During the last week of February there were further indications that the U.S. economy is stumbling. That doesn’t mean a recession’s on the horizon, but they do point to the possibility of a softening, which might (among other things) adversely affect sectors of the real estate market that never quite recovered from the Great Recession, such as Class B retail in secondary markets.
For one thing, business activity in the service sector—by far the largest part of the economy—declined in February, ending a 27-month streak of sustained growth, according to the Markit Flash U.S. Services PMU Business Activity Index. The index dropped from 53.2 in January to 49.8 in February, which isn’t terrible, but it is just below the expansion-contraction threshold of 50.
Also, sales of new single-family houses in January 2016 came in at an annualized rate of 494,000 units, according to the Census Bureau and the HUD. That’s 9.2 percent below the revised December rate of 544,000 units, and 5.2 percent below the January 2015 total of 521,000.
Then there’s the matter of consumer confidence. The Conference Board Consumer Confidence Index, which had increased moderately in January, declined in February. The index now stands at 92.2 (1985 = 100), down from 97.8 in January. The Present Situation Index declined from 116.6 to 112.1, while the Expectations Index decreased from 85.3 to 78.9 in February.