Household Wealth on the Up, but Business Still Hoarding Cash
After posting six consecutive days of losses, the Dow Jones Industrial Average (DJIA) is finally rebounding today, with stocks up around 1% on the hour. Good news from economic indicators in the way of narrowing trade deficits, declining household debts, and better than expected wholesale inventory reports seem to be sustaining the rally. Adding fuel to the value-adding trade-flame is the Federal Reserve’s latest report on U.S. Household Wealth.
According to the Fed, household wealth in the first quarter rose by $850 billion dollars and now stands at a total of $58.1 trillion. This marks the indicators’ highest point since prehistoric times (before the financial crisis), matching levels reached in March of 2007. Bearing more good news, the Fed claims that household debt is down by a mark of 2% nation-wide, due largely to lower mortgage rates and defaults.
As consumer debt shrank, credit lines grew, with Consumer Credit reportedly capping a 2.4% increase over last year’s first quarter. Local and state Governments too (not just Chris Christie) are finally walking the walk and talking the talk, leading the way in debt reduction (2.9%) by the steepest margin since 1996. Total government debt saw the smallest rise percentage-wise since the first quarter of 2007, but still grew at a pace of 7.8%
Another sign of progress for the economy, non-financial U.S. businesses increased their foreign borrowing by the highest amount since 2008. However, corporate cash reserves remain unusually high, hitting a record mark of $1.91 trillion last quarter, a sign that businesses are still far from sold on the merits of the current economic “recovery.”