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U.S. economy sped up at the end of 2019

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The U.S. economy seemed to get a second wind at the end of the year.

The numbers: The huge service side of the U.S. economy sped up at the end of 2019, coinciding with solid holiday sales and reduced trade tensions with China.

The Institute for Supply Management’s survey of service-oriented companies such as banks retailers and restaurants rose to a four-month high of 55% in December, from 53.9% in the prior month.




Numbers over 50% are viewed as positive for the economy and anything above 55% is seen as exceptional. The index is still well below its postrecession peak of 60.8%, however, that was reached just a little over a year ago.

Service-oriented companies that derive most of their sales in the U.S. have been better shielded from the conflict with China than more internationally oriented manufacturers.

The ISM’s manufacturing gauge fell to a more than 10-year-low of 47.2% in December, staying below the key 50% cutoff line for the fifth straight month.

What happened: The index for business production in the service sector rebounded in December, rising 5.6 points to 57.2%. Production has dropped in the previous month to a nine-year low.

New orders grew more slowly, however, as did employment. Both indexes were still positive, though.

“The respondents are positive about the potential resolution on tariffs,” said Anthony Nieves, chairman of the services survey.

 

Altogether, 11 of the 17 industries tracked by ISM said their businesses were expanding. A year ago all but one were growing.

“Growth remains steady,” said an executive at a hospitality company.

“Business activity and growth in our business continues to expand,” said an executive at a management firm.

What they are saying? “There was trepidation ahead of the U.S. nonmanufacturing ISM report after its manufacturing cousin hit a 3-year low in the same month,” said senior economist Jennifer Lee of BMO Capital Markets. “Thankfully, there was no need for it. And this is arguably more important as it accounts for 80% of the private sector economy.”

Big picture: The most of Americans now work for service-style companies and that is why the economy is still growing despite a slump in manufacturing.

Sales inside the U.S. have held up well, negating the need for companies to reduce payrolls. Firms say one of their biggest problems is finding enough skilled labor to fill empty positions, forcing them to either raise wages, retrain new hires or invest more in automation.

A strong service sector bodes for the economy in 2020, especially if the U.S. and China continue to ratchet down tensions.

Market reaction: The Dow Jones Industrial Average

DJIA, -0.42%

and S&P 500

SPX, -0.28%

fell in Tuesday trades on ongoing worries about tensions in the Middle East after the U.S. killed a top Iranian general in Iraq.

The 10-year Treasury yield

TMUBMUSD10Y, -4.87%

slipped 1.80%.

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North Korea tells UN it will focus on economy now that it has ‘effective war deterrent’ – Global News

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An earthquake struck off the coast of Taiwan on Wednesday, swaying buildings in Taipei, the capital.

Taiwan’s Central Weather Bureau said the magnitude 5.9 quake struck at a depth of 106 kilometres (66 miles).

There were no immediate reports of damage or casualties.

An Associated Press journalist said the office building where the AP bureau is in Taipei swung slightly for about 10 to 15 seconds.






1:53
Residents survey damage after strong earthquake hits the Philippines


Residents survey damage after strong earthquake hits the Philippines

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U.S. housing market to remain a bright spot in a weak economy

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By Hari Kishan and Richa Rebello

BENGALURU (Reuters) – U.S. house prices will continue to surge well into next year and beyond, outpacing inflation and the overall economy, a Reuters poll of property analysts found, making it a bright spot against an otherwise gloomy economic backdrop.

In a stark reversal, the U.S. housing market – at the epicenter of the global financial crisis more than a decade ago – was expected to extend a helping hand to an economy severely battered by the coronavirus pandemic.

Buoyed by record-low interest rates and strong pent-up demand from a segment of the workforce largely unaffected by pandemic-induced job cuts, house prices will continue to rise over the next two years, the Sept. 15-29 poll of over 40 analysts showed.

U.S. house prices were predicted to rise 4.0% this year and by an average 3.5% in 2021 and 2022. That suggests the trend since 2013 of house price rises outpacing consumer inflation would continue for the next three years at least, according to current inflation expectations.

Underscoring the view that the latest data showing a surge in house prices was not just a blip, over 60% of analysts, or 24 of 39 who responded to an additional question, said that trend would continue to hold for at least another year. The remaining 15 said less than a year.

“Three factors support relatively high home prices – undersupply after a decade of underbuilding, single-family housing attractiveness in a socially distancing world, and most importantly low interest rates,” said Nathaniel Karp, chief U.S. economist at BBVA.

“However, economic uncertainty remains elevated and the recovery after the pandemic could take time, which are the risks to the current valuations.”

U.S. house prices outlook: https://fingfx.thomsonreuters.com/gfx/polling/xlbvgjmgepq/Reuters%20Poll-U.S.%20house%20prices%20outlook.PNG

Already tight inventory levels have been squeezed to record lows after construction activity came to a grinding halt because of the coronavirus pandemic, and with no policy relief expected, home buyers may outbid each other and crank up prices.

Existing home sales reached a seasonally adjusted annual rate of 6 million units in August, the highest since the tail end of the previous housing boom in 2006, and were expected to average around 5.5 million units in the coming year.

“A surge in demand has put further strain on an already tight inventory. The latest supply of existing homes dropped below three months (of inventory) for the first time since records began in 1982, and that implies sales will ease back toward the end of the year,” said Matthew Pointon, property economist at Capital Economics.

When asked to rate the affordability on a scale of 1 to 10, with 1 as extremely cheap and 10 as very expensive, the poll gave a median of 7, up from 6 in the previous poll when predictions were for house prices to rise at a slower pace than currently expected.

“U.S. home prices are not yet at a level that is concerning,” said Matthew Gardner, chief economist at Windermere Real Estate. “That said, we need significant growth in the number of new homes built to meet current demand. If more units are not provided, we could see unsustainable upward price pressure in the resale market.”

(Reporting by Hari Kishan; Additional reporting and polling by Richa Rebello and Tushar Goenka; Editing by Ross Finley and Andrea Ricci)

Source:- Reuters poll – TheChronicleHerald.ca

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U.S. housing market to remain a bright spot in a weak economy – TheChronicleHerald.ca

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By Hari Kishan and Richa Rebello

BENGALURU (Reuters) – U.S. house prices will continue to surge well into next year and beyond, outpacing inflation and the overall economy, a Reuters poll of property analysts found, making it a bright spot against an otherwise gloomy economic backdrop.

In a stark reversal, the U.S. housing market – at the epicenter of the global financial crisis more than a decade ago – was expected to extend a helping hand to an economy severely battered by the coronavirus pandemic.

Buoyed by record-low interest rates and strong pent-up demand from a segment of the workforce largely unaffected by pandemic-induced job cuts, house prices will continue to rise over the next two years, the Sept. 15-29 poll of over 40 analysts showed.

U.S. house prices were predicted to rise 4.0% this year and by an average 3.5% in 2021 and 2022. That suggests the trend since 2013 of house price rises outpacing consumer inflation would continue for the next three years at least, according to current inflation expectations. [ECILT/US]

Underscoring the view that the latest data showing a surge in house prices was not just a blip, over 60% of analysts, or 24 of 39 who responded to an additional question, said that trend would continue to hold for at least another year. The remaining 15 said less than a year.

“Three factors support relatively high home prices – undersupply after a decade of underbuilding, single-family housing attractiveness in a socially distancing world, and most importantly low interest rates,” said Nathaniel Karp, chief U.S. economist at BBVA.

“However, economic uncertainty remains elevated and the recovery after the pandemic could take time, which are the risks to the current valuations.”

U.S. house prices outlook: https://fingfx.thomsonreuters.com/gfx/polling/xlbvgjmgepq/Reuters%20Poll-U.S.%20house%20prices%20outlook.PNG

Already tight inventory levels have been squeezed to record lows after construction activity came to a grinding halt because of the coronavirus pandemic, and with no policy relief expected, home buyers may outbid each other and crank up prices.

Existing home sales reached a seasonally adjusted annual rate of 6 million units in August, the highest since the tail end of the previous housing boom in 2006, and were expected to average around 5.5 million units in the coming year.

“A surge in demand has put further strain on an already tight inventory. The latest supply of existing homes dropped below three months (of inventory) for the first time since records began in 1982, and that implies sales will ease back toward the end of the year,” said Matthew Pointon, property economist at Capital Economics.

When asked to rate the affordability on a scale of 1 to 10, with 1 as extremely cheap and 10 as very expensive, the poll gave a median of 7, up from 6 in the previous poll when predictions were for house prices to rise at a slower pace than currently expected.

“U.S. home prices are not yet at a level that is concerning,” said Matthew Gardner, chief economist at Windermere Real Estate. “That said, we need significant growth in the number of new homes built to meet current demand. If more units are not provided, we could see unsustainable upward price pressure in the resale market.”

(Reporting by Hari Kishan; Additional reporting and polling by Richa Rebello and Tushar Goenka; Editing by Ross Finley and Andrea Ricci)

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