The Fed Can't Help Housing or Autos at This Point
These key sectors are already in decline, and lower interest rates won’t stop that trend.
A weakening auto sector is bad for housing.
Photographer: Joe Raedle/Getty Images North AmericaHopes are running high that potential interest rate cuts by the Federal Reserve will support the auto and housing sectors, two parts of the economy that are sensitive to borrowing costs. The risk, though, is rising that any relief won’t come until after these critical leaders of the current economic cycle have already fallen into contraction.
Headed into the promotion-heavy Memorial Day weekend, analysts spoke of automakers finally succumbing to the need to spur car sales with deep discounts. What’s remarkable is the line manufacturers have been able to hold off on incentives, which fell for 11 straight months, according to TrueCar Inc.’s ALG data and analytics unit. While shareholders have applauded the safeguarding of profit margins as inventories piled up, the pressure to match supply and demand has given way to three months - and counting - of production cuts.