CERF Blog
The Federal Reserve released its 2010 quarter 4 Flow of Funds Accounts today. The 125-page press release and the related database includes a huge volume of data on all things financial for the United States.
I will focus my comments on debt levels and on the wealth of the household sector.
Quarter 4 debt of the domestic nonfinancial sectors rose a seasonally-adjusted annual rate of about 5 percent. This breaks down to private sector debt up 1.25 percent and public sector debt up 12.75 percent. The private sector debt consists of household debt, which declined 0.5 percent, and business debt which rose 3.5 percent. The public sector debt increase was driven by 8 percent and 20 percent respective increases of state/local and federal debt.
Fourth quarter U.S. household sector wealth increased by $2.1 trillion, driven by gains in equities and funds that are influenced by equities, mutual funds and pension funds. The value of credit market instruments and deposits rose a lessor extent. The wealth data are not seasonally adjusted.
The wealth gain occurred despite a fall in housing assets of $185 billion to $18.19 trillion, the lowest level since 2003, and the second consecutive quarterly decline. This fall contributed to a fall in owner’s equity in household real estate of over $200 billion and a fall of home equity as a share of housing assets from 39.1 to 38.5 percent.
The main indicator of small business vitality in this report, the equity of noncorporate business, increased very slightly.
From this report, I see that the United States real estate sector is still very weak. I also see that the household sector is indeed reducing its debt levels, but I worry that the pace is too slow. I carry these worries with me into our model run for our March 24 United States and California Economic Forecast.