Home Sales Probably Held Near Decade Low: U.S. Economy Preview
Aug. 24 Home sales in the U.S. probably teetered near a 10-year low, property values dropped and consumer spending cooled, signaling the economy has taken another turn for the worse, reports this week are projected to show.
The real-estate recession will persist into next year as stricter lending rules and higher borrowing costs shackle demand. At the same time, equity is disappearing as home prices fall, and wages aren't keeping up with inflation, depriving Americans of the means to maintain spending, the biggest part of the economy.
``The economy is going down a shaky path,'' said Maxwell Clarke, chief U.S. economist at IDEAGlobal Inc. in New York. ``We're not going to see a rebound in housing anytime soon. Consumers are living hand to mouth, and the outlook for spending is very weak.''
Consumers, after getting a temporary lift from the government's tax rebates earlier this year, are focusing on buying necessities and hunting for bargains to stretch their paychecks following the jump in food and fuel costs.
Home Depot Inc., the world's largest home-improvement retailer, said second-quarter profit fell 24 percent, its eighth straight quarterly drop. The Atlanta-based company forecast a decline in sales and earnings for the year.
`We continue to see pressure on our market and the consumer,' Chief Executive Officer Frank Blake said in a statement on Aug. 19.
Commerce Department figures on Aug. 29 will underscore the dimming outlook for consumer spending, according to the Bloomberg survey.
The report is also projected to reinforce concern over inflation. The price gauge tied to spending patterns probably rose 4.5 percent in the year ended July, the biggest 12-month gain since 1991.
The measure that excludes food and energy costs, the one tracked by Federal Reserve policy makers, probably rose 2.4 percent from a year earlier, the biggest gain since February 2007, the survey showed.
Concerns about slower growth and the pickup in prices led Fed policy makers to hold the benchmark interest rate at 2 percent this month. Minutes of the Aug. 5 meeting, to be released Aug. 26, may shed more light on the debate within the central bank about the future direction of rates.
The one bright spot for the economy remains the narrowing of the trade deficit. A surge in exports caused the economy to grow even faster in the second quarter than previously projected. Revised figures from the Commerce Department, due Aug. 28, may show the economy expanded at a 2.7 percent annual rate from April through June, up from an advance estimate of 1.9 percent issued last month, according to the survey median.
`The data releases this week should illustrate the stark contrast between how well the economy performed in the second quarter and how bad the outlook for the second half of the year is,' said Paul Ashworth, international economist at Capital Economics Ltd. in London.
Other reports this week may show orders for durables goods stalled in July and confidence among American consumers was little-changed this month from multiyear lows reached earlier this year, even as gasoline prices retreated.