Rising Interest Rates, A Domino Meltdown

As Fed is expected to raise interest rates again on Thursday & further help home sales to keep tanking, home-goods retailers are already jolted by slowdown in housing market while electric bills are soaring across US.

Shades of the run up to the 2008 mortgage-induced economic meltdown? Can the current news & “domino effect” it suggests get any worse? As the WSJ noted, “falling home sales are rippling thru the economy, providing a window into how rising interest rates can cool spending, hiring & growth … When people buy homes, they buy a lot to go inside, including furniture, curtains, lighting fixtures & appliances.” Consider the recent struggles of Bed Bath & Beyond, which last month said it would close 20% of its stores & cuts its workforce to counter plunging sales. But, BB&B is not alone among similar retailers as mortgage rates keep rising so last week an average 30-yr fixed loan hit 6.02% compared to 2.86% a year ago. In fact, the entire home goods industry is starting to reel as the Commerce Dept says its sales declined in August from a year ago by 1.6% at all furniture & home-furnishing stores & by 5.7% at electronics & appliance stores.

Then, there’s the other shoe to drop in the form of rising electric & natural gas bills that, the WSJ says, “are expected to make it more expensive to light & heat homes in the coming months.” From New Hampshire to Louisiana, we’re told, customers’ electricity rates are increasing, while “natural gas prices have more than doubled this year, about 16%, “because of a global supply shortage made worse by the war in Ukraine” & US energy companies shipping domestic natural gas supplies to Europe that got dependent upon Russian gas, i.e., before Putin shut much of that supply down.

Davd Soul