The storm flags are up. The economy is slowing to a walk, or perhaps worse. Deutsche Bank is lowering its Q4 GDP growth forecast to zero.
Perhaps it does not come as much of a surprise. Reports show that consumer confidence, manufacturing orders, and home prices have all dropped. Durable good orders dropped over 8% in October. The figure has not fallen that much in six years. The media price for a home dropped 3.5% in October. It is the largest drop on record.
Without rising home prices, the consumer may move to the sidelines. And, well he should.
But, in light of the slowing pace of the overall economy and consumer malaise, so industries that are already in trouble could get into more trouble. Fast.
Starting with retail, Wal-Mart would hope to recover from a disasterous November with the last month of the year being the “shop until you drop” season. That may not work out.
And, the US sutomotive industry, with its bloated inventories, is already offering steep discounts through the end of the year.
The drop in home prices may also have an impact on sales of large retailer like Home Depot.
If Deutsche Bank is right, 2007 could be a very, very rough year.
Douglas A. McInyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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