Household net worth decreases, reversing a trend

Among concerns for retailers this year is the second-quarter plunge in household net worth. Net worth of the average household has fallen $1.425 trillion, or 3.4 percent. The decrease reverses a trend of increasing household net worth for the past several years, mostly due to investment earnings and appreciating real estate. Currently, declines in investments are far outstripping gains in housing values, leading to concern that consumers will cut back spending. Consumer spending is currently growing at about half the rate of growth in the 1990s. Dean Maki, an economist at Putnam Investments of Boston says, "What that's telling us is the negative wealth effect [from stock market losses] has been a weight on consumer spending, and will be going forward." Within the retail sector, there is also fear that consumer spending on homes and automobiles--sales in both categories are at an all-time high--are beginning to take substantial dollars away from general merchandise categories.