US housing slump and service Industry slow down.

The US service industries have expanded at the slowest pace in nearly a year, as house sales and construction have declined. The number of American’s signing contracts to purchase new homes has fallen for two months in a row.

The worst housing slump since 1982 has had a huge effect on builders, retailers, wholesales and the mortgage lenders. Subsequent job losses has affected consumer spending which has fuelled the fear of recession.

Despite the current growth in manufacturing, it is clear that the economy is cooling, as recent government figures indicate economic growth is down 4.9 percent from the last quarter.

The president of Insight Economics, Steven Wood has highlighted this conundrum as he argued that the “ ongoing correction in the housing markets, the turmoil in the financial markets, and the slower pace of job creation and consumer spending in general have dampened non-factory activity”.

Consumer spending is seemingly going to provide less support to the economy as predicted as property values fall and unemployment levels increase.

This has lead to a chain reaction as retailers have reacted to this slump. Sears Holdings Corp have ousted CEO Aylwin Lewis after a drop in holiday sales and the world’s largest home-improvement chain Home Depot Inc have cut 10 percent of their workforce at its Atlanta headquarters.

This is widespread across the industry as Richard Dugas CEO of Pulte Homes Inc boldly states: “Sales levels are still depressed” with most the country’s house builder’s reporting consecutive quarterly losses. The true knock on effect of the housing slump is has yet to be felt.

Story link: US housing slump and service Industry slow down.