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During the first six months of this year, Americans spent lavishly on imports, while U.S. exports remained modest.
That pattern reversed during the third quarter, with U.S. consumers spending less on merchandise and exports, chiefly oil, natural gas, and refined products, rising sharply as the Ukraine war and resulting Western sanctions left the world short of petroleum fuels.
However, the dynamic is only temporary, analysts warn.
“We see signs of weakening trade flows early in the fourth quarter, with the precipitous decline in ocean freight rates and [in] congestion at domestic ports in October highlighting waning U.S. domestic demand,” Oren Klachkin, Oxford Economics’ chief U.S. economist, wrote in a 27 October research report.
Consumer spending, which supports at least two-thirds of the U.S. economy, is losing momentum, figures show.
Spending on merchandise rose 2 percent in this year’s second quarter and 1.4 percent in the third. Spending increases for services also is losing steam, as we report in “U.S. Economy Grew in Real Terms in Third Quarter” in this issue.
In the third quarter, the amount of money that Americans spent on domestically produced goods and services ticked up just 0.1 percent, the fourth consecutive quarter that saw a slowing rate.
Also, sales of new homes fell 10.9 percent in September from August; sales of existing homes dropped for the eighth month in a row. (See details in “Sales of Newly Built Homes Fell 10.9 Percent” in this issue.)
“The Fed has likely triggered a recession in the housing industry by rapidly raising interest rates throughout the year,” according to Washington news service The Hill.
Mortgage applications and pending home sales have dropped below 2018 levels, online brokerage Redfin reported, calling the development “a serious correction.”
TRENDPOST: Buying a home involves more than just buying property. It usually means buying furniture, decorations, insurance, and other accouterments.
Therefore, the housing market’s recession, which has been underway for months, dramatically increases the odds that the overall U.S. economy will not be able to avoid following suit. We have tracked the housing market’s tumble in “U.S. Housing Market Bust?” (23 Aug 2022) and “Mortgage Rates Rise to 20-Year Highs as Home Prices Fall at Record Pace” (19 Oct 2022) among other articles.