Can Shopping Save Our Economy?
- Dec 28, 2007
Anticipation about the Commerce Department’s housing figures–released today–ran high all week. Some had hoped the data would show the housing decline was turning around; most expected it wouldn’t.
Investors were so confident the home sales results would be bad that the dollar fell Thursday against the euro for the fifth consecutive day–its longest period of decline since October, Bloomberg reported.
And sadly, the naysayers were correct. According to the Commerce Department, new home sales not only fell from last month but hit their lowest point in 12 years (12 years!). New home sales have plummeted 34.4 percent over the last 12 months.
All across the country–except for the West, where sales increased 4 percent–home sales declined last month. In the Northeast, they fell 19.3 percent; the Midwest saw a 27.6 percent drop and sales fell 6.4 percent in the South. The median sales price of new homes also dropped.
The news is the latest in a string of disappointing year-end results:
- The Commerce Department reported Thursday that durable goods orders were less than had been forecast in November, The Chicago Tribune reported.
- That paper–and others–also felt the pangs of the housing decline as it continued to drag ad revenue down. The Tribune Company, which owns the Chicago Tribune, recently reported
a 40 percent decline in November real estate classified ad revenues.
- The New York Times reported yesterday that housing has also affected statewide growth, hampering states like Nevada and Florida, which had the slowest annual growth since the decade started.
- U.S. mortgage applications have dropped to the lowest level of 2007, according to the Washington-based Mortgage Bankers Association.
Even the typically lucrative Christmas shopping season fell flat. The National Retail Federation has forecast November and December
holiday sales will be up 4 percent from last year–growing at the
slowest pace since 2002.
However, as consumers trudge to stores to exchange returns, take advantage of year-end sales and use their gift cards (which don’t count as a purchase until they are redeemed), retailers could make as much as $60 billion, according to CNNMoney.com. Half of that is expected to be gift card-related.
A stronger-than-expected shopping season could offer a vote of confidence for the U.S. economy–and act as another indication that we aren’t headed into a recession, as many have feared.
Or would it just indicate that tapped-out consumers, frustrated by their shrinking home values and the abundance of bad foreclosure, finance and economic news, just feel so hopeless that they no longer care about adding to their debt? If you owe thousands, does adding the cost of a few new outfits even seem to matter–and is that what’s giving spending a boost?
Do high consumer spending results indicate a solid economy–or a population that’s given up? What do you think?