All eyes are on the consumer ahead of Black Friday and the holidays

Atlanta, USA (CNN) — It’s been a tough year for American consumers. Inflation is everywhere, interest rates are skyrocketing, the real estate market is starting to cool off. That begs a question as the holidays approach: Are shoppers finally drained?

We’ll get a better idea of ​​that this week.

There will be a lot of data coming out in the next few days that will provide important clues about the health of the US economy. In addition to a slew of retail earnings reports, the government will release retail sales figures for October on Wednesday. Economists expect a monthly jump of 0.9%. Sales were unchanged in September, a possible sign that inflation was taking its toll on consumers.

But the latest CPI figures for October provided some relief to shoppers and Wall Street. The pace of year-on-year price increases has slowed more than expected.

Several major retailers will also announce their results for the most recent quarter. They are likely to provide forecasts about sales for the next few months.

Continuous interest rate increases by the Federal Reserve over the past few months have pushed credit card interest rates to all-time highs. So it will be more affordable than ever for many consumers looking to purchase gifts this year with their credit cards.

Inflation hurt sales in the end?

The big question facing retailers is whether or not they can continue to raise prices. Consumers have so far (perhaps reluctantly) continued to spend despite all the shocks. It helps of course that wage growth has remained fairly strong.

“Retailers have been able to pass on higher producer prices to consumers and maintain strong profit margins,” economists said in Moody’s latest report on the outlook for 2023.

Moody’s economists added that the still healthy labor market is one reason why consumer demand trends “remain extraordinarily resilient.”

Clearly, retailers need some holiday cheer. Consumer stocks have been hit hard this year by inflation fears and recession fears.

All eyes are on the housing slowdown

A rate hike by the Federal Reserve may eventually slow consumer spending more broadly. But there is another salient area of ​​the economy that has already been hit hard by aggressive central bank tightening: the housing market.

Mortgage rates have risen to more than 7%, making it more difficult to buy a home.

The housing and building permits data for October will be released at the end of this week. So are existing home sales numbers. Economists polled by Reuters expect 4.4 million homes were sold last month. This is down from 4.7 million homes in September and 6.3 million in October 2021.

The housing market may not necessarily be in the midst of a crash as it did in the late 2000s after the subprime mortgage craze sparked a huge bubble. But it’s clear that home sales are losing steam.

With that in mind, it will be interesting to see what the two home improvement retail giants Home Depot and Lowe’s have to say.

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