Consumer Prices Rose 0.4% in December Prices were up 1.4% in year ended December, the smallest increase in five years
(…) Excluding the often-volatile categories of food and energy, so-called core prices were up 0.1% in December versus November and rose 1.6% from the year prior, matching economists’ expectations. The yearly increase in core prices has clocked in at 1.6% in each of the past three months. (…)
Core goods inflation was about flat in Q4 (+0.4% a.r.) after +10.4% in Q3. Used car prices declined at a 10.8% a.r. in Q4 following their +71% a.r. explosion in Q3. Core services were up 1.6% a.r. in Q4 after +3.2% in Q3.
To be monitored:
U.S. Economy Saw Modest Growth in Late 2020, Fed’s Beige Book Shows Central bank’s business contacts downgrade characterization of economic activity following surge in Covid-19 cases
The U.S. economy grew “modestly” in the final weeks of 2020, as a resurgence in Covid-19 cases prompted activity in some sectors to slow, a Federal Reserve report said Wednesday. (…) Two of the Fed’s 12 districts reported no growth in recent weeks, while two others reported declines in activity.
The Fed’s characterization of economic conditions represented a downgrade from its previous Beige Book report, released Dec. 2, when policy makers described economic growth as “modest or moderate.”
(…) sectors, such as manufacturing and residential real estate, remained generally strong. (…)
Biden to propose $2 trillion of extra spending: report CNN reported that Biden, who is due to speak in Wilmington, Del., on Thursday, will outline a proposal that will include more direct payments to American families and significant state and local funding.
(…) Biden’s proposal is a long way from becoming law, as the Democrats can’t afford to lose a single vote in the U.S. Senate. West Virginia Sen. Joe Manchin has already expressed opposition to increasing stimulus checks to a total of $2,000 from the $600 that has already been passed, though Florida Sen. Marco Rubio, a Republican, said he is in favor of such a move. (…)
The Democrats’ path to a bill with fewer than 60 votes is narrow. They have to use budget reconciliation, which only works for certain fiscal measures. Sen. Bernie Sanders, a Vermont independent who aligns with Democrats, said Tuesday that he would use that process, citing how Republicans used it for tax cuts in 2017. (…)
If Democrats move a first bill through reconciliation, they have an incentive to pack many party priorities into that effort because there are limits on how many such bills they can pass. Each will require the House and Senate to adopt a budget resolution that sets the parameters for the size and scope of the plan and then follow up with details.
“If you want to act quickly, this is not the way to do it,” said Bill Hoagland, a former GOP aide on the Senate Budget Committee who is now at the Bipartisan Policy Center. (…)
Senior Democratic lawmakers will press their own priorities. Rep. Richard Neal (D., Mass.), chairman of the House Ways and Means Committee, has talked about combining relief efforts with infrastructure. Sen. Sherrod Brown (D., Ohio) advocates expansions of the earned-income tax credit and the child tax credit for low- and middle-income households.
New York City Renters Owe Over $1 Billion in Unpaid Rent
(…) The debt figure is the most recent indicator that unemployment benefits and federal stimulus packages have so far been inadequate to alleviate the growing financial burden of missed rent payments across thousands of city households. (…) the total debt New York City renters are carrying is likely more than $2 billion. (…)
Redfin’s 2021 Housing Market Predictions: 14.5 Million Americans Will Move Out of Town, Fueling 10% Sales Growth
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Mortgage rates will remain historically low at 3%
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There will be more home sales than in any year since 2006, but price growth will slow. Even as the pandemic hopefully nears its end, Americans will continue to buy homes that fit their new lifestyle. Annual sales growth will increase from 5% in 2020 to over 10% in 2021. Areas with the fewest Covid-19 cases per capita are now seeing 60% faster growth in the number of people listing homes for sale than areas with the most cases per capita. As Covid-19 cases hopefully decline due to vaccination, we expect more new listings to make for a more balanced market and more home sales. New listings declined 3% in 2020 from the previous year, but in 2021 we expect new listings to grow by over 5%. The increase in new listings combined with slowly rising mortgage rates will cause price growth to moderate to under 5% in 2021, down from 6% this year.
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There will be more new homes built than in any year since 2006. Rising prices for existing homes will increasingly drive more buyers to consider a new one. And because homebuyers are now more eager to buy in suburban and rural areas where land is cheaper than in the cities, there will be more areas where homes can be built profitably.
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The number of Americans relocating will be the highest it has been in 16 years, which will help the economies of affordable places like Buffalo, Cleveland and Pittsburgh. In 2021, the number of Americans moving across county lines will surpass 14.5 million, as everyone settles into their post-pandemic ways of living. That will be more than a 25% increase in out-of-town movers from 2018 when 11.4 million Americans moved across county lines. The last time there was this much cross-county migration was 2004, when 15.3 million Americans moved counties. With the increased prevalence of remote work, many families will be able to move to more affordable areas away from the office. There will be many employers who want to take advantage of the fact that it costs a lot less to employ someone living in a place like Cleveland than a person with comparable skills in San Francisco. That will cause many employers to open or expand satellite offices in affordable cities and continue to offer the option for employees to work remotely from anywhere.
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The homeownership rate will reach 70% for the first time since 2005. People who lived in expensive cities only to be close to work are abandoning their apartments to buy their first home in more affordable places. As small-time landlords in urban areas lose tenants, they will sell their investment properties. This surge in condos for sale, which currently sell for a 17% discount relative to single-family homes, will give many city-dwellers the opportunity to become first-time homebuyers as well.
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San Antonio, Tucson and Tampa will be the hottest housing markets as major southern cities like Austin, Phoenix and Miami become unaffordable. San Antonio homes cost 27% less than Austin homes (a median price of $263,000 compared to $362,000); Tucson homes cost 21% less than Phoenix homes ($265,000 compared to $336,000); and Tampa homes cost 24% less than Miami homes ($271,000 compared to $355,000).
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Expensive cities will invest in their culture and lifestyle to attract residents and tourists. These cities won’t die just because office workers leave, but these cities will have to be reborn with a greater emphasis on culture and lifestyle to attract residents and tourists.
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Most homebuyers will make an offer on a home sight unseen. In spring of 2020, 45% of recent homebuyers reported they had made an offer on a home sight unseen during their search for a home, and recent preliminary survey data shows the trend is becoming more common. Views of 3D walkthroughs on Redfin.com, where a homebuyer can point and click through a 3D scan of a home, have increased 560% since February. Video tours, where an agent views a home while the buyer is on a video call, represented less than 1% of all tour requests on Redfin before the pandemic and now account for about one in 10 home tour requests. The increased use of 3D walkthroughs and video tours, coupled with more people relocating out of town, means the sight-unseen homebuying trend will continue, with the majority of 2021 buyers making an offer before stepping foot in the home.
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2021 will usher in a new era of price competition for real estate agents. In 2021, homebuyers and sellers searching on websites like Redfin.com will see the buyers’ agent fee next to every home for sale. Redfin already displayed the buyers’ agent fee for its own listings, but in 2021, all listings will show the buyers’ agent fee as a consequence of a settlement between the Department of Justice and the National Association of Realtors. Fees won’t drop overnight, but increased transparency will usher in a new era of price competition. A buyer, able to see what her agent will earn on a sale, may negotiate a refund or work out a fee-for-service arrangement. Sellers, now able to see the commissions their neighbors are offering, will factor this in when deciding what commission to offer on their own homes.
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Everything associated with buying or selling a home will be offered at one-stop-shops. The competitive battle in the industry will heat up, as the biggest real estate companies work to become a one-stop shop for customers, integrating home trade-in and cash offers, concierge listing prep, mortgage, title, insurance, home warranty and moving services. With access to billions in capital from Wall Street, these companies will invest in talent, technology and acquisitions in 2021. More agents will see the benefits and career opportunities in joining a national real estate company that offers technology, support staff and an integrated service offering.
China’s Economy Powers Ahead While the Rest of the World Reels Lifted by its quick recovery from Covid-19, China has expanded its role in global trade and shored up its position as the world’s factory floor.
(…) The upshot is a world more reliant on China for growth than ever before. For 2020, China’s economy is expected to account for 16.8% of global gross domestic product, adjusted for inflation, according to forecasts by Moody’s Analytics. That’s up from 14.2% in 2016, before the U.S. and China entered a trade war. The U.S. is expected to make up 22.2%, virtually unchanged from 22.3% in 2016.
China’s 2020 increase in its share of global GDP—1.1 percentage points—is its largest in a single year since at least the 1970s. (…)
China also benefited because it is hard for foreign manufacturing firms to relocate, even after pandemic disruptions left many executives wanting to diversify their supply chains. Companies have to weigh losing the network effect of having so many other suppliers nearby, as well as the risks of moving elsewhere after China has proved so reliable.
A November survey by HSBC Holdings PLC of more than 1,100 global corporations found that 75%, including 70% of U.S. companies, expect to increase their supply-chain footprint in China over the next two years. (…)
But China’s share in global exports of goods is still growing. It was 15.4% in November, the most recent month for which data was available, compared with 13.7% late 2019, before the pandemic came into full swing, according to Oxford Economics.
The gain was driven in part by China’s quick pivot to sell personal protective equipment, such as masks and respirators, whose sales have surged during the pandemic.
Beijing forcefully intervened to contain Covid-19 and help keep factories and businesses open. It sealed off large parts of the country and barred people from leaving their homes for extended periods, moves that would be difficult in countries with more freedoms. (…)
It ordered state-owned banks to halt debt collection on affected businesses and individuals while offering fresh credit to small firms at cheaper-than-usual rates. Local officials required factory owners to meet tough standards to ensure safe operations, including, in some cases, tracking workers’ connections to affected regions. (…)
By mid-March, nearly all of Nuobio’s roughly 50 suppliers had resumed production, he said. All are located within 50 kilometers of the factory. “That’s the biggest advantage that China offers. Nowhere else can you find such a comprehensive and close-knit supply-chain network,” Mr. Chen said. (…)
In November, China’s exports grew at their fastest pace in nearly three years, resulting in a record trade surplus of $75 billion that month. It dipped a bit in December.
Some buyers of Chinese goods weren’t eager to resume sourcing there, worried they had become too dependent. But they found other alternatives weren’t as good. (…)
Add that the Chinese government did not have to financially support the economy like most other countries and the PBOC has been operating “quasi-normally”. The corporate sector is deleveraging and even China’s shadow banking system is getting slowly curbed. Meanwhile, China has considerably expanded its presence in global securities markets. At the end of the pandemic, China is set to emerge in good shape, particularly compared with Europe and the USA.
For the full year, Chinese exports rose 3.6% from a year earlier to a record $2.6 trillion, according to data from China’s General Administration of Customs.
China’s robust economic recovery also propped up demand for imports, which fell by just 1.1% in 2020, resulting in a $535.03 billion trade surplus for the year—the biggest since 2015. (…)
For the month of December, China’s outbound shipments jumped 18.1% from a year earlier, less than November’s year-over-year increase of 21.1% but stronger than economists’ expectations for a 12.9% rise.
Imports, meanwhile, rose 6.5% from a year earlier in December, more than November’s 4.5% gain and economists’ expectations for a 5.1% increase, reflecting strong domestic demand in China, according to Julian Evans-Pritchard, an economist at Capital Economics. For the month, China’s trade surplus with the rest of the world sat at $78.17 billion, widening from November.
For the fourth quarter as a whole, the 17% year-over-year acceleration in Chinese export growth means that net exports—which includes trade in merchandise goods and services—likely added between 0.3 and 0.4 percentage points to the country’s GDP growth in 2020, up from a contribution of 0.1 percentage points in the first nine months of the year combined, said Ding Shuang, an economist at Standard Chartered. (…)
China’s export strength has proved impervious to a rising Chinese yuan, which gained 6.1% against the U.S. dollar over the course of 2020, making many made-in-China goods more expensive on the global market. (…)
China’s imports from the U.S. rose 47.7% in December compared with a year earlier, accelerating from a 32.7% year-over-year increase in November. But that still falls short of what Beijing would need to buy to hit the trade deal’s purchase target for 2020.
For the first 11 months of 2020, China’s purchases were roughly half the amount needed, according to data compiled by the Peterson Institute for International Economics in Washington.
China’s exports to the U.S., meanwhile, jumped 34.5% in December, resulting in a $29.92 billion trade surplus for the final month of 2020. For the full year, China’s trade surplus with the U.S. reached another record of $316.9 billion in 2020, according to official data released Thursday.
Keep in mind that lockdowns around the world and work-from-home boosted demand for Chinese electronics, on top of demand for medical equipment.
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John Authers: China Hitting the Accelerator Will Fire Markets
(…) China has been trying to rein its over-extended banking sector and seemed leery of pressing ahead with major expansions of liquidity. But shown by this chart from CrossBorder Capital Ltd. of London, which aggregates a number of different monetary mechanisms used by the People’s Bank of China, it now looks as though the PBOC is hitting the accelerator again: (…)
As CrossBorder Capital shows, there is a relationship at work, and the scale of the liquidity now flowing in China should imply more gains for commodity prices ahead: (…)
U.S. Budget Gap Rose 61% in First Quarter of Fiscal 2021 The Treasury Department said the deficit from October through December totaled a record $573 billion as federal outlays rose 18%.
The U.S. Treasury Department said Wednesday the deficit from October through December totaled a record $573 billion, a 61% increase from the same period a year earlier. Federal outlays rose 18%, to $1.4 trillion, driven higher primarily by automatic safety-net spending such as jobless benefits, nutrition assistance and health care. Total receipts held steady, at $803 billion, the Treasury said.
For the 12 months that ended in December, the government ran a $3.3 trillion deficit, more than triple the shortfall a year earlier and roughly 15.8% of U.S. gross domestic product, the broadest measure of economic output. (…)
EQUITIES
Goldman Sachs surveyed clients: “In 2021, global equity returns in $ will be?”. 89% expect positive returns with 36% seeing 10%+.
Another record?
U.S. Decides Against Investing Ban on Alibaba, Tencent and Baidu The Treasury Department blocked a Pentagon effort to target the internet firms.
COVID-19
J&J shares climbed on reports its experimental one-shot vaccine is safe. The company, along with Pfizer and AstraZeneca, will provide 270 million doses to African countries.
PACING VACCINATION
In the table below, we extrapolate the current rates of vaccination for G7 nations and calculate how long it could take to provide an initial dose of vaccine to the most vulnerable in society. The projection shows that North America is on target to offer a first dose of the vaccine to the most vulnerable by Easter [April 4 this year]. However, people in Europe look likely to face a lengthy wait (and even more so given the reluctance to follow the US and UK in prioritising offering a first dose to as many people as possible). Once again, it is worth stressing that these serve as a most-pessimistic projection and that, as with the pace of testing, the pace of vaccinations is likely to rise with time. This is especially true in Europe, where the vaccination programme is still very much in its infancy. It is unlikely that the EU economy will fully reopen until vulnerable groups have been vaccinated and/or the number of cases has been seen to fall back to a more manageable level. (Fathom Consulting)
Initial Israeli data: First Pfizer shot curbs infections by 50% after 14 days
(…) Other, somewhat contrary data was released by Israeli health maintenance organizations Tuesday evening. Channel 13 News said that according to figures released by Clalit, Israel’s largest health provider, the chance of a person being infected with the coronavirus dropped by 33% 14 days after they were vaccinated. Separate figures recorded by the Maccabi health provider and aired by Channel 12 showed the vaccine caused a 60% drop in the chances for infection 14 days after taking the first shot.
Each of the HMOs compiled the data from some 400,000 patients they treated (800,000 in total).
With Pfizer’s phase 3 trials only checking some 40,000 people, and given Israel’s world-leading vaccination campaign, the data could be some of the best on-the-ground indication yet of the vaccine’s efficacy. (…)
Regardless, the vaccine is only expected to reach full protection potential a week after the administration of the second dose of the vaccine, which began in Israel this week. The second dose is expected to bring immunity levels to some 95% after about a week. (…)
Earlier, Alroy-Preis said that nearly one-fifth of over 1,000 current serious COVID-19 patients had previously received the first dose of Pfizer’s vaccine — stressing the need to continue to protect oneself after receiving the shot. (…)
(themarketear.com)
