In the aftermath of two hurricanes that helped push the price of gasoline beyond $3 a gallon, Americans are taking a seat-of-the-pants approach to fighting back. Namely, they are staying home.
Not only are they driving less and buying fewer new cars, their ability to cut back on trips to the mall is casting a pall over retailers, who fear that the holiday spending season will be a bust.
One area that appears exempt from any buyers’ strike, however, is housing. The love affair between home buyers and ultra-low mortgage rates, which has fed a 10-year construction boom, seems unimpaired.
A fresh test comes Wednesday, with a report on September housing starts. Economist Lynn Reaser is looking for a tiny decline, to an annual rate of 2 million units from 2.01 million a month earlier.
“Although there are some signs of cooling, especially among sellers of high-end homes who have been forced to reduce prices, builders remain relatively optimistic,” said Reaser, of Bank of America’s investment strategies group in Boston.
Also worth watching this week:
– Wednesday’s beige book from the Federal Reserve, a region-by-region look at economic activity, will be watched closely this week. Economist John Silvia says there are signs that “the economy has slowed going into the fourth quarter, not only with weaker retail sales, but with a decline in industrial activity.”
Keep an eye on what the report says about auto sales and housing construction, says Silvia, of Wachovia Bank in Charlotte. “Members of the Fed have indicated they are quite concerned about inflation, and they will raise rates when they meet Nov. 1,” he said.
– The days before Halloween are traditionally the spooky season in the stock market, and, sure enough, equities have fallen by about 3 percent since the start of October. So far, third-quarter corporate profits that are showing year-over-year growth of about 16 percent. With numerous earnings reports due out over the next two weeks, there is a chance that investors will see only minimal damage to their portfolios before November.
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wsluis@tribune.com
