June 5, 2014 / 4:55 PM / 4 years ago

UPDATE 2-U.S. household net worth hits record high on stocks, property

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WASHINGTON, June 5 (Reuters) - U.S. household net worth nudged up 2 percent to a record high $81.8 trillion in the first quarter as the stock market continued its upward climb and property values rose, data from the Federal Reserve showed on Thursday.

The data from the Fed showed that despite patchy signs across the U.S. economy, gains in real estate and financial assets are bolstering the wealth of individuals.

The value of residential real estate expanded $758 billion, according to the Fed, while direct and indirect holdings of corporate equities increased $361 billion.

“As has been the case during the past few years, the gains in household wealth were driven by appreciation in real estate and financial asset prices,” Barclays said in a research note on Thursday.

The rise in wealth should help support consumer spending as the U.S. economy pulls out of a winter soft patch. Many economists think consumers spend a few cents of every dollar they gain in wealth.

“We view the wealth effects that have resulted from improving real estate and financial asset prices as boosting consumption in recent quarters,” Barclays said in its note on the Fed’s so-called Flow of Funds report.

During the recession, U.S. consumers cut back sharply on spending as the value of their homes and stocks slid.

They spent the past several years paring debts, a process that increasingly looks like it may have run its course - which would present another positive for the spending outlook.

Household debt rose 2 percent in the first quarter, excluding charge-offs of home mortgages, although net originations of home mortgages continued to be weak, the Fed said in its quarterly report, formally known as the Financial Accounts of the United States.

The S&P 500 rose 1.4 percent in the first quarter as the Fed continued with a highly accommodative monetary policy for a recovering U.S. economy. For the year to date, the S&P is up 5 percent, and hit a new intraday record high on Thursday.

Credit market borrowing by non-financial sectors, both domestic and foreign, fell 10 percent to $2.32 trillion in the January-March period.

Total liquid assets for non-financial corporations fell 5 percent to $1.85 trillion.

Reporting by Michael Flaherty; Editing by Andrea Ricci

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