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Home News Macro

High Rates Hit Home: Key Indicators Show US Economy Cooling

by Team Lumida
June 28, 2024
in Macro
Reading Time: 3 mins read
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Key Takeaways:

  1. Personal spending revised down to 1.5%, indicating softer consumer demand.
  2. Core capital goods orders dropped 0.6%, reflecting business investment challenges.
  3. Pending home sales fell 2.1%, highlighting the impact of high mortgage rates.

What Happened?

The US economy is showing signs of slowing down, driven by high interest rates and persistent inflation. Personal spending, a key economic driver, was revised down to an annualized 1.5% in Q1 from a previous 3.3%. Core capital goods orders and shipments also declined by 0.6% and 0.5%, respectively, in May.

The National Association of Realtors reported a 2.1% drop in pending home sales, the lowest level since 2001. The merchandise trade deficit widened to $100.6 billion, the largest in two years. Bill Adams, Comerica Bank’s chief economist, remarked, “The economy is operating in low gear in the first half of 2024 after above-trend growth in the second half of 2023.”

Why It Matters?

This data underscores the impact of the Federal Reserve’s high-interest-rate policy aimed at curbing inflation. With borrowing costs elevated, demand for consumer goods, homes, and business equipment is cooling. The Atlanta Fed’s GDPNow forecast has adjusted second-quarter growth down to 2.7% from an earlier 3%.

High mortgage rates around 7% are particularly straining the housing market, pushing contract signings for previously owned homes to record lows. For investors, these indicators suggest a cautious approach as economic growth slows and inflation pressures persist.

What’s Next?

Looking ahead, expect continued moderation in economic activity. Personal spending figures for May may show a slight rebound, but financial strain and weak labor demand signal slower growth. After-tax personal income rose just 1.5% in Q1, the smallest increase since 2022. Continuing jobless claims climbed to 1.84 million, the highest since 2021, indicating longer job search times.

Businesses are also likely to face ongoing challenges with high borrowing costs and a strong US dollar, which could further depress export demand. Monitor these trends closely, as they could influence market sentiment and investment strategies in the coming months.

Source: Bloomberg
Tags: consumer spendingHousing marketInflationInterest RatesUS Economy
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© 2025 Lumida Wealth Management LLC is an SEC registered investment adviser. Privacy Policy. Cookies Policy.
Disclaimer Important Information This site is for informational purposes only. Information presented on this site does not constitute as investment advice.

Lumida Wealth Management LLC (‘Lumida”) is an SEC registered investment adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.

Lumida's website (referred to herein as the "Website") is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Website on the Internet should not be construed by any client and/or prospective client Lumida’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet.

Any subsequent, direct communication by Lumida with a prospective client will be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.

‍Lead Capture Forms: By submitting your contact information in the forms on this site, you are not obligated to invest in Lumida's product or services.
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