y/y. That was stable with last year's growth rate but it raised foreigners' ownership of U.S. credit outstanding to 14.1% versus 10.0% ten years ago.

Intangible Capital and Economic Growth from the Federal Reserve Board is available here.

Flow of Funds (Y/Y Chg.) % of Total 2Q'06 1Q'06 2005 2004 2003
Total Credit Market Debt Outstanding 8.9% 9.2% 8.9% 8.9% 9.1%
    Federal Government 12% 5.9% 6.5% 7.0% 9.0% 10.9%
    Households 27% 11.0% 11.8% 11.7% 11.7% 11.8%
    Nonfinancial Corporate Business 14% 6.8% 6.1% 5.5% 3.6% 2.2%
  Financial Sectors 32% 9.1% 8.9% 8.2% 8.1% 9.9%
Net Worth: Households & Nonprofit Organizations (Trillions) $53.3 $53.3 $51.8 $48.0 $44.0
  Tangible Assets: Households $26.3 $25.8 $25.2 $22.5 $20.4
   Financial Assets: Households $39.8 $39.9 $38.8 $36.4 $33.5
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