U.S. Consumer Spending Strains Under Rising Mortgage Rates, Gas Prices, and Mixed Retail Outlook

Higher mortgage rates (30-year fixed at 6.51%) and gasoline at $4.55 per gallon—45% above a year ago—are tightening household budgets. Retailers Walmart and Target posted mixed forecasts, signaling uncertainty about consumer demand. Homebuyers face higher borrowing costs during the peak buying season. The rise in mortgage rates coincides with the traditionally busiest home-buying season, potentially dampening new home sales. The mortgage rate increase marks the highest level in nearly nine months, raising borrowing costs for homebuyers during the peak season.

Associated Press

Oil prices have risen due to the Iran-related war and the Strait of Hormuz closure, pushing crude higher, lifting bond yields and feeding mortgage-rate increases. The conflict has disrupted global shipping lanes. Higher crude prices have driven inflation.

Associated Press

• Mortgage: 30-yr fixed 6.51% (up from 6.36%); still below 6.86% a year ago.

Associated Press

• Gas: $4.55/gal, +45% YoY.

Associated Press

• Unemployment claims: 209,000 (down 3k, below forecast 213k).

Associated Press

• Unemployment rate: 4.3% (“low-hire, low-fire” market).

Associated Press

• Retail outlook: Walmart weaker forecast; Target raised outlook but below Q1 pace.

Associated Press

Quarterly reports from Walmart, Target, Home Depot, Lowe’s and TJX show shoppers remain cautious but continue spending, aided by tax refunds.

Associated Press

Freddie Mac noted rates remain below last-year levels. AAA reported the $4.55 national average gasoline price. The Labor Department confirmed unemployment filings fell to 209,000. Walmart warned of a cautious quarter; Target projected continued revenue momentum despite modest growth. U.S. equities posted an eighth consecutive weekly gain, near record levels. The Labor Department's data underscores a tight labor market despite modest hiring. U.S. equities extended an eight-week winning streak, the longest since 2023, bolstered by earnings beats from Workday and Zoom.

Associated Press

Economists caution that spending may retreat once tax refunds end, and the “low-hire, low-fire” labor market could keep wages stagnant.

Associated Press

While mortgage rates have risen to a nine-month high, they remain below the 6.86% level seen a year ago, leading to differing assessments of borrowing cost pressure.

Associated Press

• “applications for unemployment benefits for the week ending May 16 fell by 3,000 to 209,000, the Labor Department reported Thursday.” — U.S. Labor Department

Associated Press

• “Shares of Workday and Zoom Communications rose after both delivered better profit reports for the latest quarter than analysts expected.” — Market analysts

Associated Press

If consumer demand weakens, the ripple effect could extend to sectors reliant on discretionary spending, such as travel and dining.

Associated Press

The Federal Reserve’s upcoming policy meeting will be closely watched for signals on interest-rate direction.

Associated Press