Deep Stock Losses Cause $1.3 Trillion Decline
According to a Federal Reserve report released on Thursday, U.S. household wealth experienced its biggest drop in a year during the third quarter. The report revealed that household net worth fell by about $1.3 trillion, or 0.9%, between July and September, bringing the total to $151 trillion. This decline was primarily due to a $1.7 trillion decrease in the value of equity holdings. However, the drop was partially offset by a rise in the value of real estate held by households, which reached a record high during the last quarter.
Stock Market Volatility and Recovery
This data from the Federal Reserve follows a volatile year for the stock market. In mid-2023, all three major indexes experienced significant losses due to concerns that the Federal Reserve would raise interest rates higher than anticipated and maintain them at peak levels for a longer period. Fortunately, these losses were quickly recovered, with the S&P 500 rising by nearly 11% since hitting its lowest point at the end of October.
Increasing Household Debt
The report also indicated that household debt continued to rise in the third quarter, increasing at a 2.5% annual rate. This growth was attributed to “somewhat slower growth” in both mortgage debt and non-mortgage consumer credit. Americans are increasingly relying on credit cards to cover everyday expenses, particularly due to high inflation. Earlier this year, credit card debt surpassed $1 trillion, while delinquencies reached an 11-year high in August.
Impact of High Inflation on U.S. Households
High inflation has created significant financial pressures for most U.S. households, as they face higher costs for essential items such as food, gasoline, and rent. Low-income Americans are disproportionately affected by these price fluctuations, as their already-stretched paychecks struggle to keep up with the rising expenses.
Although inflation has cooled down in recent months, it still remains at 3.7% compared to the same time last year, based on the latest data from the U.S. Department of Labor.
Click here to read more on Fox Business.