The fallout of a high inflation-laden economy is being borne by US households. The wealth fell by a record $6.1 trillion in the second quarter to its lowest in a year as a bear market in stocks far outweighed further gains in real estate values, a Federal Reserve report showed on Friday.
The report stated that the household net income slid to $143.8 trillion at the end of June from $149.9 trillion, recorded in March, earlier this year. Through June, Americans’ collective wealth had fallen by more than $6.2 trillion from a record $150 trillion at the end of 2021.
The drop was historic as it breached the previous record by more than $30 billion
The drop was historic as it breached the previous record by more than $30 billion, recorded two years earlier when the COVID-19 pandemic wreaked havoc in the market during its initial days. That decline in the second quarter of 2020, still stands as the largest on a percentage basis at 5.2% versus 4.1% in the most recent report.
While the US household income is taking a beating, household expenditures are touching new highs. Reportedly, the average cost of raising a child has grown to over $300,000 in the USA, primarily due to sky-high inflation rates.
According to a Bloomberg report, the average amount required to raise a child of a middle-income married couple, born in 2015, till he/she is 17 years old or in high school will be $310,605; which comes down to roughly $18,271 per year.
The US has been facing its worst bout of economic slowdown in recent times
The latest fall was led by a $7.7 trillion decline in stock market values as equities slid into a bear market in the first half of the year on worries about surging inflation and the Fed’s aggressive response with interest rate increases. The equity market drop outstripped a $1.4 trillion gain in real estate values.
Total nonfinancial debt rose at a 6.5% annualized rate after rising at an 8.3% rate in the first quarter, the Fed data showed. Household debt growth also slowed to a 7.4% annual rate from 8.3% in the first three months of the year, while business, federal, state, and local government debt levels all rose.
Moreover, a recent Bloomberg survey stated that there was a 40 percent chance that the country will slip into a recession by next year.