Following back-to-back healthy increases in May and June, retail sales stalled in July, falling by 0.6%.

This unexpected pull-back in consumer spending raises concerns about the overall health of the consumer. It suggests that following a brief spurt, consumers may be tapped out and unable or unwilling to put another purchase on their credit cards.

However, the just-released second-quarter 2009 National Balance Sheet Accounts, which provides a comprehensive accounting of consumers’ net worth, allays most of these concerns.

In the second quarter, household net worth — the difference between total household assets (both financial and non-financial) and total liabilities — increased by $141 billion.

This was its first increase since Q2/2008 and its largest one-quarter increase since Q4/2006.

The principal reason for this increase in household net worth was a sharp 20% jump in stock prices, which pushed up by 4.6% the value of total household financial assets (including shares, mutual funds and pension assets).

As the value of household assets increased, so too did household debt. In the second quarter, rising consumer confidence, record low interest rates and the effects of tax cuts led to a substantial increase in mortgage borrowing to finance stronger sales of existing homes and motor vehicles.

However, despite this increase in credit market debt, the ratio of household debt to household net worth moved down slightly. This suggests that the overall financial health of households actually strengthened in the second quarter, despite the sharp deterioration in employment.

In addition to the improvement in household net worth, interest payments as a percent of disposable incomes have declined since the beginning of the year, hitting their lowest level since the second quarter of 2006.

Looking forward, this combination of an increase in household net worth and a reduced interest rate burden should help to underpin consumer spending through the remainder of 2009 and into 2010.