The Interest Rate Sensitive Sectors of the Economy are Getting Hit by Higher Rates, Which is Next?

It goes without saying that the most rate sensitive areas of the economy should feel the burn from higher rates first. It’s useful, therefore, to look at the performance of those sectors to get a read on the impact that changes in the rate environment are having on the real economy. In this way, we can look to the most rate sensitive areas as canaries in the coal mine, so to speak. So far, the canaries are giving us strong hints that higher rates, which have already hit the housing and housing and auto sectors, are about to hit the broader corporate sector.

This week we got more confirmation that higher rates are biting the housing market. It’s a topic we’ve hit on several times over the last few months. The most recent data series confirming this trend was the NAHB housing market index published on Monday. It saw the largest month-over-month drop since early 2014, right on schedule with the rise in mortgage rates.

Pending home sales, which will be released next week, will be the next item to give us more insight as to the relative strength of housing.