American Net Worth Record Level Boosts Economic Resilience

New data from the Federal Reserve reveal that Americans are wealthier than ever before. The cumulative net worth of Americans reached an impressive $163.8 trillion at the end of the second quarter, according to the latest Financial Accounts of the United States report released on Thursday. This record value represents an almost 2% increase from the first quarter, which stood at $161 trillion. The gains were mainly driven by the ongoing price surge in the US housing market. A notable increase in real estate value by $1.8 trillion, as well as a $700 billion gain in equities, also contributed to the rise. The stock market reached a record high in June, as did the S&P CoreLogic Case-Shiller U.S. National Home Price Index. In addition to the rise in net worth, household debts increased by nearly 1% from the first quarter to $20.2 trillion, while holdings in cash and cash-like securities slightly decreased to $18.44 trillion. Overall, a healthy financial picture is emerging for the US consumer, who possesses ample cash and appreciating assets. This is one of the reasons why the US economy has remained so resilient despite the Fed's aggressive interest rate hikes over the past two years. Economist David Rosenberg noted in a memo last month that strong spending data in July was likely fueled by the so-called "Wealth Effect," where consumers tend to spend more as their assets increase in value. The strong retail sales in July were "very likely the product of the Wealth Effect, which has continued to boost consumption in the higher-end segment," said Rosenberg. But it's not just rising assets that are powering American consumers; rising wages are also playing a role. Data from the Census Bureau released earlier this week show that the median household income in the US increased by 4% to a record high of $80,610 in 2023. This significant increase represents the largest annual jump in inflation-adjusted income since 2019. All in all, based on the latest economic data, it appears that the US consumer is more than thriving.