Net wealth is rising as debt continues to fall further, with the ratio of debt to net wealth finally falling back to rates more in line with long-term trends, a report by Capital Economics said.
Household assets soared $2.9 billion, to $83.7 trillion due to the rise in equity prices and gain in house prices, bringing it back to the pre-recession peak, the firm said.
Meanwhile, according to the report, the value of household debt tumbled by $59 billion, and net wealth escalated above its pre-recession peak, to a record high of $70.3 trillion.
“This supports our existing forecast that, through the wealth effect, rising equity and house prices will boost consumption growth this year,” researchers with Capital Economics said.
However, the recovery is still not up to full health. When adjusted for inflation, net wealth is still 6.7% below the pre-recession peak.
Additionally, when compared with households’ disposable income, net wealth of 586% is some way below the 2007 high of 656%, since housing equity is only half of it 2006 peak.
