Indiana Grain Company, LLC

Posted: 07/14/10

By: tomgrisafi

The mood among consumers remains cautious, as a burst in activity at the nation's retailers earlier in the year has given way to uncertainty. Retail sales in June fell 0.5%, the second-consecutive monthly decline, while ex-autos, sales fell 0.1%.

There has been a lack of meaningful job creation, and the modest decline in the unemployment rate over the past couple of months can be traced to discouraged job seekers who have given up on their job search.

Consequently, consumers are once again focused on savings and debt repayment. Until optimism improves among businesses and hiring begins to accelerate, retailers are likely to face an uphill battle.

In the meantime, the housing market is still reeling in the wake of the expiration of the first-time and repeat home buyers tax credit.

The U.S. MBA Purchase Index fell 3.1% in the latest week, the ninth decline in ten weeks and lowest level in almost 14 years.

No doubt, the tax credit helped move up a number of sales that might have taken place during the summer.

Conventional wisdom suggests that record low mortgage rates should be lighting a fire under potential home buyers. However, job concerns, the high level of foreclosures and worries about housing prices are offsetting the favorable tailwind provided by 30-year fixed rates that are under 5%.