Q4 Financial Accounts of the United States: Update on Household and Corporate Balance Sheets

​Please find attached a selection of summary charts from the Fed’s report on the Financial Accounts of the United States (previously known as Flow of Funds) for the fourth quarter. Household net worth rose to a new record high at the end of 2016. The aggregate financial position of the household sector is strong which, combined with continued solid job growth, should provide reassurance about the underlying health of the U.S. consumer. Corporations continue to hold high levels of liquid assets and aggregate corporate leverage declined. However, capital spending remained above the level of corporate cash flow at the end of 2016.

This report also provided the first look at economy-wide corporate profits and gross domestic income (these series will not be published in the GDP report until the third release of Q4 data on March 30). These data from the Fed are preliminary and not always identical to what is reported later in the third release of fourth-quarter GDP by the BEA. That being said, real gross domestic income rose only 0.7% in the fourth quarter, although the 1.8% growth rate for 2016 was similar to the 1.9% increase in real GDP for the year. Economic profits fell 2.6% (nonannualized) in the fourth quarter, resulting in a decline in whole-economy profit margins. This report also suggests the equity market's undervaluation cushion was reduced at the end of last year.