Household wealth dipped in spring

Associated Press

WASHINGTON

Americans’ wealth declined this spring for the first time in a year, as stocks and home values fell. At the same time, corporations increased the size of their cash stockpiles.

The combination could slow an already weak economy because it implies that families have less to spend and businesses are reluctant to expand.

Household net worth dropped 0.3 percent to $58.5 trillion in the April-June quarter, according to a Federal Reserve report released Friday. That followed three-straight quarterly increases.

The value of Americans’ stock portfolios fell 0.5 percent in the second quarter. Home values dropped 0.4 percent.

Corporations had a record $2 trillion in cash at the end of June, an increase of 4.5 percent from the January-March quarter.

The economy already is struggling with high unemployment and meager pay raises.

When people feel poorer, they spend less. That slows growth. Businesses then respond by cutting back on hiring and expansion plans. It can become a cycle.

Net worth is expected to fall even further in the July-September quarter because stocks plunged in late July and early August.

A key reason was the government said the economy barely grew in the first half of the year. Investors also reacted to lawmakers’ battle over raising the government’s borrowing limit and Standard & Poor’s downgrade of long-term U.S. debt.

“August put a big dent in whatever confidence consumers had left,” said Greg McBride, senior financial analyst at Bankrate.com. That’s largely why retail sales were flat last month, he added.