Sept. 18 (Bloomberg) -- Household wealth in the U.S. increased by $2 trillion in the second quarter, a first step in restoring Americans’ finances and spending power.

Net worth for households and non-profit groups climbed to $53.1 trillion from $51.1 trillion in the prior three months, marking the first gain in seven quarters, the Federal Reserve’s Flow of Funds report showed yesterday in Washington. Wealth remained $11.1 trillion below the peak reached in the third quarter of 2007, before the recession began.

Gains in wealth will help Americans rebuild finances more quickly, shortening the time when consumers will again be able to lead economic growth. Economists project spending may take years to fully recover from the worst slump since 1980 after stocks and home values plunged.

“The recent increase in stock prices and stabilization in home prices should help dampen the negative effects on spending,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “The consumer remains much less wealthy and much more levered than they were just a couple of years ago.”

Supplemented by federal stimulus measures such as the cash-for-clunkers program, tax credits and extended jobless benefits, consumer spending this quarter will probably grow after contracting in four of the last six quarters, according to the median estimate of economists surveyed by Bloomberg News this month.

Stocks, Home Prices

The advance in net worth reflected the biggest quarterly jump in the Standard and Poor’s 500 Index since 1998 and the first increase in home values in more than two years.

The S&P 500 has continued to climb since June 30. The gauge was down 0.3 percent yesterday to close at 1,065.49, retreating for just the second time in 10 days.

Retail sales rose 2.7 percent in August, the most in three years, showing unexpected strength that extended beyond auto purchases, figures from the Commerce Department showed this week.

The drop in net worth that ended last quarter began in the last three months of 2007, the longest stretch of decreases since recordkeeping began in 1952. Wealth dropped by a record $13 trillion during that time.

Americans were constrained by plunging home and stock prices, tight credit and rising unemployment. Joblessness is forecast to rise to 10 percent by the end of this year, according to the median estimate in this month’s Bloomberg survey.

Equities, Mutual Funds

Yesterday’s Fed report showed net worth from corporate equities and mutual funds increased by $1.36 trillion in the second quarter. Real-estate-related household assets grew by $139 billion, the first gain since the last quarter of 2006.

Americans took on less debt to repair tattered balance sheets, pushing the savings rate up to 6 percent of disposable income in May, the highest level since 1998. While the jump in savings was boosted by an increase in incomes linked to the fiscal stimulus plan, some economists forecast savings will continue to rise, restraining spending.

Homeowners’ equity as a share of their real-estate holdings increased to 43.1 percent last quarter from 41.9 percent in the first three months of the year that was the lowest level on record, the Fed report showed.

Consumer debt fell at a 1.7 percent annual pace, the fourth consecutive decline.

Less Borrowing

Mortgage borrowing dropped at a 1.4 percent pace from April through June, while other forms of consumer credit fell at a 6.5 percent rate, the report showed.

Total borrowing by consumers, businesses and government agencies increased at an annual rate of 4.9 percent last quarter, led by a 28 percent surge in federal government debt, even as household and business debt fell.

Borrowing by the federal government reflected spending linked to the stimulus plan. State and local government borrowing climbed at an 8.3 percent pace.

The economy contracted at a 1 percent rate in the second quarter, matching the decline in consumer spending, after falling 6.4 percent in the first quarter.

Economists surveyed by Bloomberg this month forecast consumer spending will grow at an average 1.3 percent annual pace in the second half of the year. For all of 2009, purchases will drop 0.8 percent, the survey showed.

To contact the report on this story: Bob Willis in Washington bwillis@bloomberg.net

Last Updated: September 18, 2009 00:00 EDT