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Ahead of CPI/HD comments/RBNZ cuts/Other

Ahead of CPI/HD comments/RBNZ cuts/Other

Peter Boockvar
Aug 14, 2024
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As we're already pricing in 200 bps of rate cuts over the next year according to the fed funds futures contract table, I see today's CPI only making a difference for how the Fed will start the process in September, 25 bps or 50 bps. And with the US consumer weighed down by their cost of living, that is shifting the attention more to business activity rather the rate of change of inflation. I think the determining factor on 25 or 50 bps in September will be more the labor market data and not on inflation. 

To this, and notwithstanding the Home Depot stock rally on the hopes that rate cuts will get more people shopping again, particularly on higher ticket items, they said this on their 4.6% US comp drop:

"During the quarter, higher interest rates and greater macroeconomic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects. Additionally, we saw continued softness in spring projects, which were also impacted by the extreme weather changes throughout the quarter. When we look at the performance in the first six months of the year as well as continued uncertainty around underlying consumer demand, we believe a more cautious sales outlook is warranted for the year."

"During the 2nd quarter, our comp transactions decreased 2.2% and comp average ticket decreased 1.3%...Big ticket comp transactions for those over $1,000 were down 5.8% compared to the 2nd quarter of last year. We continued to see softer engagement in larger discretionary projects where customers typically use financing to fund the project, such as kitchen and bathroom models."

Also, "Pros outperformed the DIY customer, but both were negative for the quarter."

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