If you listened to Home Depot’s earnings call on Tuesday morning, you heard the word “uncertainty” at least seven times. That uncertainty is coming from consumers, and Home Depot expects it to hurt sales for the rest of the year.
The company said customers are putting off major home improvement projects because financing is expensive due to high interest rates and because consumers feel uncertain about the overall economic situation. So is this a Home Depot problem or a problem for the wider economy?
Many Home Depot customers are homeowners who have become wealthier in recent years as their property values have soared. The earnings report shows that even they are worried, said Steven Zaccone, a research analyst at Citi.
“So it seems like consumers are becoming increasingly weaker,” he said. “I think that’s what’s really new in the last few months.”
And if consumers spend less for fear of economic weakness, it can actually make the economy worse.
“This loss of confidence can create its own business cycle, and it’s not a good business cycle. And that’s exactly what the folks at Home Depot are talking about,” said Anirban Basu, chief economist at Associated Builders and Contractors.
Professional builders also feel this.
Shiloh Travis designs, builds and renovates homes in Austin, Texas — and spends a lot of money at Home Depot. In the past eight months, two of his clients have had to postpone major projects indefinitely because of concerns about interest rates. He’s also observed some caution in the market overall.
“I think there’s a general sense of anxiety about the future of life in general,” he said. And that makes him a little uneasy as a business owner. “I’m literally considering laying off one of my employees right now,” he said.
Travis himself said that when he was younger, he would have done whatever it took to get more business. But now that he’s approaching 50, he’s a little more cautious about taking risks. And that means he’s not sure if it’s wise to expand his business.
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