Pre-sale stocks: Consumers are keeping the economy alive…for now | Bot To News

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American shoppers just keep spending and providing vital support to the economy. The question is: How long will it last?

What’s happening: Despite persistently high inflation and the possibility of a recession ahead, Americans seem to be indulging in a healthy dose of retail therapy.

Preliminary Black Friday and Cyber ​​Monday numbers point to a strong holiday season, despite earlier concerns that it could turn out to be weak.

A record 197 million Americans made holiday purchases between Thanksgiving and Cyber ​​Monday, according to a survey by the National Retail Federation. This is 10% more than last year. Over the weekend, shoppers spent an average of about $325 on holiday-related purchases, up from $301 last year. The group predicts that total holiday sales will increase by between 6% and 8%. While this would be slower growth than last year, it is above historical averages.

Shoppers also set a new record for the biggest online shopping day of the year. According to Adobe Analytics, Cyber ​​Monday spending totaled $11.3 billion, a 5.8 percent year-over-year increase.

The continued strength of the American consumer is almost single-handedly preventing a U.S. recession, Bank of America CEO Brian Moynihan told CNN on Tuesday. Americans are still working, they still have money in their bank accounts, and they’re still spending that money, he said.

Consumer spending is the main driver of the economy, and the last two months of the year can account for around 20% of total retail sales – even more for some retailers, according to the NRF.

The Federal Reserve said in a report last month that American households still have a nice chunk of their savings due to the pandemic. They still have access to $1.7 trillion, about 75% of the total cash that households have accumulated and saved during the pandemic. This reserve is steadily decreasing. But there’s still enough left to support heavy spending…for now.

“At the end of the day, the consumer has held up well, and at the end of the day, the consumer remains responsibly strong,” Moynihan said.

Double-Edged Sword: Resilient consumers are usually a good thing. But when the Federal Reserve actively seeks to suppress high rates of inflation, they risk becoming a fly in the ointment.

“Consumers are more or less unfazed not only by high inflation, but also by interest rate hikes designed to bring prices under control,” Wells Fargo economists wrote.

The high level of spending could unnerve investors in this economy where good news is bad news as it increases inflationary pressures. This means that the Fed will be able to use reliable data to raise interest rates further.

A slowdown in consumer spending could lead to a recession and short-term economic problems, but some economists say that’s still a better outcome than long-term inflation rooted in pain.

Check payment: While American bank accounts are still fairly strong, they are starting to dry up. In the third quarter of 2022, credit card balances jumped 15% year over year. That’s the biggest annual jump since the New York Fed began tracking the data in 2004.

US consumer confidence fell to its lowest level since July in November. This is the second month in a row that the headline number has fallen.

“Intentions to buy homes, cars and expensive appliances have cooled. The combination of inflation and interest rate increases will continue to pose challenges to confidence and economic growth in early 2023,” Lynn Franco, senior director of economic indicators at the Conference Board, said in a statement.

Economists take this to mean that spending cannot remain so strong for much longer. At some point, the toll on pandemic-era savings will fall, Chris Rupkey, chief economist at FwdBonds LLC, said in a note Tuesday. “This will quickly take the wind out of consumers’ sails,” he said.

Housing prices decreased in September compared to August. This is the first time prices have fallen for three consecutive months in about four years.

The S&P CoreLogic Case-Shiller National Home Price Index, which measures home prices in the 20 largest U.S. cities, fell 1% in September from August. In the last three months, it decreased by 2.6%.

But buying a home is no easier. Even as the housing market has cooled this year due to skyrocketing mortgage rates, home prices are still rising, with prices up 12.2% in the third quarter from a year earlier, according to the Federal Housing Finance Agency.

Prices are still so high that mortgage giants Fannie Mae and Freddie Mac will raise government-backed loan limits to record levels for 2023, with maximum loan limits reaching more than $1 million for high-cost areas. the FHFA announced Tuesday.

Mortgage rates have soared this year due to a series of aggressive rate hikes by the Federal Reserve. This has made it difficult – if not impossible – for many younger Americans to buy their first home.

Regional differences: The decline in overall prices does not reflect the broader housing market, said Bill Adams, chief economist at Comerica Bank. This is because some regions have too much influence on the direction of the index.

“The correction in the tech industry is having an outsized impact on home prices and valuations in the Bay Area and the Pacific Northwest, but price declines in the rest of the country are less severe,” he said. “Rising mortgage rates and high prices have led to a big pullback in home building and sales, but aside from a big pullback in tech-focused metros, national home prices have so far declined only modestly.”

In the Case-Shiller release, the largest monthly declines were in San Francisco, down 2.2%, and Phoenix and Las Vegas, both down 2.1%. Prices in Los Angeles fell 1.7% on the month. Price increases were generally smaller in the Midwest and East Coast.

Bitfront, the crypto exchange backed by Japanese social media app Line, is shutting down after failing to weather industry turmoil, my colleague Diksha Madhok reports.

The US-based exchange’s announcement comes as the digital asset market grapples with a financial contagion triggered by the spectacular collapse of another crypto exchange, FTX.

Trading on Bitfront will be suspended until the end of the year, with withdrawals on March 31, 2023, it said in a statement on its website on Monday.

The company said it was unable to “overcome the challenges in this rapidly evolving industry,” while distancing its decision from the FTX implosion.

“Please note that this decision … is not related to the recent problems associated with some exchanges that have been accused of wrongdoing,” he added.

Digital currency prices have plummeted. Bitcoin, the world’s largest cryptocurrency, is down about 65% this year. It was trading at about $16,785 on Wednesday, according to CoinDesk.

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