: Higher interest rates sap consumer appetite for new cars and other major purchases

by | Nov 15, 2023 | Stock Market

Higher borrowing costs appear to have sapped consumer demand for new cars and other big ticket items. Receipts at U.S. auto dealers fell 1% in October, the government said Wednesday, while sales of home furnishings and building materials also fell. Interest rates have surged to the highest rate in years as the Federal Reserve battles to bring down inflation. Higher borrowing costs typically depress demand and help tamp down prices.

The pace of auto sales has slowed to an annual rate of 16 million in October from 16.6 million in the early summer, U.S. Census data shows. Both higher rates and high prices have played a big role. “Dealers have seen a decline in demand and have lowered prices,” said Jeffrey Roach, chief economist for LPL Financial in Charlotte, N.C. Sales of home furnishings such as beds, tables, couches and bureaus, meanwhile, have fallen four straight months and they are down nearly 12% in the past year. High mortgage rates have curbed home sales and depressed purchases of furnishings. Appliance sales have also declined. “We’ve recently seen upticks in the shares of U.S. consumers who are delaying major purchases,” retail analyst Claire Tassin and senior economist Kayla Bruun of Morning Consult wrote in a note. Since interest rates are likely to remain high until well into next year, the effect on retail sales and consumer spending is likely to persist, Wall Street

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