March 9 (Reuters) - U.S. household wealth rose in the final three months of last year to snap two straight quarterly declines in net worth as a late-year recovery in the stock market strengthened consumer balance sheets.
Household net worth rose 2% to $147.71 trillion in the fourth quarter of 2022 from $144.78 trillion at the end of the third quarter, the Federal Reserve reported on Thursday. The value of holdings of equities increased $2.7 trillion, while real estate values dropped by about $100 billion.
The quarterly snapshot of U.S. financial accounts also showed credit growth was slowing among households and businesses as the year ended in the face of a sharp increase in interest rates engineered by the Fed over the course of 2022.
Total domestic nonfinancial debt grew at a 3% annual rate in the fourth quarter, down from 4.5% the quarter before and from 8.8% a year earlier. Household debt growth slowed to a 2.3% annual rate from 6.2% in the third quarter, while business debt growth eased to 3.6% from 4.3%.
After hitting a record $151.9 trillion in the first quarter of last year, household wealth plummeted by more than $7 trillion over the second and third quarters as the Fed's aggressive rate-hike campaign sent stocks into a bear market.
The Fed has delivered 4.5 percentage points of rate increases since last March as the highest inflation in four decades brought an abrupt end to a period of near-zero percent borrowing costs that had prevailed during the coronavirus pandemic.
The benchmark S&P 500 Index (.SPX) fell by roughly 25% through the first nine months of 2022 before posting a 7% recovery in the fourth quarter to staunch the overall decline in net worth. On the year, though, wealth declined by about $4 trillion from 2021.
