A top media story this afternoon was the first quarterly increase in household net worth since 2007, with US personal wealth increased by $2 trillion in Q2 according to Federal Reserve estimates. Clearly as the value of IRAs and 401Ks and (eventually) real estate holdings regain some of the value lost it only stands to reason that consumer spending should increase. Indeed, retail August sales released earlier this week showed an improvement of 2.7% over July.
If you read our recent posts on the long term view for US consumers you will recall we touched on overlapping negative trends in employment, demographics and credit. Today’s data suggests another factor: psychology. In the chart below we have illustrated the wild swings in household net worth experienced by the American Consumer over the past 15 years. As the 45-54 age group becomes the largest component of the US labor force (see our post “TIDAL” from Sept .11), what will the psychological impact of this volatility be on spending as this critical group races to build a big enough nest egg before retirement begins?