U.S. Consumers Curtailed Spending Plans Sharply in April
U.S. consumers aren’t counting on themselves to be big drivers of economic growth in the coming year, according to results of a Federal Reserve Bank of New York survey published May 8. Respondents last month said they expect to increase household spending by just 2.6 percent over the next 12 months, marking the slowest projected pace of growth in data from June 2013, when the survey began. The pessimism contrasted with respondents’ views toward income growth and their overall financial situations, which both improved in April. (Bloomberg)
SURVEY OF SENIOR LOAN OFFICERS
Regarding loans to businesses, the April survey results indicated that over the first quarter of
2017, on balance, banks left their standards on commercial and industrial (C&I) loans basically
unchanged. A modest net fraction of banks reported weaker demand for C&I loans, while
inquiries for C&I lines of credit remained basically unchanged.On balance, banks reported tightening standards on CRE loans. Responding to a set of special
questions, banks reported tightening most credit policies on CRE loans over the past year. In
doing so, banks cited a less favorable or more uncertain outlook for CRE property prices,
capitalization rates, and vacancy rates or other fundamentals as their most important factors.
Participants also cited a reduced tolerance for risk as an important reason for tightening CRE
credit policies. On balance, banks reported weaker demand for CRE loans in the first quarter.Regarding loans to households, standards and demand for most categories of residential real
estate (RRE) mortgage loans were little changed on balance. For consumer lending, banks
reported tightening standards on and weaker demand for auto loans and easing standards on and
weaker demand for credit card loans. Standards and demand for other types of consumer loans
were basically unchanged.
Dodge Momentum Index Loses Steam in April
The Dodge Momentum Index fell 5.1% in April to 133.8 (2000=100) from its revised March reading of 140.9. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. April’s decline was due to a 12.0% drop for the institutional component of the Momentum Index, while the commercial component rose a meager 0.1%. Since early 2016, the Momentum Index has gained substantial ground, albeit in a saw-tooth pattern, increasing by over 20% through March this year. Despite April’s decline, the broad upward trend for the Momentum Index remains present, suggesting that construction activity still has further room to grow in 2017. The planning data’s strengthening over the past year stands in stark contrast to the 2014-2015 period, when the Momentum Index saw little improvement, gaining just 4.0% in that 24-month span.
U.S. Labor Market Conditions Steadily Improve
(…) During April, the index value improved 3.5 points following increases of 3.6 and 3.2 points during the prior two months. These latter two figures were revised from 0.4 and 1.5 as more source data became available. Improvement in last month’s index reflected a firmer gain in nonfarm payrolls, longer hours worked and a lower unemployment rate. Offsetting these influences was slower 12-month growth in average hourly earnings and a lower labor force participation rate. (…)
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Conference Board’s Employment Trends Index Rises to 132.64 A basket of U.S. employment indicators increased in April, suggesting employers are adding jobs at an accelerating pace.
The Conference Board said its employment trends index rose to 132.64 in April from 131.58 in March. The April figure was 4.1% higher than last year. (…) In April, seven of the basket’s gauges rose, driven by the ratio of involuntary part-time workers to part-time workers.
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Labor Shortage Squeezes Builders As demand for commercial real estate climbs, contractors say they are seeing shortages of electricians, carpenters and other subcontractor laborers, making it harder to hold down costs.
(…) Construction labor costs are rising an average of 4% to 5% annually, outpacing inflation, according to Anirban Basu, chief economist of the Associated Builders and Contractors. “The situation is going to get worse,” he said.
Over all, the association said the industry needs 500,000 more workers. The trade group estimates 600,000 additional workers would be needed for the $1 trillion in infrastructure building and improvement for which President Donald Trump has said he would seek funding. (…)
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Boston’s Real-Estate Market Is Poised for a Boom GE is moving its headquarters to Boston as roughly 14 million square feet of new space is being developed in the city amid a historic real estate boom.
Investors Lighten Up on U.S. Stocks, Betting on Europe Investors are pulling money out of the U.S. stock market at one of the highest rates in years, moving billions of dollars to other markets and scaling back a long-held bet that U.S. growth would bring superior returns.
Global money managers’ allocations to U.S. stocks slumped to a nine-year low in April, according to a survey from Bank of America Merrill Lynch. And U.S. equity funds saw an outflow of $22.2 billion during the six weeks that ended May 3, the largest six-week redemption in more than a year, according to EPFR Global.
Much of the money is going to Europe. Net inflows into European funds in the first three months of the year hit a five-year high for the first quarter, according to Thomson Reuters Lipper.
Emerging markets are also benefiting. Strong manufacturing, industrial production and trade data in the developing world helped attract the strongest three-month stretch of net inflows to emerging-market funds since 2014, according to the Institute for International Finance. (…)
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It’s Time to Buy European Stocks—Sorta, Kinda, Maybe Emmanuel Macron’s victory is good news for investors, Europe is recovering perfectly well and investors ought to have some exposure to the region. Like Mr. Macron’s voters, it is hard to be any more enthusiastic.
(…) However good the data, it is hard to get truly excited about Europe. Investors have been hit too many times by political ructions and surprise bank failures in the past seven years to be entirely calm. Italy’s populist 5 Star Movement is neck and neck with the ruling Democratic party, so the Italian election next year will test nerves.
Outside the banks, stocks aren’t particularly cheap, either. (…)
Chinese Millennials—Already Big Homeowners—Use Apps to Snap Up Overseas Property Young Chinese are buying real estate in other countries as hedge against a weakening currency, homes for their own children when they study abroad
(…) About 70% of Chinese millennials, those born between 1981 and 1998, own a home, the highest share of respondents from nine countries and regions who were surveyed in a recent HSBC study. Chinese parents often register home purchases under their child’s name to prepare the child for marriage and raising a family, which likely boosts the percentage.
Still, a growing sliver of Chinese millennials are looking to buy property abroad. Kevin Lee, chief operating officer of Beijing-based consulting firm Youthology, put the percentage in the low single digits but said it would continue to increase.
(…) In the past year, home prices have soared to more than 30 times household income in major Chinese cities.
Uoolu said about 80% of its monthly active users are between the ages of 20 and 39, and that 20,000 customers have bought or are in the process of purchasing overseas property. A similar real-estate platform, Juwai.com, estimates that roughly 30% to 40% of its buyers are millennials. (…)
CETERIS NON PARIBUS
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Alipay and WeChat Pay Make Push Into U.S. China’s Alipay and WeChat Pay, which allow payments for groceries, movies and more with smartphones, are expanding into North America, hoping to ride waves of Chinese traveling abroad.
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China’s Alipay Grabs Slice of U.S. Market With First Data Deal