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Home Depot Q2 2018 Results Shed Light on U.S. Economy

Accepted submission by takyon at 2018-08-15 01:11:38
Business

Home Depot's Sales Rebound Muted by Inflation in Fuel and Lumber [bloomberg.com]

Home Depot Inc.'s sales rebounded last quarter as Americans took on more remodeling projects, but rising costs for lumber and transportation are weighing on profitability.

[...] Home Depot and its smaller rival Lowe's Cos. are often seen as proxies for the health of the housing sector because property owners spend more on their homes when they believe values are rising. But for several quarters there's been increasing concern that years of robust home-price gains are cooling. For its part, Home Depot has continually said that a shortage of available homes [bloomberg.com] in many markets would actually underpin higher home-improvement spending.

[...] Even as the overall housing market looks to be cooling, several trends are driving demand for home-improvement products. A shortage of available listings has slowed property purchases, causing some owners to opt for sprucing up their homes instead. Additionally, more people are staying longer in their homes, which also supports the uptick.

The labor market also plays a role: A strong run of hiring, coupled with moderate wage growth, has boosted Americans' wherewithal to spend money on fixing up their homes. Spending on home improvement -- which accounts for about 38 percent of private residential construction outlays -- surged 13.8 percent in June from a year earlier to reach $221 billion, according to Commerce Department data. Going forward, the job market may continue to propel housing and remodeling demand. But potential hurdles include a pickup in mortgage rates, a shortage of skilled workers for building and remodeling projects, and rising costs for construction materials such as lumber, which is affected by tariffs.

Also at CNN [cnn.com] and CNBC [cnbc.com].


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