The strength of private rice consumption as seen from the financial assets of rice households

It became clear that the median value of US real household income (adjusted for inflation) in '22 announced by the US Census Bureau on the 12th of this month was 74,580 dollars, a 2.3% decrease from 76,330 dollars in '21. In response to increased US inflation associated with supply chain turmoil after the COVID-19 pandemic, US household income declined for 3 consecutive years, and fell 4.7% compared to 2019, which was the peak. Prior to this, according to the latest US household financial assets announced by the Fed on the 8th of this month, it became known that US household assets for 2Q 23 increased 3.7% from 1Q to 154 trillion 28 trillion dollars, and recorded a record high. Of the 5.49 trillion dollars added to US household assets, it is divided in half by the increase in price gains in the US stock market (2.58 trillion dollars) and the recovery in US housing prices (2.48 trillion dollars). According to SPXTR (S&P 500 total return index, S&P 500 dividend inclusive index), the return on period investment for 2Q 23 was 8.7%, which surpassed the 2021 4Q (6.1%), which was the peak after the COVID-19 pandemic, and in addition to exceeding the 2021 4Q (6.1%), which was the peak after the COVID-19 pandemic, US housing prices have also recently begun to rise again after a temporary decline last year. Despite the downward trend in rice household income, it can be seen that rice household assets are constantly piling up.

Looking at the latest size of US household net assets (154 trillion), although there is not much difference from 150 trillion dollars at the end of 21 and 146 trillion dollars at the end of 22, the net assets of US households at the end of 19, which is just before the COVID-19 pandemic, have greatly increased from 117 trillion dollars. It is calculated that household financial assets of 37.57 trillion dollars swelled due to financial and fiscal measures (monetary mitigation effect is about 15 trillion dollars, fiscal measure effect is about 20 trillion dollars) launched by the US authorities that were forced to respond to the COVID-19 pandemic. While prices in the US stock market and US housing market have risen over the 14th quarter (201Q to 23/2Q), gains from price increases in US stocks and real estate have increased by 10.5 trillion dollars and 15.5 trillion dollars, respectively. The United States has a home equity loan system, and since it is secured by housing, credit risk is low for lenders, and therefore borrowers can enjoy low interest rates, etc., so any amount of unrealized profit can be turned into personal consumption without restrictions on the use of funds. Also, some of the funds that took advantage of price increases in major US tech stocks have spread to the current large market price of Japanese stocks. This is why private consumption of rice, centered on wealthy Americans, supported by rising profits in US stocks and real estate prices, has not declined at all.

While the monetary and fiscal measures launched by the US authorities are boosting private consumption of rice, the strength of private consumption of rice is still largely due to the tight US labor market. At the end of the day, private consumption will be based on the number of workers and wage increases that are higher than before the COVID-19 pandemic. Despite the fact that a drastic increase in policy interest rates by the Fed has been implemented, the wage tracker (Atlanta Fed) is currently hovering at 5.3% (August), which is above the mid-3% range before the COVID-19 pandemic. The high growth in rice wages seems to have backed up private consumption of rice.

There is also a view that US student loan payments will resume at the end of October this year and that concerns about the exhaustion of excessive savings in rice households around the end of this year will wind up in private consumption of rice. The U.S. Department of Education aims for repayment exemption based on the Higher Education Act and is expected to begin a new legal process. An “on-ramp repayment program” for 12 months (until 24/9) will be set up to reduce the risk of student loan borrowers falling into default (default on debt). Due to the program, those who are late in payment during the period will not be declared in default. Also, even if excessive savings in rice households are exhausted, as long as there are US household assets that rise to 150 trillion dollars accumulated in stocks and real estate, unabated private consumption of rice will lead strong US economic growth for the time being.