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Household net worth edged down to $149.3 trillion from a record
$149.8 trillion at the end of last year, the Fed's quarterly
snapshot of the national balance sheet showed.
The drop was driven by a $3 trillion fall in the value of
corporate equities - a plunge that has worsened in the current
quarter - while real estate values climbed another $1.7
trillion.
It was the first decline in household wealth since the first
quarter of 2020, when the onset of the coronavirus pandemic
shook financial markets and caused a short but deep recession.
Still, the report showed household balance sheets overall
remained healthy through the first three months of the year -
some $32.5 trillion above pre-pandemic levels - and looked
likely to continue to support strength in consumer spending in
the face of high inflation.
Of particular note, bank account balances rose, with checkable
deposits and currency rising about $210 billion to $4.47
trillion, and time and savings deposits up about $90 billion to
$11.28 trillion.
That added cash may help maintain consumer outlays even as the
Fed seeks to tamp down demand and slow price rises.
As yet is unclear whether the net effect will be to cushion
decelerating growth as the Fed raises interest rates so as to
achieve the desired soft-landing, or to dull the impact of
higher borrowing costs so much that the central bank ends up
needing to push up rates so far and fast that it triggers a
recession.
So far, the long-awaited consumer shift from buying goods to
buying more services appears to have simply pushed inflation
pressures over into services, rather than cooled price pressures
overall
Stocks have continued weakening into the second quarter over
concern about a surge in inflation to 40-year highs and whether
the Fed's aggressive response to it could stall the economy. The
decline suggests Americans' wealth likely took another hit from
the start of April onward.
(Reporting by Lindsay Dunsmuir, Dan Burns and Ann Saphir;
Editing by Chizu Nomiyama and Marguerita Choy)
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