11.2 TRILLION

Reuters
U.S. 2008 household wealth fell $11.2 trillion: Fed


WASHINGTON (Reuters) – U.S. households suffered a record-large 9 percent drop in wealth and pared debt in the fourth quarter as a deepening recession battered confidence and finances, Federal Reserve data showed on Thursday.

Household net worth dropped by $5.1 trillion from the prior quarter to $51.5 trillion. For the full year, net worth dropped by $11.2 trillion, reflecting steep declines in the housing and stock markets.

The declines in household net worth were the largest since quarterly and annual records began in 1951 and 1946, respectively, the Fed said.

Since a second-quarter 2007 peak of $64.4 trillion, household wealth has dropped by about 20 percent. That has put a chill on consumer spending and added to Americans' anxiety about economic well-being.

The U.S. central bank's quarterly Flow of Funds report also showed that household borrowing contracted at a 2 percent annual rate in the fourth quarter, after increasing at a 0.2 percent pace in the previous period. This was the first quarterly decline on record.

Home mortgage debt fell at a 1.6 percent pace -- the third consecutive quarter of declines -- and consumer credit dropped at a 3.2 percent rate.

Businesses slowed their pace of borrowing to 1.7 percent from a 4.1 percent rate in the third quarter. The biggest jump in borrowing came from the federal government, coming in at a 37 percent rate in the fourth quarter.

At the end of the fourth quarter, domestic nonfinancial debt outstanding totaled $33.5 trillion, with households accounting for $13.8 trillion, nonfinancial businesses $11.1 trillion and government debt of $8.6 trillion.