All eyes on the consumer ahead of Black Friday and the holidays – CNN | CarTailz

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It’s been a tough year for American consumers. inflation everywhere. Rapidly rising interest rates. A housing market that is starting to cool down. That raises a question with the holidays just around the corner: are shoppers finally exhausted?

We’ll understand that better this week.

A LOT of data will be released over the next few days that will provide important clues as to the health of the economy. Alongside a series of retail earnings reports, the government is due to release October retail sales figures on Wednesday. Economists are forecasting a monthly increase of 0.9%. Sales were flat in September, a possible sign that inflation was taking its toll on consumers.

But the latest CPI reading for October brought some relief to shoppers… and to Wall Street. The pace of year-on-year price gains slowed more than expected, sparking a massive stock market rally on Thursday.

Several major retailers are also poised to release their most recent quarterly results…and possibly offer sales forecasts for the next few months. Walmart (WMT), Target (TGT), TJ Maxx and Marshalls-owned TJX (TJX), Macy’s (M), Kohl’s (KSS) and Gap (GPS) are all on the earnings calendar for this week.

The Fed’s relentless rate hikes in recent months have pushed credit card rates to all-time highs. Therefore, it will be more expensive than ever for many consumers looking to buy gifts with their Visa and Mastercards this year. After all, Black Friday is less than two weeks away.

According to the government’s latest Gross Domestic Product (GDP) report, consumer spending rose 1.4% in the third quarter. That’s still decent growth, but it’s a slowdown from the first and second quarters.

The big question facing retailers is whether they will be able to keep raising prices. So far, consumers have continued to spend (perhaps reluctantly) despite all the sticker shock. It helps, of course, that wage growth has remained fairly robust.

“Retailers have been able to pass rising producer prices on to consumers and maintain solid premiums on costs,” Moody’s economists said in a recent forecast report for 2023.

Moody’s economists added that the still-healthy labor market is one reason consumer demand trends “have remained exceptionally resilient.”

Retailers clearly need to cheer up around the holidays. Consumer stocks have been hit hard this year by inflation concerns and recession fears, falling even more than the broader market.

The SPDR S&P Retail ETF (XRT), a fund that ranks Victoria’s Secret, Abercrombie & Fitch (ANF) and Gap among its top holdings, is down more than 25% this year.

Still, some experts fear retailers could continue to struggle in 2023. Consumers may eventually need to pay closer attention to their wallets as worries of an imminent economic downturn mount.

“What makes us cautious are, in our view, some profit estimates that are a bit too high. As growth slows, those numbers have to come down,” Matt Quinlan, portfolio manager at Franklin Templeton, said in a recent webcast.

Quinlan added that “some parts of the … consumer discretion [sector] would be ones where earnings estimates would need to be revised down a bit more.”

Finally, the Fed’s rate hikes could slow broader consumer spending. But there is another notable area of ​​the economy that has already been hit hard by the aggressive central bank tightening: the housing market.

Mortgage rates have risen above 7%, making it harder for first-time homebuyers to afford a home.

A report on October housing starts and building permit dates will appear towards the end of this issue Week. So are the numbers for existing home sales. Economists polled by Reuters forecast 4.4 million homes were sold last month. That would be a decrease from 4.7 million households in September and 6.3 million in October 2021.

The housing market isn’t necessarily in the midst of a spectacular collapse like it was in the late 2000s after a subprime mortgage craze fueled a massive bubble. But home sales are clearly losing momentum.

With that in mind, it will be interesting to see what home improvement giants Home Depot (HD) and Lowe’s (LOW), both of which are reporting earnings this week, have to say on the housing front.

Both companies could benefit from a “nesting” trend, where current homeowners choose to spend more on home improvements because they want to stay indoors. But the two retailers could get less of a boost if there are fewer new homebuyers looking to fix homes.

Inflation could also be an issue. When Home Depot reported its most recent earnings in August, it found that customers weren’t making as many purchases as they were a year ago.

The number of total transactions decreased by 3% compared to the same period in 2021. However, this decline was offset by rising prices. According to Home Depot, customers spent just over $90 on average while shopping, up 9% from a year ago.

Investors seem nervous that rising prices will eventually hurt Home Depot and Lowe’s as well. Home Depot’s stock is down nearly 25% this year, while Lowe’s stock is down about 20%.

Monday: Meeting of President Biden and China’s leader Xi at G20; retail sales in China; Japan’s GDP, Eurozone Industrial Production; Earnings from Tyson Foods (TSN) and Oatly

Tuesday: US Producer Price Index; Earnings from Walmart, Home Depot, Tencent Music (TME), Energizer (ENR), Krispy Kreme and Advance Auto (AAP)

Wednesday: US Retail Sales; trade data for Japan; British inflation; Earnings from Target, Lowe’s, TJX, Cisco (CSCO), Nvidia (NVDA) and Bath & Body Works

Thursday: Weekly Unemployment Claims in US; US housing starts and building permits, UK budget; Earnings from Alibaba (BABA), Macy’s, BJ’s Wholesale (BJ), Kohl’s, Applied Materials (AMAT) and Gap

Friday: US Existing Home Sales, Earnings from (JD) and Foot Locker (FL)

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