WASHINGTON — Americans’ wealth declined this spring for the first time in a year, as stocks and home values fell. At the same time, corporations increased the size of their cash stockpiles. The combination could slow an already weak economy because it implies that families have less to spend and businesses are reluctant to expand.
Household net worth dropped 0.3 percent to $58.5 trillion in the April-June quarter, according to the Federal Reserve’s Flow of Funds report released Friday. The decline followed three straight quarterly increases.
The value of Americans’ stock portfolios fell 0.5 percent in the second quarter. Home values dropped 0.4 percent.
Corporations held a record $2 trillion in cash at the end of June, up 4.5 percent from the January-March quarter.
Consumers are already struggling with high unemployment and meager pay raises. When people feel poorer, they spend less. That slows growth. Businesses then respond by cutting back on hiring and expansion plans.
Net worth is expected to fall even further in the July-September quarter because stocks plunged in late July and early August. A key reason was the government’s saying the economy barely grew in the first half of the year. Investors also reacted to lawmakers’ battle over raising the government’s borrowing limit and Standard & Poor’s downgrade of long-term U.S. debt. The Associated Press
