By Dave Carpenter & Jeannine Aversa, AP Business Writers
WASHINGTON (AP) — Americans are recovering their shrunken wealth — gradually.
Household net worth rose last quarter, mainly because the healing economy boosted stock portfolios. But the gain was slight. And it was less than in the previous two quarters.
The Federal Reserve said Thursday that net worth rose 1.3% in the fourth quarter to $54.2 trillion. It marked the third straight quarter of gains. But economists say consumers would need a stronger and more prolonged increase in their wealth to persuade them to ratchet up spending.
Net worth had risen by a more robust 4.5% in the second quarter of 2009 and an even faster 5.5% in the third quarter. Net worth is the value of assets such as homes, checking accounts and investments minus debts like mortgages and credit cards.
Even with the gain, Americans' net worth would have to rise an additional 21% just to get back to its pre-recession peak of $65.9 trillion. That illustrates Americans' vast loss of wealth from the worst downturn since the 1930s.Growth in stock portfolios delivered the biggest lift to net worth in the October-to-December period. The value of stocks rose by nearly 4% to $7.7 trillion. Higher home prices helped a bit. The value of real-estate holdings edged up 0.2%.
During the recession, which began in December 2007, household net worth had plunged as low as $48.5 trillion in the first quarter of 2009. Stock holdings and home values nose-dived. As their net worth evaporated, Americans felt less inclined to spend.
For all of last year, consumer spending dropped 0.6%. This year, as wealth, the economy and financial conditions slowly recover, consumer spending is projected to grow around a modest 2.2%, according to the National Association for Business Economics.