Record Low in Home Sales Confirms Weakening US Consumer
The US consumer has been keeping the US economy afloat since 2020, but the elevated interest rates are taking their toll on the consumer.
The US consumer has been keeping the US economy afloat since 2020, but the elevated interest rates are taking their toll on the consumer. There have been several indicators that show consumer health, and most of them are showing weakness in 2024, however, the FED is still not committing to the start of the rate cut cycle, as FED’s Bowman indicated earlier.
Yesterday we had the US New Home Sales report, which missed expectations, while today the Pending Home Sales for May showed another decline, after the major -7.7% dive in April. The Pending Home Sales Index (PHSI)*, an indicator of home sales derived from contract signings, decreased to 70.8 points in May. This represents a 6.6% drop in pending transactions compared to the same month last year. The decline highlights ongoing challenges in the housing market, likely influenced by factors such as higher mortgage rates and affordability issues, which continue to weigh on buyer activity.
The May US Pending Home Sales Report from NAR
- US May pending home sales -2.1% vs +2.5% expected
- Home sales YoY for May -6.6%
- April pending home sales were -7.7%
- Index at 70.8 points vs 72.3 prior
The May US Pending Home Sales Report from the National Association of Realtors (NAR) revealed a decline of 2.1% in pending home sales, significantly below the expected increase of 2.5%. This follows a prior drop of 7.7%. The index now stands at 72.3 points, compared to the previous reading. Indicates continued weakness in the housing market. Reflects ongoing challenges such as higher mortgage rates and affordability issues. Could impact overall economic outlook if the trend persists.
Walgreen Closing Stores As Consumers Curb Spending
Besides that, I mentioned earlier that other sectors are also showing weakness for the US consumer, with the pool companies showing falling sales while pharmacies are also witnessing lower demand. Walgreens, a major US drugstore chain, has issued a significant warning about the state of the US consumer market. The company has reduced its expectations, citing that consumers are cutting back on spending and announcing plans for substantial store closures. Walgreens, the second-largest drugstore chain in the US, has expressed dissatisfaction with current consumer trends.
The company revised its outlook due to “challenging pharmacy industry trends and a worse-than-expected US consumer environment.” While companies often attribute poor performance to macroeconomic factors, such warnings can also signal broader issues ahead. Recently, housing-related companies like POOL and RH have also issued similar alerts. Shares of Walgreens Boots Alliance (WBA) have plummeted by 19.7% in premarket trading. During a conference call, Walgreens revealed that it has experienced a “sustained pullback in discretionary spending in the quarter” and has responded by lowering prices.
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