If you need to know the health of the U.S. economy, take a look at the earnings reports on Tuesday and Wednesday from Walmart and Goal.
The outcomes will tell so much concerning the spending behavior of the American consumer, who powers nearly 70% of the economy. An official take will come from the Census Bureau when it releases the monthly report on retail sales for October on Wednesday.
Economists expect a 1% gain in retail sales for October following no change within the prior month. The reading will reflect sales leading as much as the critical holiday shopping period, which kicks off next week with Thanksgiving.
“Consumers are unlikely to drag back on discretionary spending until they’re forced to,” in accordance with Mike Graziano, consumer products senior analyst at RSM US. “With greater than $1 trillion in excess savings in real dollars, consumers have the money available to spend throughout the vacation season in the event that they decide to.”
Graziano adds that the drop in gas prices because the summer’s peak of $5 a gallon to close $3.50 now “is akin to a money stimulus for consumers who dipped into savings over the summer to pay for fuel. Lower prices on the pump will profit lower income tiers and supply the resources for more spending on discretionary desires.”
Political Cartoons on the Economy
The patron can also be getting a psychological boost from news last week that the federal government’s official gauge of consumer inflation dropped to an annual rate of seven.7% last month after peaking at 9.1% in June. But higher rates of interest are cutting into spending on homes and other large items that require financing.
And the Federal Reserve is hardly done with its campaign to snuff out inflation through hikes in rates of interest, although the lower-than-expected reading of the patron price index for October is leading some to predict the central bank may ease up barely when it meets in December.
“Excluding food, shelter, energy, and used vehicles, year-on-year inflation stays at 6.3%” Joseph Politano wrote in his email newsletter Apricitas Economics last week. “This metric has slowed significantly over the previous few months but stays relatively high – on an annualized basis, it has increased 5.3% during the last three months.”
“Because it exemplifies most of the cyclical inflation components that the Federal Reserve theoretically has more control over, its high growth rate is probably going disheartening to (Fed) officials – and is a component of the rationale they aren’t letting up on rate hikes yet,” Politano added.
One place where the Fed’s anti-inflation moves have had a direct effect is on the housing sector. Mortgage rates dipped last week following the discharge of the inflation data but are still in the center 6% range for a 30-year fixed rate loan, or double what they were a 12 months ago.
That has cut into sales, down by a few third from a 12 months ago, but to date prices have stopped rising as fast as they did slightly than there being a wholesale drop.
National Association of Realtors Chief Economist Lawrence Yun said last week he expects home sales to fall next 12 months by 7% nationally, however the median home price will increase by 1% as tight inventories prevent the form of crash seen in the course of the financial crisis of 2007 to 2009.
“Housing inventory is a few quarter of what it was in 2008,” Yun said. “Distressed property sales are almost non-existent, at just 2%, and nowhere near the 30% mark seen in the course of the housing crash. Short sales are almost unattainable due to the significant price appreciation of the last two years.”
Yun also foresees the sector rebounding in 2024, with a ten% rise in sales and a 5% increase in prices.
This week will bring reports on latest home construction, with constructing permits projected to fall by 3.1% from last month and starts to drop by 1.9%.
