Maybe it was Easter. Maybe it was Passover. Maybe it’s higher interest rates. What can I possibly be talking about? The economy, of course.
I was in Manhattan this weekend for series of business meetings. With most of my time spent in the fashionable Fifth Avenue shopping district, I was surprised to see how quiet the last few days have been in New York. In a city where it’s hard to get a good hotel room or a table at a good restaurant, it was noticeably quiet in Manhattan over the past few days. I was hoping Easter or Passover played a role, but at most that can only count for a couple days.
The stores that people come to New York for were quiet… no big line-ups as usual. The best hotels and high-end restaurants… not an issue getting a reservation there either. The people “in the trenches” I talked to (the store merchants, restaurateurs and hotel people) told me they hope it’s just a lull before the busy summer tourist time. But they do not remember tourist (or local shopping) traffic being this quiet in the past few pre-summer periods.
Personally, my gut tells me higher interest rates are placing a damper on high-end spending. And in New York, if you are on Fifth Avenue shopping, it’s high-end. This weekend The Wall Street Journal noted the median price of a home in nearby and touristy Ocean City, New Jersey fell 7% in March. That can’t be helping either.
Overall, U.S. retail sales rose 0.6% in March according to the U.S. Commerce Department… a respectable increase. But other economic reports point to a changing tide in consumer spending habits.
The number of U.S. mortgage loans that entered the stage of foreclosure in February jumped a staggering 68% from February, 2005. With interest rates rising, and the growth of home prices slowing, consumers are finding it harder to make ends meet. The bigger the loans that were taken out, the bigger the problems for people who took loans that their income could just cover. A tighter consumer budget will make for a quieter economy. And it’s something we’ll just have to get used to after several years of consumer spending silliness.