Flow of Funds: Net Worth of Households Grew, Household Debt Reduction Continues, Net Lending Remains a Challenge
Net worth of households increased $682 billion to $54 trillion in the fourth quarter of 2009. In 2009, net worth of households moved up $2.8 trillion following a $13.1 trillion loss on 2008. The gains in equity prices in 2009 more than offset the losses of real estate holdings (-$905 billion) of households. There has been an 11.7% increase in household net worth from the trough in the first quarter of 2009.
Although households experienced an increase in their wealth during 2009, they have significantly cutback on borrowing. In the fourth quarter of 2009, household net borrowing fell $54.4 billion, putting the annual decline at nearly $237 billion. The significant pace of debt reduction is a big negative for consumer spending.
At the same time, net lending in the economy continues to be problematic. Net lending fell at annual rate of $577 billion in the fourth quarter vs. $361 billion drop in the third quarter. Self-sustaining economic growth is unlikely to occur if this situation persists in 2010.
International Trade: Decline in Oil and Auto Imports Account for Narrowing of Trade Gap
The trade deficit narrowed to $37.29 billion in January from a revised $39.9 billion deficit in December 2009. Exports and imports of goods and services dropped in January. Inflation adjusted exports of goods declined 1.6% and that of imports fell 3.1%. Exports of food (-2.3%), autos (-5.6%0, and capital goods excluding autos (-2.6%) accounted for a large part of the weakness in exports. On the imports side, autos (-8.0%), petroleum (-3.1%), and consumer goods excluding autos (-2.6%) posted the significant declines. The real trade deficit of goods narrowed to $41.0 billion in January from $43.8 billion in December. However, the January reading of the real trade deficit nearly matches the fourth quarter average, implying that international trade will have a positive effect on real GDP in the first quarter if the trade gap narrows noticeably in February and March.
In January, the trade deficit narrowed vis-à-vis Euro-area ($2.9 billion vs. 5.4 billion in December), Mexico ($4.6 billion vs. $5.2 billion in December), and Japan ($3.5 billion vs. $4.6 billion in December) but widened vis-à-vis China ($18.3 billion vs. $18.1 billion in December) and Canada ($3.9 billion vs. $3.0 in December).
Total Continuing Claims Holding at Elevated Level
Initial jobless claims fell 6,000 to 462,000 during the week ended March 6. The four-week moving average of initial jobless claims is up nearly 8,000 from a low of 469,000 in February. Continuing jobless claims, which exclude initial claims be one week, rose 37,000 to 4.558 million and the insured unemployment rate held steady at 3.5%
Total continuing jobless claims, inclusive of those under special programs, edged down slightly to 10.2 million during the week ended February 20; these claims have held at over 10 million for eleven consecutive weeks. A meaningful decline of these claims should signal that labor market conditions are indeed improving.
Although households experienced an increase in their wealth during 2009, they have significantly cutback on borrowing. In the fourth quarter of 2009, household net borrowing fell $54.4 billion, putting the annual decline at nearly $237 billion. The significant pace of debt reduction is a big negative for consumer spending.
At the same time, net lending in the economy continues to be problematic. Net lending fell at annual rate of $577 billion in the fourth quarter vs. $361 billion drop in the third quarter. Self-sustaining economic growth is unlikely to occur if this situation persists in 2010.
International Trade: Decline in Oil and Auto Imports Account for Narrowing of Trade Gap
The trade deficit narrowed to $37.29 billion in January from a revised $39.9 billion deficit in December 2009. Exports and imports of goods and services dropped in January. Inflation adjusted exports of goods declined 1.6% and that of imports fell 3.1%. Exports of food (-2.3%), autos (-5.6%0, and capital goods excluding autos (-2.6%) accounted for a large part of the weakness in exports. On the imports side, autos (-8.0%), petroleum (-3.1%), and consumer goods excluding autos (-2.6%) posted the significant declines. The real trade deficit of goods narrowed to $41.0 billion in January from $43.8 billion in December. However, the January reading of the real trade deficit nearly matches the fourth quarter average, implying that international trade will have a positive effect on real GDP in the first quarter if the trade gap narrows noticeably in February and March.
In January, the trade deficit narrowed vis-à-vis Euro-area ($2.9 billion vs. 5.4 billion in December), Mexico ($4.6 billion vs. $5.2 billion in December), and Japan ($3.5 billion vs. $4.6 billion in December) but widened vis-à-vis China ($18.3 billion vs. $18.1 billion in December) and Canada ($3.9 billion vs. $3.0 in December).
Total Continuing Claims Holding at Elevated Level
Initial jobless claims fell 6,000 to 462,000 during the week ended March 6. The four-week moving average of initial jobless claims is up nearly 8,000 from a low of 469,000 in February. Continuing jobless claims, which exclude initial claims be one week, rose 37,000 to 4.558 million and the insured unemployment rate held steady at 3.5%
Total continuing jobless claims, inclusive of those under special programs, edged down slightly to 10.2 million during the week ended February 20; these claims have held at over 10 million for eleven consecutive weeks. A meaningful decline of these claims should signal that labor market conditions are indeed improving.
