Weak Retail Sales & Lower Interest Rates

As expected, retail sales were the slowest since 2002.

For consumers, this is actually good news. Retailers will need to dump inventory and lure shoppers. There will be some good deals out there.

Another important thing to consider is the overall impact that this has on the economic psyche. The steady drumbeat of negative news will have lasting impact and add to further belt tightening and cautious spending behavior.

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More interest rate drops on the way. And deep ones.
I'm still thinking this through, but I think it is good and bad. A lower rate reduces the housing re-set pain. It lowers banking carrying costs. That is a big advantage.

But will it re-inflate spending and re-inflate the housing market? Somewhat, but not to the desired degree. Borrowing and spending can continue, but not at the same pace.

For housing, the damage is done.
1. Real demand is lower than was experienced - That is, speculators are gone and they were 20%+ of the market (some reports say 30%)
2. Folks get locked in - Lower rates may prevent more foreclosures, but it does nothing to boost demand. Those folks are still locked in. And people now know how fragile and how scary real estate is - they aren't going to rush in.
3 Lending terms are tighter - Money just won't be available on the same terms.