WASHINGTON, Sept 26 (Reuters) – U.S. consumer confidence dropped to a four-month low in September, weighed down by persistent worries about higher prices and rising fears of a recession, though households remained generally upbeat about the labor market.
The second straight monthly decline in confidence reported by the Conference Board on Tuesday also reflected higher interest rates and concerns about the political environment.
The nation faces a potentially disruptive shutdown of the federal government on Saturday amid political wrangling. Confidence fell across all age groups, and was most pronounced among consumers with annual incomes of $50,000 or more.
“Inflation is slowing, but prices are still higher than they were before the pandemic and this is taking a toll on consumer confidence,” said Christopher Rupkey, chief economist at
FWDBONDS in New York.
The Conference Board said its consumer confidence index dropped to 103.0 this month, the lowest reading since May, from an upwardly revised 108.7 in August. Economists polled by Reuters had forecast the index easing to 105.5 from the previously reported 106.1. Consumers’ perceptions of the likelihood of a recession over the next year ticked back up.
A sharp decrease in the expectations measure accounted for the decline in confidence, which economists partially attributed to the looming government shutdown, with Congress so far failing to pass any spending bills to fund federal agency programs in the fiscal year starting on Oct. 1.
Hundreds of thousands of federal workers will be furloughed and a wide range of services, from economic data releases to nutrition benefits, suspended beginning on Sunday.
“Consumers also expressed concerns about the political situation and higher interest rates,” said Dana Peterson, chief economist at The Conference Board in Washington.
The cutoff date for the preliminary survey was Sept. 18. Millions of Americans will also start repaying their student loans in October and most have run down their pandemic savings.
The survey showed consumers increasingly concerned about their family finances.
The Federal Reserve last week left its benchmark overnight interest rate unchanged at the 5.25%-5.50% range. The U.S. central bank, however, stiffened its hawkish stance, projecting another rate hike by year end and monetary policy staying significantly tighter through 2024 than previously expected.
The Fed has hiked the policy rate by 525 basis points since March 2022.
Though consumers continued to fret over the higher cost of living, their inflation expectations over the next year remained stable and they showed no intentions of drastically pulling back on purchases of motor vehicles and other big-ticket items like television sets and refrigerators over the next six months.
Fewer, however, expected to buy a house, with the rate on the popular 30-year fixed-mortgage the highest in more than 22 years and home prices reaccelerating.
Consumers’ 12-month inflation expectations were unchanged at 5.7% for the third straight month.
Consumer spending remains underpinned by a tight labor market, which is keeping wage growth elevated.
The survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, widened to 27.3 this month compared to 26.7 in August. This measure correlates to the unemployment rate in the Labor Department’s closely followed employment report.
Stocks on Wall Street fell. The dollar rose against a basket of currencies. U.S. Treasury prices were lower.
HOUSE PRICES ACCELERATE
A separate from the Commerce Department showed new home sales plunged 8.7% to a seasonally adjusted annual rate of 675,000 units in August after racing to a 17-month high in July.
Economists had forecast new home sales, which account for a small share of U.S. home sales, falling to a rate of 700,000 units. New home sales are counted at the signing of a contract, making them a leading indicator of the housing market. They, however, can be volatile on a month-to-month basis. Sales increased 5.8% on a year-on-year basis in August.
Though new home sales remain supported by a dearth of previously owned homes on the market, the resurgence in mortgage rates is reducing affordability for prospective home buyers.
The rate on the 30-year fixed mortgage vaulted above 7% in August and climbed to an average of 7.19% last week, the highest since July 2001, according to data from mortgage finance agency Freddie Mac. Mortgage rates are rising in tandem with U.S. Treasury yields, which have surged on worries that soaring oil prices could hamper the Fed’s fight against inflation.
“While we expect higher rates to hurt new home sales, we think they will be more resilient than existing home sales as builders seem willing to scale up their use of incentives to motivate sales,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics in New York.
A third report from the Federal Housing Finance Agency showed annual home price growth quickened for a second straight month in July, largely reflecting the tight supply in the market for previously owned homes. House prices jumped 4.6% on a year-over-year basis in July after rising 3.2% in June. Prices shot up 0.8% month-on-month after advancing 0.4% in June.
The resurgence in house prices was seen feeding through to higher inflation, likely giving the Fed cover to maintain its hawkish posture for some time.
“The Fed will see the reacceleration of house prices as a reason to keep interest rates higher for longer,” said Bill Adams, chief economist at Comerica Bank in Dallas. “Renting households are seeing some relief in new lease prices, but since two thirds of Americans are homeowners, the Fed cannot afford to look past house prices’ influence on the cost of living.”
Reporting by Lucia Mutikani; Additional reporting by Amina Niasse; Editing by Chizu Nomiyama and Andrea Ricci
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A sign outside the headquarters of JP Morgan Chase & Co in New York, September 19, 2013. REUTERS/Mike Segar/File Photo Acquire Licensing Rights
NEW YORK, Sept 26 (Reuters) – JPMorgan Chase (JPM.N) reorganized the leadership in its investment bank, promoting a new head in North America to succeed Fernando Rivas, who plans to retire, according to a memo seen by Reuters.
Rivas, who previously ran the financial institutions group, was one of JPMorgan’s lead negotiators in its purchase of failed First Republic Bank in May. He will be replaced by Jay Horine.
The bank also appointed several global heads for industry groups reporting to Jim Casey and Vis Raghavan, its co-heads of global investment banking, effective immediately.
Reporting by Nupur Anand in New York; Editing by Lananh Nguyen and David Gregorio
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A Swedish flag flutters in front of residential houses in Stockholm, Sweden, September 14, 2023. REUTERS/Marie Mannes/File Photo Acquire Licensing Rights
FRANKFURT/OSLO, Sept 25 (Reuters) – Troubled Swedish landlord SBB is exploring the sale of a controlling stake in its residential arm, which owns 23,000 apartments, as it overhauls its business to meet debt deadlines next year, its chief executive told Reuters.
CEO Leiv Synnes said the company’s sale of control in a schools property business to Canadian investor Brookfield was just the start of a sweeping overhaul of its operations, and that selling a minority or controlling stake in its residential arm could be next.
“This is the first step,” Synnes said, referring to the sale of control in EduCo that allowed the repayment of an inter-company loan, releasing 7.8 billion Swedish crowns ($706 million) of cash. “We need to take more steps.”
Synnes said he was in discussions with investors about its 39-billion-crown ($3.5 billion) residential arm as he seeks to close a financing gap. The company said it was also mulling a stock-market listing for that business.
“There are many investors that are looking to expand their business in the Nordics,” said Synnes.
SBB’s problems are unfolding as Sweden struggles to contain a wider property crisis, triggered by high debts, rising interest rates and a wilting economy.
TURNING FOCUS TO COMMUNITY ARM
Selling control of this business would focus SBB on its community arm, which owns care homes, government buildings, hospitals, police stations, fire stations and army barracks.
Long popular with investors, SBB is at the epicentre of a property crash that threatens to engulf the Nordic state’s economy.
The $13 billion group, which owns swathes of property across Sweden, racked up a pre-tax loss of 11 billion Swedish crowns ($1.09 billion) in the second quarter, while its cash dwindled.
The EduCo deal, which will make Brookfield majority owner, with the Swedish firm left with a 49.84% stake, secures extra cash, sending SBB’s (SBBb.ST) shares up by roughly a third and boosting its bonds.
“The fact that SBB is freeing up 8 billion crowns must be seen in a very positive light. In a crisis, it is almost all about having liquidity, and SBB is getting it now,” Carlsquare analyst Bertil Nilsson said.
SBB group built up vast debt by buying public property, including social housing, government offices, schools and hospitals.
It is now scrambling to salvage its finances after seeing its credit rating downgraded to junk, with some looking at the government as a potential saviour. Its shares have lost more than 90% of their value since peaking in 2021.
The Swedish real estate industry’s issues have alarmed investors and prompted the Swedish central bank to issue several warnings.
Earlier this year, it cautioned that problems in heavily indebted commercial property companies could spill over and hit the economy more widely, threatening a domino effect on banks, who have lent ever more to property companies.
($1 = 11.0415 Swedish crowns)
Reporting by Terje Solsvik, Jesus Calero and Chiara Elisei; writing by John O’Donnell; editing by Anna Ringstrom, Alexander Smith and Bernadette Baum
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Sept 24 (Reuters) – Swedish property group SBB (SBBb.ST) on Sunday divested 1.16% of its education subsidiary EduCo to Brookfield Super-Core Infrastructure Partners for around 242 million Swedish crowns ($21.73 million) as it looks to bolster its finances.
SBB will hold approximately 49.84% of EduCo after the divestment, following which EduCo will be controlled by Brookfield. The transaction is expected to be completed in October this year.
Sweden is in the grips of a worsening property crisis, with developers grappling with large debts, rising interest rates and a wilting economy. Earlier this year, the International Monetary Fund flagged Sweden’s historically high household borrowing, coupled with debt-driven commercial property firms and their dependence on local banks, as a financial stability risk.
SBB, one of Sweden’s largest commercial landlords, in May initiated a strategic review including a potential sale of all of the company, or some of its business segments, to improve its finances.
As part of the deal announced on Sunday, EduCo will repay part of its inter-company loan from SBB, resulting in the Stockholm-based company receiving approximately 7.8 billion Swedish crowns ($700.46 million) in cash.
SBB’s remaining loan to EduCo will be around 5.5 billion Swedish crowns.
Brookfield bought a 49% stake in EduCo from SBB in November of last year. Discussions with Brookfield to sell the remaining 51% stake broke down in July, dealing a blow to SBB, which was fighting for survival after its shares plunged in May on concerns over its financial position and a refinancing of billions of crowns in debt.
Brookfield Super-Core Infrastructure Partners is the infrastructure fund of Canada’s Brookfield Asset Management(BAM.TO). Brookfield declined to comment.
SBB also said it had decided on a decentralised group structure, wherein the company will establish three wholly, or partially owned business units – Education, Community, and Residential.
($1 = 11.1356 Swedish crowns)
Reporting by Rishabh Jaiswal in Bengaluru; editing by Barbara Lewis and Sharon Singleton
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Construction sites are photographed in Frankfurt, Germany, July 19, 2023. REUTERS/Kai Pfaffenbach Acquire Licensing Rights
BERLIN, Sept 22 (Reuters) – German housing prices fell by the most since records began in the second quarter as high interest rates and rising materials costs took their toll on the property market in Europe’s largest economy, government data showed on Friday.
Residential property prices fell by 9.9% year-on-year, the steepest decline since the start of data collection in 2000, the federal statistics office said. Prices fell by 1.5% on the quarter, with steeper declines in larger cities than in more sparsely populated areas.
In cities such as Berlin, Hamburg and Munich, apartment prices fell by 9.8% and single and two-family house prices dropped by 12.6% on the year.
For a decade, low interest rates have fuelled a property boom in Europe’s largest real estate investment market. A sharp rise in rates and increasing construction costs have put an end to the run, tipping a string of developers into insolvency as deals froze and prices fell.
Building permits for apartments in Germany declined 31.5% in July from a year earlier, the statistics office disclosed on Monday, as construction prices rose by almost 9% on the year.
Germany aims to build 400,000 apartments a year, but has struggled to meet the goal.
German housing industry association GdW on Friday sounded the alarm over the situation calling for government support for construction companies.
“The construction crisis in Germany is getting worse day by day and is increasingly reaching the middle of society,” GdW, which represents around 3,000 housing companies nationwide, said in a statement.
GdW called for a cut in value added tax (VAT) to 7% from the current level of 19% for affordable rentals and government funding loans with a 1% interest rate to support companies.
The government is scheduled to hold a summit with the industry on Monday to discuss the situation.
GdW and the Haus&Grund owner’s association said they were boycotting the summit as they had too little influence on its agenda.
The German cabinet plans to present an aid package for the industry by the end of month after announcing plans to promote the construction sector, including reducing regulatory and bureaucratic requirements.
Reporting by Riham Alkousaa and Klaus Lauer, editing by Kirsti Knolle and Sharon Singleton
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Vehicles drive among the buildings during the evening rush hour in Beijing’s central business area, China November 21, 2018. REUTERS/Jason Lee/File Photo Acquire Licensing Rights
BEIJING, Sept 20 (Reuters) – China should step up policy support for the economy while promoting reforms to help achieve the annual growth target of around 5%, Yi Gang, former governor of the People’s Bank of China (PBOC), said in remarks published on Wednesday.
China’s factory output and retail sales grew at a faster pace in August, but tumbling property investment threatens to undercut a flurry of support steps that are showing signs of stabilising parts of the wobbly economy.
“We should appropriately increase macroeconomic policy adjustments, effectively support the expansion of domestic demand and promote a virtuous economic cycle,” state media quoted Yi, deputy head of the economic committee of the Chinese People’s Political Consultative Conference (CPPCC), as saying.
That will help China achieve the 2023 growth target of around 5%, Yi said.
The government should move to boost the weak confidence of private firms and tackle local government debt risks that have hampered local authorities’ ability to support growth, Yi said.
“In the long term, affected by factors such as the slowdown in urbanisation and the population aging, the overall demand for home purchases may fall to a new level,” Yi said.
The central bank should use its structural policy tools to support “rigid and improved housing demand”, he said.
Yi also called for reforms of China’s system on residence permits, or “hukou”, and improve social welfare for millions of migrant workers who had entered cities, which will help boost consumption.
Reporting by Kevin Yao; Editing by Chizu Nomiyama
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U.S Representative Andy Barr (R-KY), Rep. Mike Gallagher (R-WI), and Rep. Blaine Luetkemeyer (R-MO) attend a House Select Committee on the Chinese Communist Party hearing entitled “The Chinese Communist Party’s Threat to America,” in Washington, U.S., February 28, 2023. REUTERS/Nathan Howard/File Photo Acquire Licensing Rights
Sept 19 (Reuters) – The chair of the U.S. House of Representatives’ committee on China on Tuesday planned to meet with a semiconductor industry group to express concerns over U.S. investments in China’s chip industry, according a source familiar with the matter.
Representative Mike Gallagher, an influential Republican lawmaker whose select committee has pressed the Biden administration to take a tougher stance on sending U.S. technology to China, planned to meet with the Semiconductor Industry Association, which represents major chip firms such as Nvidia (NVDA.O) and Intel (INTC.O) whose sales to China have been affected by U.S. export rules, the source said.
Gallagher planned to tell the group he believes that U.S. rules enacted last October that cut off the sale of advanced artificial intelligence chips to China should be tightened to cover less advanced chips, the source said. The source added that Gallagher also aimed to talk with the group about reducing the number of semiconductor manufacturing machines that could be sent to China.
Also among the planned discussion topics is U.S. investment in Chinese chip firms. Intel, Qualcomm (QCOM.O) and other firms have venture capital arms that have invested in Chinese technology companies, the source added.
Gallagher also will express his concerns that a massive Chinese effort to build up capacity to build less advanced chips used in automobiles, washing machines and other everyday products could one day result in China dumping those chips on the U.S. market and drive U.S. makers of such chips out of business, the source said.
A representative for the Semiconductor Industry Association did not immediately return a request for comment.
Reporting by Stephen Nellis in San Francisco
Editing by Nick Zieminski
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[1/2]People on a property tour visit a show flat of a real estate property developed by Sunac China Holdings in Xishuangbanna Dai Autonomous Prefecture, Yunnan Province, China, June 22, 2019. Picture taken June 22, 2019. REUTERS/Lusha Zhang/File Photo Acquire Licensing Rights
HONG KONG, Sept 19 (Reuters) – Chinese developers Sunac (1918.HK) and Country Garden (2007.HK) brought some relief to the crisis-hit property sector by forging debt deals with creditors, but the outlook remained clouded by uncertainty about a recovery in home sales.
Shares in Sunac China Holdings surged as much as 14% in early trade on Tuesday after creditors approved its $9 billion offshore debt restructuring plan, the first green light of such a debt overhaul by a major Chinese developer.
The stock, however, gave all its gains later and dropped more than 7% in the afternoon trade after reports, citing court documents, showed Sunac has filed for U.S. bankruptcy protection under Chapter 15.
Under the U.S. bankruptcy code, the move shields non-U.S. companies that are undergoing restructurings from creditors that hope to sue them or tie up assets in the United States. The step is seen as procedural in large offshore debt revamp processes.
China Evergrande Group (3333.HK), which is seeking to restructure a total of $31.7 billion in one of the largest such exercises in the world, also sought protection under Chapter 15 last month.
TROUBLED SECTOR
Separately, cash-starved Country Garden won approval from creditors to extend repayment on another onshore bond, the last in the batch of eight bonds it has been seeking extensions for, two sources familiar with the matter said on Tuesday.
The developments come as Beijing steps up efforts to revive the property sector, which accounts for roughly a quarter of the world’s second-largest economy, with a raft of support measures unveiled over the last few weeks.
Sunac said late on Monday that creditors holding 98.3% of the total value of the bonds who attended the vote had approved the restructuring plan proposed and agreed to by some creditors in March.
The developer will seek approval of the plan by a Hong Kong court at a hearing scheduled for Oct. 5.
As part of the restructuring terms, a portion of its debt would be exchanged into convertible bonds backed by its Hong Kong-listed shares along with new notes with maturities of between two and nine years.
“I will treat it as a positive … We haven’t seen much progress on the offshore market, so this shows at least some Chinese developers are trying to reach an agreement,” said Gary Ng, senior economist at Natixis Corporate and Investment Bank.
If the plan could be implemented well, and depending on whether the recovery of China’s property market could generate sufficient cash flows, investors would be able to get something back, he added.
PROPERTY SECTOR OUTLOOK
While Sunac is among a string of Chinese developers that have defaulted on their offshore debt obligations since an unprecedented liquidity crisis hit the property sector in 2021, Country Garden has not missed any offshore payments yet.
The latest debt agreements with creditors will give some breathing room to Chinese developers and help them avoid default or a messy liquidation process, but the success of the agreements will depend on a recovery in the property sector.
Some offshore bondholders say they don’t have many options apart from agreeing to debt restructuring proposals, given their returns will likely be very low if they choose to liquidate a cash-strapped developer.
Even as Beijing implements measures to prop up the sector, house prices have continued to decline – latest data show new home prices fell at their fastest pace in 10 months in August, while falls in real estate investment and sales deepened.
ANZ Senior China Economist Betty Wang said the support measures could spur some “genuine demand” especially ahead of the traditional sale season during late September/early October in top-tier cities.
“However, the pace and the extent of such a turnaround will be much smaller than in previous cycles,” she said in a report published on Tuesday.
“It’s also questionable whether it will kick off a sustainable rebound especially considering the uncertain job outlook, deteriorating income inflows, a shift in expectations, and potential increase in housing supply in the long-term.”
Reporting by Donny Kwok and Xie Yu in Hong Kong, Steven Bian in Shanghai, and Kevin Huang in Beijing; Writing by Anne Marie Roantree and Sumeet Chatterjee; Editing by Lincoln Feast
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People walk along the beach on the Suffolk coast as the Sizewell B nuclear power station can be seen on the horizon, near Southwold, Britain, January 31, 2019. REUTERS/Russell Boyce Acquire Licensing Rights
LONDON, Sept 18 (Reuters) – Britain on Monday opened the search for private investment in the Sizewell C nuclear project, inviting potential investors to register their interest.
The building of the plant by French energy giant EDF in southeast England, capable of producing around 3.2 gigawatts of electricity or enough to power around 6 million homes, was approved in July 2022.
“The government, the Sizewell C Company and EDF, the project’s lead developer, are looking for companies with substantial experience in the delivery of major infrastructure projects,” a statement from the Department for Energy Security and Net Zero said.
The British government announced last year that it would support Sizewell C with around 700 million pounds ($895 million) while taking a 50% stake during its development phase.
“The launch of the formal equity raise opens another exciting phase for the project, following a positive response from investors during market testing,” said Sizewell C Company Joint Managing Director, Julia Pyke.
Reporting by Kylie MacLellan, writing by William James
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Men stand near residential buildings in Beijing, China April 14, 2022. REUTERS/Tingshu Wang/File Photo Acquire Licensing Rights
BEIJING, Sept 15 (Reuters) – A slump in China’s property sector worsened in August, with deepening falls in new home prices, property investment and sales, despite a recent flurry of support measures, adding pressure to the world’s second-largest economy.
New home prices fell at the fastest pace in 10 months in August, down 0.3% month-on-month after a 0.2% decline in July, according to Reuters calculations based on National Bureau of Statistics (NBS) data. Prices were down 0.1% from a year earlier, after a 0.1% decline in July.
For August, property investment fell for the 18th straight month, down 19.1% year-on-year from a 17.8% slump the previous month, separate data showed on Friday. Home sales are down for the 26th consecutive month, according to Reuters calculations based on the data.
China has in recent weeks delivered a raft of measures to boost home buying sentiment, including easing some borrowing rules, and relaxing home purchasing curbs in some cities.
These policies have given major cities like Beijing a tiny boost in new home sales, but some worry they might be short-lived and could potentially dry up demand in smaller cities.
China’s broader economy is showing signs of stabilisation with economic figures showing quickening growth in industrial output and retail sales.
However, analysts say a series of supportive policies have yet to firm up the crisis-hit property sector with major Chinese developers still fighting to avoid default.
“We are still hopeful that housing sales would stage small sequential pickups in the coming months, but stimulus will ultimately stop short of reflating the sector,” said Louise Loo, China economist at Oxford Economics.
China’s central bank said on Thursday it would cut the amount of cash banks must hold as reserves, its second such easing this year.
“The more material risks in the near-term come from some property developers and financial institutions, and a small RRR cut could do very little to help,” said Nomura in a research note on Friday.
Around 30 cities eased home purchase curbs and relaxed mortgage rules for buyers in recent weeks but analysts say Beijing may have to introduce more aggressive property easing measures to deliver a real recovery.
Authorities may also need to lift almost all restrictions on home transactions, invest more in the urban renovation programme, speed up infrastructure spending and restructure local government debt, said Nomura.
Moody’s on Thursday cut China’s property sector outlook to negative from stable, citing economic growth challenges, which the rating’s agency said will dampen sales despite government support.
China’s property crisis is seen as one of the biggest stumbling blocks to a sustainable economic recovery, with rising risks of default among private developers threatening to imperil the country’s financial and economic stability.
Reporting by Liangping Gao, Ella Cao and Ryan Woo
Editing by Sam Holmes
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