Sunday 18 August 2024

Home Depot Raises Alarm over Economy as Election Looms


American multinational retail company Home Depot has raised the alarm about the direction of the economy under lame-duck President Joe Biden and VP Kamala Harris.

The Home Depot, Inc. issued the warning about the impact of so-called “Bidenomics” as the critical November presidential election draws near.

The company issued a warning about the direction of the U.S. economy as consumers pulled back spending at the home improvement store.

Sales figures from Home Depot show Americans cutting back during the second quarter of the fiscal year 2024.

The company said its sales decreased by 3.6% during the second quarter.

Home Depot expects sales overall for the year to drop 3-4% compared to last year.

In a statement, Ted Decker, Home Deport’s chair, president, and CEO, said:

“During the quarter, higher interest rates and greater macro-economic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects.

“However, the team continued to navigate this unique environment while executing at a high level.”

CNN noted that consumer spending at Home Depot is considered a bellwether of consumers’ moods about the economy and the housing market in general.

Home Depot’s business is closely tied to the housing market.

The demand for housing far outpaces the supply of available homes in the U.S.

The issue is leading to a housing shortage and exorbitantly priced homes.

The situation is made even worse by high interest rates triggered by the inflation crisis that the Biden-Harris administration accelerated.

Biden and Harris’s reckless government spending during their first weeks in office caused inflation to surge to record highs.

In a statement, Neil Saunders, the managing director of GlobalData, said:

“Interest rate decisions matter more to Home Depot than they do to an average retailer, if only because a large chunk of home improvement demand is tied to the housing market.

“High interest rates have, and still are, acting as a brake on house moves.”

Saunders added that Home Depot’s revised outlook for the year “suggests more negative sentiment around the consumer economy from management and reflects a more cautious rate-cutting stance from the Fed than was expected earlier in the year.”

Richard McPhail, Home Depot’s chief financial officer, also noted that higher interest rates are a key factor weighing on sales.

The Federal Reserve has lifted benchmark rates from zero to more than 5 percent in the past two years in an effort to quell inflation.

Many Home Depot customers are homeowners, and they often finance large projects with debt, McPhail said.

Since mid-2023 they have been holding back.

“They have this deferral mindset waiting for the cost of borrowing to go down,” McPhail said in an interview.

However, in the first half of 2024, “our customers are now telling us that general economic uncertainty is weighing on their minds just as much as higher interest rates,” McPhail said.

“If you think about the crowding-out that inflation is creating in durable goods, unemployment is beginning to tick up again, [and] just general unease is having an influence on our customers.”

Homeowners who took out mortgages when rates were lower are in many cases staying put.

As many big repairs occur when homes change hands, the decrease in turnover has “taken out what’s likely over $10bn in demand in our market”, McPhail added.


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