Not that this should come as any big surprise.
Fresh evidence shows that high energy prices and sagging home values are pinching the main driver of the of the U.S. economy — the Average Joe’s wallet.
But if I understand math correctly, slowing growth is still growth.
Oh, the pinch is real. I'm just glad that the AP writer admitted that the main driver of the US economy is our wallets.
The Commerce Department reported Thursday that new home sales fell 4.3 percent last month, while the inventory of unsold homes on the market rose to a record high and median home prices slipped between June and July.
At the same time, orders for durable goods such as cars or expensive appliances dropped 2.4 percent in July. That reflects what economists say is consumers’ hesitation to buy big-ticket items in a tighter economic environment.
No question people are thinking twice. And that's making Wall Street blink.
Home improvement chain Lowe’s Cos. warned Monday the slowing housing market will hurt its earnings for the rest of the year, its stock tumbled 10 percent this week. Shares in Williams-Sonoma Inc. fell to a new 52-week low Thursday after the home furnishings retailer cut full-year guidance because of the slowing economy.
It may also just mean that people are just being more frugal.
The pullback was evident in Applebee’s International Inc.’s results. The company reported last month that sales dropped 1.8 percent during the second quarter while profits fell 26 percent to $20.4 million. On the more affordable end, McDonald’s Corp., the world’s largest restaurant company, posted its strongest quarterly results in more than three years, with net income jumping 57 percent to $834 million.
It doesn't seem wholesale panic is on the horizon. Heck, I just saw gasoline here in the midwest for under $2.50 a gallon. It's been a while. The news does weigh on people's minds.
Beyond the psychological impact, lower home values cut into consumers’ ability to borrow money, Hoffman (Stuart Hoffman, chief economist at PNC Financial Services Group) said. Since the real estate boom started, homeowners borrowed against the increased value of their houses.
Losing that borrowing power could take tens of billions of dollars out of the U.S. economy this year, although that remains a tiny fraction of overall spending, Hoffman said. The shift is likely to have the biggest effect on home improvement retailers, as people scale back investment in their houses, he said.
So, a little less borrowing and a little more saving. That will pinch some industries, but it should help consumers weather the turbulence.
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