The Federal Reserve yesterday afternoon released data on household balance sheets and income for the third quarter of 2016, and the results look favorable. Household net worth rose to a record $90.2 trillion on gains in assets, amid modest increases in liabilities.
Equity holdings rose by $494 billion over the previous quarter, while the value of real estate grew by $554 billion. Total assets rose by $1.7 trillion. On the liabilities side, total liabilities rose by $152 billion, a 4 percent growth rate. Taking on more debt may be a sign that Americans are more confident in their own economic situation.
In another positive development, household savings rates remained at a relatively healthy level. Household savings measured in the flow-of-funds accounts tend to be volatile quarter to quarter, but on a two-year moving average basis, the household savings rate is slightly above 10 percent, well above the low of a 4.4 percent rate in 2007. But that still remains below the mid-teens rates that were prevalent from the mid-1960s through the mid-1980s.
The combination of gains in jobs and incomes, along with solid household balance sheets, rising net worth, and improving consumer attitudes are all positive developments for the economic outlook.
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