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US household wealth declined in the spring

By Associated Press
September 17, 2011

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WASHINGTON - Americans’ wealth declined last spring for the first time in a year, as stocks and home values fell. At the same time, corporations increased the size of their cash stockpiles.

The combination could slow an already weak economy because it implies that families have less to spend and businesses are reluctant to expand.

Household net worth dropped 0.3 percent to $58.5 trillion in the April-June quarter, according to the Federal Reserve’s Flow of Funds report released yesterday. The decline followed three straight quarterly increases.

The value of Americans’ stock portfolios fell 0.5 percent in the second quarter. Home values dropped 0.4 percent.

Corporations held a record $2 trillion in cash at the end of June, an increase of 4.5 percent from the January-March quarter.

Consumers are already struggling with high unemployment and meager pay raises.

When people feel poorer, they spend less. That slows growth. Businesses respond by cutting back on hiring and expansion plans.