High-rise apartments under construction can be seen in the distance behind a row of residential housing in south London, Britain, August 6, 2021. REUTERS/Henry Nicholls
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LONDON, Aug 5 (Reuters) – House prices in Britain fell the first time in more than a year in July in monthly terms and the market is likely to weaken further as interest rates go up and the cost-of-living squeeze tightens, mortgage lender Halifax said on Friday.
Prices, which recently hit record highs,edged down by 0.1% from June when they had risen by 1.4%, Halifax said.
In annual terms, prices rose by 11.8%, slower than a 12.5% increase in June.
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The weakening of the house market comes after a boom triggered by the COVID-19 pandemic and the switch to working from home which pumped up demand for bigger homes, and by rock-bottom borrowing costs which are now rising again.
“House prices are likely to come under more pressure as those market tailwinds fade further and the headwinds of rising interest rates and increased living costs take a firmer hold,” Russell Galley, Halifax managing director, said.
“Therefore a slowing of annual house price inflation still seems the most likely scenario.”
Rival mortgage lender Nationwide said earlier this week that house prices rose in July at the slowest monthly pace in a year and Bank of England data has shown the lowest level of new mortgage approvals in two years in June. read more
The BoE raised interest rates on Thursday by the most since 1995 taking the Bank Rate to its highest level since 2008 as it seeks to limit the damage from a surge in inflation which is now expected to surpass 13% later this year. read more
Halifax said London continued to record slower annual house price inflation than other regions in July but the 7.9% growth rate was the highest in almost five years.
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Reporting by William Schomberg; editing by William James
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A logo of German real estate company Vonovia, is pictured during a news conference in Duesseldorf, Germany, March 6, 2018. REUTERS/Thilo Schmuelgen
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DUESSELDORF, Germany, Aug 3 (Reuters) – Vonovia (VNAn.DE), Germany’s largest residential landlord, is considering a range of measures to secure access to capital as interest rates rise, including property sales and joint ventures, it said on Wednesday.
It has earmarked 13 billion euros ($13.2 billion) worth of properties for sale and is looking into the possibility of new investors who could invest in its real estate portfolios, it said.
It also said it was under no time pressure to agree joint venture partnerships with investors.
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“In the current market environment we want to be particularly prudent and identify the right deals and the right timings,” it said in presentation slides.
For the first half of 2022, Vonovia posted a 36% jump in core profit (FFO) to 1.06 billion euros and affirmed its guidance for 2022 core profit of 2.0 to 2.1 billion euros.
($1 = 0.9825 euros)
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Reporting by Matthias Inverardi; Writing by Maria Sheahan; Editing by Rachel More, Kirsti Knolle
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A general view of residential properties at the Balqis Residence on Palm Jumeirah in Dubai, United Arab Emirates, March 25, 2022. Picture taken March 25, 2022. REUTERS/Christopher Pike
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DUBAI, July 28 (Reuters) – Dubai’s red-hot property market surged in the first half of the year as investors piled in, while Russians were among the top five buyers as the emirate benefits from an influx of wealth in the wake of Western sanctions.
The first half saw residential real estate transaction volumes up 60% with an 85% rise in the value of property sold, property consultancy Betterhomes said in a report.
The top buyers were from India, the United Kingdom, Italy, Russia and France, in that order, followed by Canada, the United Arab Emirates, Pakistan and Egypt tied in eighth place, Lebanon and China.
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Demand was boosted by geopolitical instability in Europe and mortgage buyers looking to get in ahead of well-telegraphed interest rate hikes as central banks tackle inflation, Betterhomes said.
Reuters reported earlier this year that Russians were pouring money into Dubai real estate as they seek a financial haven in the wake of Western sanctions on Moscow over its invasion of Ukraine. read more
“The market has faced growing headwinds in the form of rising interest rates and a strengthening dollar, but has so far proven to be robust with little sign of slowing,” Betterhomes said.
In the first half of the year, a record 37,762 units were sold, it said, citing Dubai Land Department data. Total transactions in the residential property market amounted to nearly 89 billion dirhams ($24.23 billion), it added.
Dubai’s property market began recovering from 2020’s severe downturn early last year with buyers snapping up luxury units as the emirate eased pandemic restrictions faster than most cities around the world.
However, S&P Global Ratings said in October that Dubai’s real estate recovery was fragile and uneven, and an oversupply of residential properties would pressure prices in the long run.
Luxury property transactions were up 87% versus the first half of last year, while apartments made up 62% of all transactions, Betterhomes said.
Investors dominated sales, making up 68% of all buyers, up 10% compared with a year earlier.
($1 = 3.6729 UAE dirham)
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Reporting by Yousef Saba; Editing by Kirsten Donovan
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People queue for food in the financial district of Canary Wharf, London, Britain, May 18, 2022. REUTERS/Kevin Coombs
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LONDON, July 28 (Reuters) – Britain’s commercial real estate sector is entering or might already be in a downturn, according to an industry survey, as higher interest rates push up investors’ financing costs and weaker consumer sentiment hurts demand for retail space.
The Royal Institution of Chartered Surveyors (RICS) said on Thursday that 43% of respondents to its quarterly commercial property survey thought the sector was in the early stages of a downturn, and a further 10% thought it was in the middle of one.
By contrast, three months ago 53% said the sector was in the early or middle stages of an upturn, a proportion that has now slumped to 22%.
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“The gloomier macro outlook appears to be dampening sentiment across the commercial real estate market,” RICS economist Tarrant Parsons said.
“Given interest rates are set to rise further from here, it appears the market may be at a turning point.”
British consumer price inflation hit a 40-year high of 9.4% in June, and financial markets expect the Bank of England next week to raise interest rates by half a percentage point to 1.75%, which would be the biggest rate rise since 1995.
Markets price in BoE rates hitting 3% by early 2023 and RICS said credit conditions for property investment were now tougher.
“This appears to have dampened momentum behind investor activity in particular, with headline capital value projections turning flat on the back of this,” it added.
Capital values were projected to fall outright for retail space, which is bearing the brunt of the cost-of-living squeeze. Demand for office space was levelling off – especially for second-tier locations – while the outlook for industrial sites such as warehouses remained strong, RICS said.
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Reporting by David Milliken
Editing by William Schomberg
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A man wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, walks past an electronic board displaying various countries’ stock indexes including Russian Trading System (RTS) Index which is empty, outside a brokerage in Tokyo, Japan, March 10, 2022. REUTERS/Kim Kyung-Hoon
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HONG KONG, July 26 (Reuters) – Asian shares pared losses on Tuesday as investor sentiment improved on China’s reported plans to tackle a debt crisis in real estate development.
MSCI’s broadest gauge of Asia stocks outside Japan (.MIAPJ0000PUS) bounced back to a gain of 0.36% in afternoon sessions. Chinese stocks jumped after reports the country would set up a fund of up to $44 billion to help property developers. read more
Hong Kong’s Hang Seng Index (.HSI) was 1.48% higher and China’s benchmark CSI300 Index (.CSI300) also widened gains to a rise of 0.91% at the morning close. Japan’s Nikkei (.N225) fell 0.08%, erasing some morning losses.
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FTSE futures edged up 0.15%. U.S. markets are likely to open lower, with E-mini futures for the S&P 500 index down 0.32%.
U.S. retailer Walmart Inc (WMT.N) cut its profit forecast on Monday and said customers were paring back discretionary purchases as inflation bit into household budgets. Shares fell 10% after hours. read more
Investors are also awaiting a likely 75 basis point Federal Reserve interest rate increase later this week – with markets pricing about a 10% risk of a larger hike, as well as waiting to see whether economic warning signs prompt a shift in rhetoric.
“We are leaning to the view that 75 bps is most likely but won’t be the end unless they see some demand destruction and some tempering of inflation,” said John Milroy, an investment adviser at Ord Minnett.
“We are fearful they have to materially slow the U.S. economy further.”
Big technology companies such as Apple (AAPL.O), Microsoft (MSFT.O) and Amazon.com are due to report earnings this week.
“The market has stabilized” from rate hike expectations, said Redmond Wong, Greater China market strategist at Saxo Markets in Hong Kong. “The focus is now on earnings.”
In China, “maintaining stability is the key theme,” said Wong on likely outcomes from politburo meetings expected to begin this week.
In currencies, the dollar was marginally softer but not drifting too far below recent milestone highs as uncertainty continued to swirl around the interest rate and economic outlook.
The euro rose 0.21% to $1.0240 but was hemmed in by uncertainty over Europe’s energy security, which is not helped by a looming cut in the westbound flow of Russian gas. read more
The yen steadied at 136.54 per dollar. The U.S. dollar index , which touched a 20-year high this month, was down slightly at 106.380.
Oil prices rose further on expectations Russia’s reduction in natural gas supply to Europe could encourage a switch to crude, with Brent futures last up 1.27% at $106.45 a barrel and U.S. crude up 1.26% at $97.92 a barrel. read more
Benchmark 10-year Treasury yields fell to 2.875% as growth worries gave support to bonds.
Gold hovered at $1,721.8 an ounce and bitcoin nursed overnight losses at $21,111.31.
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Reporting by Kane Wu in Hong Kong; Editing by Sam Holmes
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OTTAWA, July 22 (Reuters) – Canadian home prices are dropping fast after surging during the coronavirus pandemic, but that is offering little relief for consumers who face sky-rocketing rents and fading buying power as interest rates rise.
Desperate would-be buyers found themselves caught in a frenzy of bidding wars for real estate during the pandemic, when home prices in Canada rose more than 50% in just two years.
Now the competition has moved to rentals, with landlords demanding months of rent upfront and at times, even pitting tenants against one another to see who will pay more, according to real estate agents and media reports.
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The average rent on a 1-bedroom apartment in Canada is up 13.7% from the start of the year, data from Rentals.ca shows, with year-on-year rents surging 18.5% in Toronto and 19.2% in Vancouver.
The shift from frantic demand for homes-to-buy to homes-to-rent makes plain a broader issue with Canadian housing: that there simply is not enough of it, said Dan Scarrow, president of Macdonald Realty in Vancouver.
“Higher (interest) rates are not destroying demand for housing, it’s just shifting the demand from buying to renting,” he said. “The demand just sloshes between renters and buyers, depending on where rates are so long as you have constrained supply.”
The Bank of Canada has raised its policy interest rate to 2.5% now from 0.25% at the start of the year to fight inflation, which hit a near 40-year high of 8.1% in June.
The rapid rise in borrowing cost has chilled the real estate market, pulling down Canada’s average home price by 18.5% from its February peak, according to data from the Canadian Real Estate Association.
But softer prices do not appear to be helping would-be buyers, who now can’t get loans due to far higher mortgage qualifying rates. And that, in turn, is driving up rental demand.
“Rents have gone insane because people have to have a place to live,” said Paul Eviston, a Vancouver-based real estate agent. “Demand on the rental market has really taken off as a lot of people that were would-be buyers are now forced to rent.”
That hot rental demand has put a floor under condo prices in large cities, real estate agents said, with investors feeling confident enough to wait out price dips and some even looking to snap up more investment properties.
Toronto agent Imran Khan just sold a loft apartment to an investor who was able to lease it out within days of closing.
“I’ve listed properties for rent … and we get multiple offers, right. Like right away,” said Khan.
Rising immigration and a post-pandemic return to urban centers will further bolster demand for city condos, said Khan. Landlords, for their part, are pushing for higher rents when units turn over, agents said.
The shift from owned-homes to rental-homes is also starting to show up in Canada’s inflation data, with homeowners’ replacement cost increases easing sharply to 10% from 13% in April, while rent inflation remains near the 32-year high hit in April.
Mortgage interest costs, which fell sharply as the pandemic took hold and rates were slashed, are now surging. Homeowners who took out variable loans or those with mortgages coming up for renewal are feeling the most pinch.
“Right now is actually one of those unique moments where buyers, sellers, and renters are probably all struggling,” said Scarrow. “Usually, there is a winner. But I think this time it’s a struggle really for everyone.”
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Reporting by Julie Gordon in Ottawa and Shreya Jain in Toronto, editing by Deepa Babington
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NEW YORK, July 20 (Reuters) – U.S. existing home sales fell for a fifth straight month in June to the lowest level in two years, as fast-rising interest rates and record-high selling prices make buying a home too expensive for a growing share of American households.
Mortgage interest rates have soared as a result of the Federal Reserve’s stiff rate hikes to try to tame high inflation. That has driven a new buyer’s monthly payment up by more than 50% in the first six months of 2022 by some estimates and has had a clear effect on home sales that had surged during the COVID-19 pandemic to the highest levels since the mid-2000s.
In June, sales of previously owned homes fell 5.4% to a seasonally adjusted annual rate of 5.12 million units, the lowest level since June 2020 when sales were rebounding from the COVID-19 lockdown slump, the National Association of Realtors said on Wednesday. Sales have now fallen each month since January.
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Economists polled by Reuters had forecast sales would decrease to a rate of 5.38 million units. Sales were unchanged in the Northeast and fell in the Midwest, the West and South.
Home resales, which account for nearly 90% of the residential real estate market, dropped 14.2% on a year-on-year basis. The decline brought June’s sales rate to below the pace that prevailed in 2019 before the pandemic.
That was not enough to stall the relentless increase in selling prices, however. The median existing house price climbed 13.4% from a year earlier to an all-time high of $416,000 in June. It was the 23rd straight month of double-digit annual price gains, the longest such run since the late 1970s.
Sales gains remained concentrated in the upper-price end of the market amid a paucity of entry-level houses. Sales of homes priced below $500,000 were down by double-digit margins, led by a 31% year-over-year drop in the $100,000 to $250,000 range, while sales of houses selling for $500,000 and up eked out modest gains.
“Falling housing affordability continues to take a toll on potential home buyers,” NAR Chief Economist Lawrence Yun said in a statement. “Both mortgage rates and home prices have risen too sharply in a short span of time.”
There were 1.26 million previously-owned homes on the market, up 9.6% from May and 2.4% from a year earlier, the first yearly increase since 2019.
With demand cooling, monthly supply is likely to continue to steadily improve. The government reported on Tuesday that housing completions in June decreased 4.6%, but the backlog of homes yet to be built hovered near record highs. read more
At June’s sales pace, it would take 3.0 months to exhaust the current inventory of existing homes, up from 2.6 months in May. A six-to-seven-month supply is viewed as a healthy balance between supply and demand.
Properties typically remained on the market for 14 days in June, the shortest period ever. First-time buyers accounted for 30% of sales, up from 27% in May. All-cash sales made up 25% of transactions.
HIGHER MORTGAGE RATES
The interest rate-sensitive housing market has softened notably this year as the Fed lifts rates aggressively to blunt inflation that is running at its highest pace in four decades.
The average contract rate on a 30-year fixed-rate mortgage climbed to nearly 6% in June, according to the Mortgage Bankers Association, up from about 3.3% at the start of the year, which has put home purchases out of reach for a growing number of prospective buyers. The rate in the latest week was 5.82%, MBA said earlier on Wednesday.
While it is unclear how much higher mortgage rates will climb, it’s almost certain they will remain high for some time with the Fed set to raise interest rates again at its policy meeting next week and more hikes to come through the end of the year.
An Oxford Economics index out last week showed homes were the least affordable in the first quarter of 2022 at any time since the 2007-2009 financial crisis, and it forecast that picture would worsen through the rest of this year.
“The increase in both home prices and mortgage rates since the end of 2021 has pushed the monthly mortgage payment on a median priced home up by nearly $700, or 56%, pricing millions of buyers out of the market,” Nancy Vanden Houten, lead U.S. economist at Oxford Economics, wrote in a note following Wednesday’s sales data. “We think underlying demand from younger households and investors may keep a floor under home sales, but not if home price growth does not begin to moderate.”
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Reporting by Dan Burns; Editing by Nick Zieminski and Paul Simao
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A worker loads copper cathodes into a warehouse near Yangshan Deep Water Port, south of Shanghai March 23, 2012. REUTERS/Carlos Barria
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HONG KONG, July 15 (Reuters Breakingviews) – China’s export manufacturing machine is more important than ever with domestic output growing just 0.4% year-on-year in the second quarter. Given weak consumption and cooling global demand, it makes sense for the country’s producers of everything from cargo ships to lava lamps to try to seize overseas market share from neighbours. It will sting if they do.
It is hard to believe that an economy under roving lockdowns during the three months ending in June really outperformed the same period in 2021, when life was normal. Property, an industry that drives up to a third of activity, is approaching a state of near-collapse; angry home buyers are defaulting on mortgages en masse read more . Officials also have to worry about a looming unemployment crisis. They have opened the credit taps and front-loaded infrastructure spending, but falling returns on investment means that stores up trouble for later read more . Thus the central bank has remained conservative on interest rates.
Fortunately there’s the export sector. China managed to boost its share of world exports by two percentage points during the pandemic to control a whopping 15% share in March. However, growth rates have been cooling as Western economies flirt with recession. If this long-standing pillar of performance starts wobbling, it would offset recoveries in other segments.
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In June, China’s trade surplus touched a record $98 billion. That’s discouraging for foreign companies that had hoped to sell to the country’s vast consumer class. It also reflects how China has kept the key parts of its supply chain for itself. Despite chatter about outsourcing some manufacturing to ASEAN countries, that region’s monthly trade deficit with China has risen to $17 billion. Japan and South Korea are watching their surpluses slowly evaporate as Chinese firms challenge their champions in sectors like shipping, robotics and automobiles.
In a world where absolute demand is falling, salespeople fight harder over remaining customers. As Chinese companies try to enlarge their share of a shrinking pie, they will launch brutal price wars, which Beijing could support with cheap credit and policy preferences. In April the central government rolled out fresh export tax rebates.
Victory might sour quickly. Putting rival exporters out of business could drive nearby economies into recession, which would in turn deduct from demand for Chinese goods and services. That will rebalance trade, but at that point neighbours are unlikely to appreciate it.
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CONTEXT NEWS
China’s gross domestic product grew 0.4% year-on-year in the quarter to the end of June and 2.5% in the first half of the year, the National Bureau of Statistics reported on July 15. Economists polled by Reuters had expected 1.0%. Compared to the prior quarter, output contracted 2.6%.
The property sector, which drives between a quarter and a third of GDP, showed signs of continued stress. New home prices fell 0.5% in June from the prior year. Property sales by floor area contracted 22.2% in the first six months of 2022, new construction starts fell 34.4% and investment is down 5.4%.
Factors supporting growth include infrastructure investment, which grew 7.1% in the first half, recovering credit growth and robust exports. China’s trade surplus hit a record high of $98 billion in June. Retail sales posted a surprise 3.1% rise in June.
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
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Editing by Antony Currie and Pranav Kiran
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
High-rise apartments under construction can be seen in the distance behind a row of residential housing in south London, Britain, August 6, 2021. REUTERS/Henry Nicholls
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LONDON, July 14 (Reuters) – British house prices rose at their slowest pace in more than a year last month as buyer demand softened slightly although the overall breadth of price increases remained well above pre-pandemic levels, a survey showed on Thursday.
The Royal Institution of Chartered Surveyors’ (RICS) monthly house price balance – measuring the difference between the percentage of surveyors reporting price rises and those seeing a fall – fell to +65 in June from a downwardly revised +72 in May.
This was the index’s lowest reading since March 2021, and lower than forecast in a Reuters poll of economists, but still well above the series’ long-run average of +13.
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“Pricing across much of the housing market remains resilient for now with a shortage of stock continuing to be a feature highlighted by many respondents to the survey,” RICS chief economist Simon Rubinsohn said.
Britain’s housing market, like that in many other rich nations, boomed during the COVID-19 pandemic as people sought more space to work and socialise at home. Official figures for April showed house prices were 22% higher than in February 2020.
However, analysts are looking at the extent to which a 40-year high in consumer price inflation and rapidly rising Bank of England interest rates will cool the market.
Last month mortgage lender Nationwide said there were “tentative signs of a slowdown”, although its rival Halifax reported a 13.0% annual rise in prices for June, the largest since 2004. read more
RICS said the balance of its members expecting house prices to rise over the next 12 months fell to +37 from +78 in February. Upward pressure on rent, however, was growing.
“A lack of social housing development allied to more onerous changes in the private lettings market is … leaving the rent expectations metric pointing to further strong growth in the midst of the worsening cost of living crisis,” Rubinsohn said.
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Reporting by David Milliken
Editing by William Schomberg
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WASHINGTON, June 28 (Reuters) – U.S. consumer confidence dropped to a 16-month low in June as worries about high inflation left consumers to anticipate that the economy would slow significantly or even slide into recession in the second half of the year.
Despite the gloomy outlook, consumers showed little sign of cutting back on spending, with buying plans for motor vehicles and other big ticket items like refrigerators and washing machines increasing, the survey from the Conference Board on Tuesday showed. But fewer consumers compared to April intended to go away on vacation at home or abroad, reflecting record high gasoline prices and expensive airfares.
The economy is on recession watch as the Federal Reserve aggressively tightens monetary policy to tackle inflation. For now, it continues to grow, with other data on Tuesday showing the goods trade deficit again narrowing significantly in May as exports hit a record high.
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“Right now we are at an inflection point in the economy, where actual spending and economic activity is still positive, however, consumer confidence and financial conditions, especially interest rates, are indicating a slowdown ahead,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.
The Conference Board’s consumer confidence index dropped 4.5 points to a reading of 98.7 this month, the lowest since February 2021. Consumers’ assessment of current business and labor market conditions were little changed. But their short-term outlook for income, business and labor market conditions were the weakest since March 2013, which the Conference Board said were “suggesting weaker growth in the second half of 2022 as well as growing risk of recession by year end.”
Consumer fears of a recession could become self-fulfilling. The University of Michigan’s survey last week showed consumer sentiment plunging to a record low in June.
The Conference Board survey places more emphasis on the labor market, which remains tight, but consumers are feeling the inflation pain. National gasoline prices averaged just above $5 per gallon for most of June, before slipping back to around $4.88 per gallon as of Tuesday, according to data from AAA.
“Consumers hate inflation and this is depressing consumer confidence via the expectation channel even as households see labor market conditions as strong,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
The Conference Board survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, ticked up to 39.7 from a reading of 39.5 in May. This measure correlates to the unemployment rate from the Labor Department.
There were 11.4 million job openings at the end of April, with nearly 2 openings per every unemployed person.
Stocks on Wall Street were mostly lower. The dollar rose against a basket of currencies. U.S. Treasury prices fell.
INFLATION EXPECTATIONS JUMP
Consumers’ inflation expectations over the next 12 months jumped to a record high 8.0% from 7.5% in May.
The Fed this month raised its policy rate by three-quarters of a percentage point, its biggest hike since 1994. The U.S. central bank has increased its benchmark overnight interest rate by 150 basis points since March.
Consumers still intend to keep on spending on goods even as they worry about inflation. The share of consumers planning to buy a motor vehicle over the next six months rose. More consumers planned to buy major household appliances, including dryers and vacuum cleaners.
But vacation is not on the cards for many, which could slow consumer spending and economic growth in the second half.
Plans to buy a home were unchanged as borrowing costs increase further and house prices remain elevated amid a shortage of entry-level homes.
A separate report on Tuesday showed the S&P CoreLogic Case-Shiller national home price index increased 20.4% on a year-on-year basis in April after surging a record 20.6% in March. Hefty price gains were recorded in Tampa, Miami and Phoenix.
Signs that house price inflation has probably peaked were reinforced by a third report from the Federal Housing Finance Agency showing home prices increased 18.8% in the 12 months through April after accelerating 19.1% in March.
Nevertheless, the economy is chugging along. A fourth report from the Commerce Department showed the goods trade deficit contracted 2.2% to $104.3 billion in May, suggesting that trade could contribute to economic growth this quarter for the first time in nearly two years. read more
A record trade deficit weighed on the economy in the first quarter, resulting in gross domestic product declining at a 1.5% annualized rate. Trade has subtracted from GDP for seven straight quarters. Growth estimates for the second quarter range from as low as a 0.3% rate to as high as a 2.9% pace.
Wholesale inventories increased 2.0% in May, while stocks at retailers climbed 1.1%.
“Exports and inventories are still rising in May at least, and this means the recession clouds offshore will have to sit on the horizon for another month,” said Christopher Rupkey, chief economist at FWDBONDS in New York.
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Reporting by Lucia Mutikani; Editing by Paul Simao and Chizu Nomiyama
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