Asha G. Bangalore agb3@ntrs.com Households: Net Worth Advances, Debt Outstanding Declines June 9, 2 Households experienced another quarter of gains in their net worth without improvements in real estate wealth. In the first quarter, household net worth increased $943 billion to $58.1 trillion. The seven quarterly improvements in net worth have not been adequate to match the peak ($65.79 trillion) posted in the second quarter of 27. Higher equity prices helped to lift overall net worth as households recorded $298.5 billion of loss in their real estate portfolio. Chart 1 Households & Nonprofit Organizations: Net Worth NSA, Bil.$ 675 675 6 6 525 525 45 45 375 375 3 3 225 97 98 99 1 2 3 4 5 Source: Federal Reserve Board /Haver Analytics 6 7 8 9 225 At the same time, total outstanding debt of households has dropped (see Chart 2) during the last three years. In the first quarter, household debt fell to $13.3 trillion from $13.39 trillion in the previous quarter (the peak was $13.9 trillion in the first quarter of 28). Households also are showing a willingness to borrow, with non-mortgage debt (see Chart 3) accounting for the entire increase.
Chart 2 Households: Liabilities: Credit Market Debt SA, Bil$ 14 14 13 13 12 12 1 1 9 4 5 6 7 8 Source: Federal Reserve Board /Haver Analytics 9 9 Chart 3 6 Households: Liabilities: Consumer Credit Change - Period to Period SA, Bil$ Households: Liabilities: Home Mortgages Change - Period to Period SA, Bil$ 4 4 3 2-2 2 - -4 1 2 3 4 5 6 7 Sources: Federal Reserve Board /Haver Analytics 8 9-2 2
In the business sector, corporations accumulated a significant amount of debt in the first quarter (+$128 trillion), taking advantage of low interest rates. The large increase reflects expectations of higher interest rates as the economy improves. Chart 4 Nonfarm Nonfinancial Corp Bus: Liabs: Credit Mkt Instruments Change - Period to Period SA, Bil$ 225 225 15 15 75 75-75 1 2 3 4 5 6 7 Source: Federal Reserve Board /Haver Analytics 8 9-75 Government borrowing has slowed, with federal debt outstanding showing a $184 billion increase in the first quarter, the smallest quarterly increase since the recession began. State and local government borrowing fell in the first quarter (see Chart 5). 3
Chart 5 6 Federal Government: Liabilities: Credit Market Instruments Change - Period to Period SA, Bil$ State & Local Govt: Liabilities: Credit Market Instruments Change - Period to Period SA, Bil$ 6 4 4 2 2-2 1 2 3 4 5 6 7 Sources: Federal Reserve Board /Haver Analytics 8 9-2 Jobless Claims Still Holding at Elevated Level Initial jobless claims rose 1, to 427, during the week ended June 4. Continuing claims, which lag initial claims by one week, fell 71, to 3.676 million. The four-week moving average of initial claims has moved up from the low seen in March, while that of continuing claims are holding nearly steady (see Chart 6) in the past two months. The bottom line is that jobless claims are at unacceptable high levels despite the seven quarters of economic growth. 4
Chart 6 Unemployment Insurance: Initial Claims, 4-Week Moving Average SA,Thous Continuing Claims: 4-Week Moving Average SA, Thous 675 675 6 525 6 525 45 45 375 375 3 3 7 8 9 Sources: Department of Labor /Haver Analytics 225 Trade Gap Narrows in April Due to Special Factors The trade deficit narrowed roughly $3. billion to $43.68 billion in April, reflecting an increase in exports and a decline in imports. In real terms, the improvement in the trade deficit was larger than in nominal terms. The real trade deficit narrowed to $44.2 billion from $49.7 billion in March. 5
Chart 7 Trade Balance: Goods and Services, BOP Basis SA, Mil.$ -225-225 -3-3 -375-375 -45-45 -525-525 -6-6 -675 4 5 6 7 Source: Census Bureau /Haver Analytics 8 9-675 International Trade April 2 Trade Balance ($ billions) Exports (m-o-m % change) Imports (m-o-m % change) Goods & Services Goods Goods - 2$ Goods & Services Goods - 2$ Goods & Services Goods - 2$ Dec- -4.5-54.4-46.9 1.7 1.8 2.2 1.6 Jan- -47.9-61.7-51.6 2.2 1.5 5.4 4.3 Feb- -46. -59.7-49.9-1.4-3.5-2. -3.5 Mar- -46.8-61.1-49.7 4.9 4.5 4.2 2.8 Apr- -43.7-58.1-44.2 1.3.8 -.4-3.1 The decline in inflation adjusted imports of auto and parts is the second largest on record. The natural disasters of Japan in April accounted for the sharp drop in auto-related imports. This should be reversed in the near term as auto production resumes in Japan. 6
Chart 8 Imports: Automotive Vehicles, Parts, and Engines Change - Period to Period SA, Mil.Chn.25$ 3 3 2 2 - - -2-2 -3 95 Source: Bureau of the Census /Haver Analytics 5-3 Chart 9 Imports of Cars and Trucks From Japan (millions) 45 45 375 375 3 3 225 225 15 15 75 8 Source: Haver Analytics 9 75 7
In addition, the drop in oil imports after adjusting for inflation in April was large (-$2.8 billion, see Chart ) which appears to be partly due to higher prices. However, continued economic growth is most likely to change this occurrence. Chart Imports: Petroleum End-Use Commodity Category Change - Period to Period SA, Mil.Chn.25$ 6 6 4 4 2 2-2 -2-4 95 Source: Bureau of the Census /Haver Analytics 5-4 The narrowing of the trade gap is noteworthy and a plus for second quarter GDP but both these outsized declines will be reversed soon. The trade deficit narrowed vis-à-vis Mexico, Japan, Canada, and Euro-area but widened vis-à-vis China ($21.6 billion vs. $18. billion). 8