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WSJ: Consumer Appetite for Cars, Homes Boosts U.S. Economy
Posted on 7/15/20 at 10:21 am
Posted on 7/15/20 at 10:21 am
People have been putting off purchases of big ticket items during the pandemic. Now there is a surge in demand for big ticket items, such as homes, cars, and appliances.
There's also a shortage of inventory that manufacturers are trying to correct - particularly with pickup trucks and SUVs.
quote:
Historically low interest rates are luring in auto and home buyers with higher incomes than service-sector workers hardest-hit by pandemic
LINK
Consumers have continued spending on big-ticket items such as vehicles and homes during the coronavirus pandemic, helping support the U.S. economy as it battles a surge in cases and renewed business shutdowns.
Historically low interest rates are luring in auto and home buyers, many of whom have higher incomes and firmer job security than low-wage, service-sector workers hardest-hit during the recession, economists and industry experts say.
“Looking at the car sales, looking at the retail activity, looking at the housing data, it has been pointing to a really bigger recovery story,” said James Knightley, an economist at ING Groep NV. “If you’ve got a job and feel pretty secure and you see your equity holdings rise in value, you’re probably still feeling pretty good.”
Mr. Knightley said the big-ticket purchases could weaken if the rise in coronavirus infections and dialed-back state reopenings significantly dampen employment and consumers’ ability to spend. Incomes also could take a hit if the federal government doesn’t continue providing expanded unemployment benefits to the millions of people still out of work because of the crisis, he added.
“I’m just growing a little bit more nervous that after this good run, we could be in for a softer set of numbers,” he said.
Congress is debating whether to extend an extra $600 a week in unemployment benefits provided by the federal stimulus enacted in the spring. The aid is scheduled to expire at the end of July.
Solid spending on durable goods—typically more expensive products designed to last more than three years—differs from previous downturns, when consumers sharply pulled back on these larger purchases while continuing to spend at service-sector businesses, according to findings from a Harvard-based nonprofit research group.
Spending on long-lasting, durable goods accounts for about 7% of gross domestic product. Outlays at service-sector businesses comprise a much larger share of economic output and were the hardest-hit businesses by the pandemic. Growth in services will need to rise much more for the U.S. to achieve a full economic recovery. In May, consumers increased their spending on services by 5.4%. A Commerce Department report due out Thursday on retail spending, which covers spending on autos but not houses, is expected to show a June increase of 5.2%, according to a Wall Street Journal survey of economists.
There's also a shortage of inventory that manufacturers are trying to correct - particularly with pickup trucks and SUVs.
This post was edited on 7/15/20 at 10:22 am
Posted on 7/15/20 at 10:35 am to goofball
Not surprising given interest rates
Posted on 7/15/20 at 10:46 am to goofball
translation: the bubble is the whole economy now, not just housing
Posted on 7/15/20 at 10:50 am to goofball
We recently received an inheritance after my grandmother died.
We have purchased a house, boat, 2 cars, a UTV, and a golf cart.
Every dealer has said the same thing. It's the largest demand they've had in over a decade. One car dealership had the highest sales month in the history of the dealer in June. 197 cars.
We have purchased a house, boat, 2 cars, a UTV, and a golf cart.
Every dealer has said the same thing. It's the largest demand they've had in over a decade. One car dealership had the highest sales month in the history of the dealer in June. 197 cars.
This post was edited on 7/15/20 at 10:50 am
Posted on 7/15/20 at 11:17 am to goofball
This is why car prices, especially used car prices, are inflated right now.
Posted on 7/15/20 at 11:29 am to TheFlyingTiger
quote:
translation: the bubble is the whole economy now, not just housing
I think it's more of the start of a bullwhip effect when it comes to durable goods. The market was shut down for a couple of months, so there's pent up demand for these products. There's also a lack of supply since the factories that provide them were also shut down.
So now there's a temporary spike in demand and shortage of supply. They are running overtime to build more cars and trucks now - but once they meet the spike in demand, they will need to go back to normal output or risk oversupply.
Posted on 7/15/20 at 12:23 pm to dewster
quote:
think it's more of the start of a bullwhip effect when it comes to durable goods. The market was shut down for a couple of months, so there's pent up demand for these products. There's also a lack of supply since the factories that provide them were also shut down.
So now there's a temporary spike in demand and shortage of supply. They are running overtime to build more cars and trucks now - but once they meet the spike in demand, they will need to go back to normal output or risk oversupply.
That is definitely the case in the short term. In the long term, however, production is what drives in economy, not consumption. There are many businesses that have closed down and will not reopen. The lack of production whether it be in services or goods themselves will spell a down turn regardless. It will take a decade before we realize the actual effect all of this has had. Some industries will take longer.
Posted on 7/15/20 at 12:25 pm to VaBamaMan
quote:
a golf cart
Did you get it insured?
Posted on 7/15/20 at 12:29 pm to goofball
I believe it. My area’s housing market left us in the dust. Saw a dump that needed a lot of work listed for $375k. I thought no way would I spend that much on a 3/2 that needed a bunch of work. Sold for $390k. Cash offer.
I really can’t see how this is sustainable. People buying houses right now are competing with 15-20 offers (realtor friend says). Are their houses really going to appreciate in value over the next five years?
I really can’t see how this is sustainable. People buying houses right now are competing with 15-20 offers (realtor friend says). Are their houses really going to appreciate in value over the next five years?
Posted on 7/15/20 at 12:36 pm to StringedInstruments
quote:
Are their houses really going to appreciate in value over the next five years?
only if their area becomes super desirable for whatever reason.
interest rates cant really get lower, so they'll either continue be artificially held down like they have been for a decade, or theyll be allowed to rise.
the rise is inevitable, who knows when, but when that happens your price drops.
Posted on 7/15/20 at 12:37 pm to goofball
Not surprising because people’s shite was destroyed thanks to the peaceful protest honoring St. Floyd
Posted on 7/15/20 at 1:16 pm to TheFlyingTiger
quote:
only if their area becomes super desirable for whatever reason.
Like people fleeing places where police were defunded or abolished?
This post was edited on 7/15/20 at 1:17 pm
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