Soaring mortgage rates, inflation forecast downturn despite third-quarter growth
(Reuters) – The market turmoil which forced a $1 billion writedown of U.S. consumer staple retailer Target Corp on Thursday was the latest sign that the overall economy was not as hot as the Federal Reserve’s first-quarter forecast suggested.
FILE PHOTO: People walk by a Target store in the Brooklyn borough of New York, U.S., October 6, 2018. REUTERS/Lucas Jackson
The Fed held its benchmark rate steady at a record low of 0.25 percent, and markets have since swung widely in response to the first quarter’s disappointing economic data.
Inflation, which has generally been a healthy concern for retailers, has been the main concern for homebuilders, which this week trimmed their 2018 profit projection for the domestic homebuilding industry to between $45 billion and $55 billion.
Meanwhile, despite a strong rebound in consumer confidence in May and strong consumer spending in September, the report suggested that the rebound was temporary and that growth in the U.S. economy was slowing.
“There continue to be signs of an economy cooling and a consumer spending rebound only being temporary,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group in his weekly survey of Wall Street’s top analysts.
“Even if the underlying trend of slowing growth is real, the magnitude of that reduction in growth… suggests that the economy is probably much closer to a double-dip or two-dip recession than a long-term upturn,” he wrote in a note.
The U.S. central bank raised its forecasts for both personal consumption expenditures (PCE) and personal income in the third quarter, but raised the number of rate hikes from two to three while remaining steady on unemployment.
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While the central bank will continue to buy $75 billion of bonds