Americans' wealth grew 2.2 percent last quarter

WASHINGTON — After declining in the spring, Americans' wealth grew 2.2 percent in the July-September quarter as a rebound on Wall Street boosted stock portfolios.

Household net worth rose to nearly $55 trillion, even though the value of real estate holdings sank 3.7 percent, the Federal Reserve said Thursday.

That's far above the bottom hit during the recession: $49 trillion in the first quarter of 2009. Yet net worth would have to rise an additional 20 percent to regain its pre-recession peak of $66 trillion. That's a reminder of Americans' vast loss of wealth over the past three years.

Still, they are making steady, if still gradual strides in rebuilding their assets. And stocks have made additional gains over the past five weeks, further boosting wealth since the new quarter started Oct. 1.

The increased net worth is lifting hopes for the economy, because consumers tend to spend according to how wealthy they feel. And their spending drives about 70 percent of economic activity. Last quarter, consumers increased their spending at the fastest pace in nearly four years.

Net worth is the value of assets such as homes and investments, minus debts like mortgages and credit cards. Its bounce-back last quarter came after household wealth had dropped 2.6 percent in the spring, the first decline since early 2009. At the time, investors' fears over Europe's debt crisis had shriveled stock portfolios.

Since then, stocks have surged. And household wealth rose in the July-September quarter as a result. The value of households' stock portfolios reached $7.8 trillion, a nearly 14 percent increase from the second quarter.

Buoyed by its strongest September since 1939, the stock market enjoyed by far its best quarterly showing in a year during the third quarter. The Standard & Poor's 500, a broad gauge of the market's performance, climbed 10.7 percent.

The last quarter to produce higher returns was the July-September period of 2009 — midway through a 13-month bull rally — when the S&P 500 jumped about 17 percent.

It all translates into more money for the roughly half of U.S. households that own stocks or stock mutual funds. As measured by the Dow Jones U.S. Total Stock Market Index, stock values gained $1.4 trillion in value during the quarter and $1.2 trillion more between Sept. 30 and the close of trading Wednesday. About $15 trillion is now invested in U.S. stocks, based on the Dow Jones U.S. Total Stock Market Index.