No Housing Spillover? Retail, Auto Weakness Tells a Different Story

Once again, Fed chief Ben Bernanke, this time speaking in South Africa, has said there doesn't appear to be "major spillovers from housing onto other sectors of the economy." The key words to watch are "doesn't appear to be" and "major."

That pretty much gets him off the hook for what really may be going on -- and I'm not talking just about warnings from the likes of Bed, Bath & Beyond (BBBY), which late Monday warned of weaker than expected results in large part because of slower "sales of merchandise related to the home."

As I reported recently, the head of the San Diego auto dealers' trade group attribute softness in auto sales in San Diego, and the loss of 1,300 auto-related jobs, to (a drum roll, please!) slower housing sales.

That's borne out by what AutoNation (AN) CEO Mike Jackson has been saying for several months: The slowdown in housing is having an impact on his business. "...The overall malaise, if you will, is people coming to terms with higher payments for their homes and not sure what their home worth is," he said on his company's earnings call in April.

Last time I looked, automobiles were a big part of the economy and any slowdown there still causes its own ripples as the price of life continues to rise.

Pretty soon Goldilocks may no longer like the taste of the porridge that has become more expensive than it was when she first found herself as poster child of the greatest economic fairy tale ever told.

Comments

[wixeywaxy:]

The housing slow down is as much of result as it is of an effect. The collapse of the sub prime market and mounting failures was a house of cards from inception. It's effect on the economy is real but not the reason we are having a general slow down. The price of oil is a considerably greater factor. It's not only the price at the pump, but now the fact that oil is an ingredient in nearly every manufactured product is not only raising cost that are difficult to pass on but the inflationary effects are more difficult to mask. You are a smart guy so unless you are blind to your own experience you know inflation as reported is a fraud. I could list 100 ways they have increased my personal expenses recently in stealth steps, like removing the pockets from my shirt, fewer belt keepers on my trousers, by billing separately items formerly included, by moving up the due dates etc., on and on. Vic

2007 Jun 07 04:17 PM