NEW$ & VIEW$ (31 JULY 2013)

Home Prices Jump, but Headwinds Build

Home prices during the first half of 2013 posted their largest gain since the housing boom peaked seven years ago, but rising mortgage rates and the potential for more supply could eventually slow the run-up.

(…) home prices in 20 major U.S. cities rose by 12.2% in May from one year earlier. The Standard & Poor’s/Case-Shiller index shows that home prices are now down from their 2006 peak by 24.4%, compared with a peak-to-trough decline of 35.1% in March 2012. Prices in two cities, Dallas and Denver, reached an all-time high, surpassing peaks set in 2007 and 2006, respectively.

Some economists say the Case-Shiller index could overstate the magnitude of recent price increases because of how it counts foreclosures. Because foreclosures may be in greater disrepair than traditional homes, they tend to sell at a discount. As the share of distressed-property sales rises, as it did beginning in 2007, price falls can be magnified in markets with lots of foreclosures; later, when the share of distressed sales falls, as it has over the past year, prices appear to rebound faster. The Zillow index, by contrast, doesn’t include foreclosed properties, minimizing potential volatility from this shift in the sales mix.

Nationally, home values rose by 5.8% in June from one year ago, according to Zillow Inc., the real-estate website, the largest gain since 2006. So far this year, prices are up 2.7%, the strongest year-to-date gain in June since 2005.

For now, inventories remain tight in a majority of the nation’s major housing markets. The Wall Street Journal’s survey of quarterly housing-market conditions in 28 metro areas found that Phoenix, Seattle, Denver, and Sacramento, Calif., had less than a 2.5-month supply of homes for sale at the current sales pace. Dallas, Los Angeles, San Diego, Washington, D.C., and Orlando, Fla., had less than three months of supply, according to data compiled by John Burns Real Estate Consulting in Irvine, Calif.

Typically, real-estate agents consider a balanced market to have a six-month supply. Nationally, the supply of existing homes for sale stood at five months at the end of June, according to the National Association Realtors.

EU Jobless Rate Falls

Eurostat, the EU’s official statistics agency, said Wednesday that 10.9% of the workforce in the 27 nations that then formed the EU were unemployed in June, down from 11.0% in May. That is the first fall in the jobless rate since January 2011.

The number of unemployed in the 17 euro-zone countries edged down to 19.27 million from 19.29 million, the first decline since April 2011. The fall wasn’t sufficient enough to move the jobless rate overall, which held firm at 12.1%—its highest on record—for the fourth successive month.

The unemployment rate fell in Portugal, Spain and Ireland—three of the countries given forms of financial assistance since the bloc’s debt crisis began—but rose in Cyprus and Greece, as well as in the Netherlands and France.

Pointing up Eurozone Retail PMI improves to 21-month high in July

The eurozone retail sector neared stabilisation in July, Markit’s retail PMI® data showed. The value of retail sales fell for the twenty-first month running, but at the slowest rate over that period. Moreover, both Germany and France posted higher sales during the month, with the latter recording the first expansion since March 2012. The main negative finding from the latest survey was a sharper decline in Italian retail sales.


Germany’s retail sector registered a third successive month of rising sales in July, the longest sequence of growth for a year. Moreover, the rate of expansion accelerated further, to the fastest since January 2011. The French retail PMI rose for the fourth month in a row in July, and registered above the no-change mark for the first time since March 2012. Moreover, the rate of growth signalled was the fastest since October 2011.

imageItalian retailers continued to weigh on the overall eurozone performance. Sales fell for the twenty-ninth month running, and at the strongest rate since April. Moreover, the gap between the Italian and German retail PMIs was the largest since February 2012.

Eurozone retail sales were lower on an annual basis in July, as has been the case since June 2011. That said, the rate of decline was the slowest
since March 2012, and sales in Germany and France posted year-on-year growth. Italy continued to register a severe annual drop in sales, however.


Retail employment in the eurozone declined for the sixteenth consecutive month in July, albeit at the weakest rate in that sequence. German retailers hired extra staff for the thirty-eighth month running, while the rate of retail job shedding in France slowed to a marginal pace. Italian retail employment fell at the weakest pace in five months.

Retailers’ purchasing of new stock fell at a sharper rate in July. This partly reflected a build-up of unsold stock during the month, the first such increase since August 2012. Meanwhile, the rate of purchase price inflation eased on the month, and remained weaker than the historic survey average.

Euro-Area Inflation Holds at 1.6%, Providing ECB Some Leeway

Euro-area inflation held steady in July after accelerating for two months, adding leeway for the European Central Bank to loosen monetary policy as the 17-nation currency bloc struggles to pull out of a record-long recession.

Pointing up  Beijing offers growth assurance in its economic balancing act

China’s authorities, mindful of the risk of a sharp economic slowdown that could derail their reform efforts, sent their clearest signal yet that they will safeguard growth and tweak policy when necessary.

The message from a meeting of China’s top decision-making body, the Politburo, sought on Tuesday to dispel market concerns about China’s near-term economic outlook by stressing stability of growth.

The main economic planning agency followed on Wednesday with assurances that this year’s growth goal was safe and that the authorities would supply markets with relatively ample funding. (…)

In particular, the politburo’s mention of “stable and healthy development” of the real estate sector caught markets’ attention, interpreted as a sign that Beijing would not risk any radical action to cool that market, concerned about the impact on overall economic growth.

Such a view was reinforced on Wednesday by comments from a senior central bank official, who dismissed any link between the property boom and easy credit. (…)

“Fiscal policy will play a bigger role in supporting the economy as we need to maintain prudent monetary policy,” said Zhu Baoliang, chief economist at the State Information Centre, a top government think-tank in Beijing.

“There will be more tax cuts and the fiscal deficit may exceed 2 percent of GDP (target),” he said, adding that this should allow growth to stabilize in the second half of the year. (…)

“The central authorities will continue to coordinate the multiple tasks of stabilizing growth, restructuring the economy and promoting reforms,” the official Xinhua news agency said, citing a statement released after the politburo meeting.

Both the party leadership and the planning agency highlighted plans to boost China’s urban population by 400 million over the next decade, with the planning agency’s chief, Xu Shaoshi, saying the government would unveil its urbanization plan in the second half of the year. (…)

Taiwan economic growth beats forecasts Rise in consumer spending drives 2.3% second-quarter growth

The economy grew 2.3 per cent between April and June from the same period of last year, the government said on Wednesday. That surpassed the consensus forecast of 2.1 per cent in a Bloomberg survey of economists, and followed first-quarter growth of 1.7 per cent.

The announcement came a week after South Korea also outperformed forecasts by reporting year-on-year growth of 2.3 per cent for the same period.

Taiwan’s struggling labour market means it is unclear whether that consumption growth is sustainable, economists say. While unemployment is low, real wages have been falling gradually for years. Data for May showed average earnings fell 0.3 per cent from a year earlier.

Nonetheless, consumption grew 5.3 per cent quarter on quarter, rebounding from a 0.4 per cent fall in the first three months of the year, according to seasonally adjusted estimates by JPMorgan.

Exports rose 5 per cent year on year in the second quarter, after growth of 4.8 per cent in the previous quarter.

But export orders fell 3.4% YoY in June…

Ford Truck to Use Natural Gas

Ford Motor Co. will begin selling an F-150 pickup truck later this year that is modified to run on compressed natural gas, as demand continues to grow among commercial fleet buyers.

Ford sold 11,000 trucks last year that run on natural gas, and that was double what the company sold in the years of 2009, 2010 and 2011 combined. Until now, Ford hadn’t made it an option available on the base F-150, reserving it for heavier-duty models and its Transit Connect delivery van.

With the addition of the F-150, Ford expects to sell about 15,000 CNG vehicles this year, the company said in a statement. (…)

Neither GM nor Chrysler would disclose how many CNG vehicles they have sold this year. The Natural Gas Vehicles for America—a trade group—estimates that there are about 130,000 natural gas vehicles on U.S. roads, primarily in commercial trucks and buses.

Companies, including Pioneer Energy Services and AT&T Inc., have been among Ford’s biggest clients for the compressed natural gas. The extra cost to build the trucks can quickly be covered because the companies use so much fuel at a higher cost and refueling isn’t difficult because they can install their own natural gas pumps. (…)


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