The Federal Reserve has released some key data in its quarterly “flow of funds” report that shows Americans actually saw a gain in wealth in the Second Quarter of 2009.  The Fed calculates this net worth as all assets minus liabilities.  And who said the stock market never helped anyone out?  Property prices may have fallen throughout the second quarter, but not stocks.  Wealth did not exactly track the stock market, but the Fed said wealth of U.S. households rose by 3.9% to $53.14 trillion from a level of $51.14 trillion in the first quarter. The drop during the first quarter was  -3.4%.

The DJIA ended the first quarter on March 31 at 7,608.92, and that figure was up 11% at 8,447.00 at the end of the quarter on June 30.  With the DJIA challenging 9,800, we might even have a better reading on the value of American wealth for the quarter ending in just two weeks.  The Federal Reserve data showed that financial assets rose 4.4% in Q2, but keep in mind that the S&P and DJIA are effectively up 50% from the lows of the panic selling in March.

But the de-leveraging has not been seen unanimously as U.S. non-financial debt rose at a 4.9% annual rate after a rise of 4.1% in Q1 based on government borrowing.  But the private debt contracted as household debt decreased at a 1.7% annualized rate while government debt expanded (by 28.2%, the fourth consecutive double-digit increase).  Home mortgage debt slid 1.4% and consumer credit dropped at a rate of 6.5%.

Also noted was that U.S. household net worth in the second quarter climbed to about 4.87 times disposable personal income, versus 4.75-times in Q1.

Non-Financial business borrowing fell by 1.8% in Q1, much more than the 0.2% drop in Q1.  That figure was the biggest decline in about 15 years.  Outstanding total borrowings of non-financial debt  was $34.35 trillion in Q2, up from $33.94 trillion in Q1.

There is an interesting note here though regarding a financing gap of the amount in which companies need to raise outside capital to finance cap-ex and operations.  This went to negative $155.8 billion in Q2 from a negative $43.9 billion figure in Q1.

California’s and Michigan’s woes are not the only woes out there in muni-land… The report shows that state and local government debt came in sharply higher by 8.3% in Q2, and that is after seeing a gain of 4.9% in Q1.

If you want to know how these figures compare to 2008 levels, the Commerce Department listed the U.S. 2008 Gross Domestic Product at $14.26 Trillion, while personal consumption expenditures was just over $10 billion.

As far as how this compares to the size of America’s top 25 public corporations, you can always look at our new 24/7 Wall St. Real-Time 500 Largest List that shows the real-time value of the 500 largest stocks in America by market cap.  The top 25 companies on that list have a combined value today over $3.65 trillion.

This is a very long report but can be found here at the Federal Reserve site.

Jon C. Ogg
September 17, 2009

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