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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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Lifted by U.S., Mexico economy rebounds 12% in third quarter from coronavirus – The Journal Pioneer

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By Dave Graham

MEXICO CITY (Reuters) – Mexico’s economy grew 12.0% during the third quarter, largely as expected, making up for much of the record contraction over the previous three months at the height of the coronavirus lockdown, preliminary data showed on Friday.

The seasonally-adjusted jump in gross domestic product (GDP) published by national statistics agency INEGI was fractionally better than the 11.9% expansion predicted by a Reuters poll.

The quarter-on-quarter increase was easily the biggest since current records began at the start of the 1980s, and benefited from massive stimulus spending in the United States.

U.S. demand helped Mexico rack up large trade surpluses during the past four months, as exports picked up speed, especially in the automotive industry. By contrast, domestic demand has lagged, with many businesses still struggling.

Alfredo Coutino, an economist at Moody’s Analytics, said Mexico was still heavily reliant on the U.S. economy, and forecast the recovery would slow in the months ahead.

“The Mexican economy is benefiting from the upturn in the U.S. business cycle, mainly through the U.S. demand for Mexican exports and remittances sent by Mexican migrants working in the U.S.,” Coutino said in a research note.

Between April and June, at the peak of Mexico’s pandemic lockdown, the economy shrank 17.1% from the first quarter.

Mexico has not recovered as quickly as the U.S. economy, which shrank by an annualized rate of 31.4% in the second quarter then jumped by 33.1% in the July-September period.

COMEBACK

Despite the economic chaos of the pandemic, remittances to Mexico have surged this year, and President Andres Manuel Lopez Obrador has forecast they will reach a record $40 billion.

During a regular news conference, Lopez Obrador hailed the GDP figures as evidence the economy was bouncing back.

A breakdown of the data showed primary activities like farming, forestry and fishing advanced by 7.4% compared with the previous quarter. Secondary activities such as manufacturing increased by 22.0%, INEGI said. Meanwhile tertiary activities, which encompass consumer spending and services, climbed 8.6%.

Lopez Obrador was eager to point out that the primary sector, which he has pushed with schemes to boost farming and tree planting, is doing better now than it was a year ago.

Mexico’s economy is forecast to shrink almost 10% in 2020, its deepest annual contraction since the Great Depression.

However, primary activities, which make up only a small part of the economy, were up 2.7% in the first nine months of this year compared with the same period in 2019, INEGI said.

The severest months for the Mexican economy were April and May, when much of business activity ground to a halt, leading to the loss of roughly one million formal jobs. By Oct. 28, more than 400,000 jobs had been recovered, Lopez Obrador said.

Compared with the same period last year, Latin America’s no. 2 economy shrank by 8.6% in unadjusted terms in the third quarter, just less than the Reuters forecast of 8.7%.

Final third quarter data is due to be published on Nov. 26.

(Reporting by Dave Graham; Editing by Hugh Lawson, Chizu Nomiyama and Marguerita Choy)

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Lifted by U.S., Mexico economy rebounds 12% in third quarter from coronavirus – TheChronicleHerald.ca

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By Dave Graham

MEXICO CITY (Reuters) – Mexico’s economy grew 12.0% during the third quarter, largely as expected, making up for much of the record contraction over the previous three months at the height of the coronavirus lockdown, preliminary data showed on Friday.

The seasonally-adjusted jump in gross domestic product (GDP) published by national statistics agency INEGI was fractionally better than the 11.9% expansion predicted by a Reuters poll.

The quarter-on-quarter increase was easily the biggest since current records began at the start of the 1980s, and benefited from massive stimulus spending in the United States.

U.S. demand helped Mexico rack up large trade surpluses during the past four months, as exports picked up speed, especially in the automotive industry. By contrast, domestic demand has lagged, with many businesses still struggling.

Alfredo Coutino, an economist at Moody’s Analytics, said Mexico was still heavily reliant on the U.S. economy, and forecast the recovery would slow in the months ahead.

“The Mexican economy is benefiting from the upturn in the U.S. business cycle, mainly through the U.S. demand for Mexican exports and remittances sent by Mexican migrants working in the U.S.,” Coutino said in a research note.

Between April and June, at the peak of Mexico’s pandemic lockdown, the economy shrank 17.1% from the first quarter.

Mexico has not recovered as quickly as the U.S. economy, which shrank by an annualized rate of 31.4% in the second quarter then jumped by 33.1% in the July-September period.

COMEBACK

Despite the economic chaos of the pandemic, remittances to Mexico have surged this year, and President Andres Manuel Lopez Obrador has forecast they will reach a record $40 billion.

During a regular news conference, Lopez Obrador hailed the GDP figures as evidence the economy was bouncing back.

A breakdown of the data showed primary activities like farming, forestry and fishing advanced by 7.4% compared with the previous quarter. Secondary activities such as manufacturing increased by 22.0%, INEGI said. Meanwhile tertiary activities, which encompass consumer spending and services, climbed 8.6%.

Lopez Obrador was eager to point out that the primary sector, which he has pushed with schemes to boost farming and tree planting, is doing better now than it was a year ago.

Mexico’s economy is forecast to shrink almost 10% in 2020, its deepest annual contraction since the Great Depression.

However, primary activities, which make up only a small part of the economy, were up 2.7% in the first nine months of this year compared with the same period in 2019, INEGI said.

The severest months for the Mexican economy were April and May, when much of business activity ground to a halt, leading to the loss of roughly one million formal jobs. By Oct. 28, more than 400,000 jobs had been recovered, Lopez Obrador said.

Compared with the same period last year, Latin America’s no. 2 economy shrank by 8.6% in unadjusted terms in the third quarter, just less than the Reuters forecast of 8.7%.

Final third quarter data is due to be published on Nov. 26.

(Reporting by Dave Graham; Editing by Hugh Lawson, Chizu Nomiyama and Marguerita Choy)

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Losses mount for oil companies as pandemic grips economy – OrilliaMatters

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NEW YORK — Exxon Mobil reported its third consecutive quarter of losses as the global pandemic curtailed travel and crippled global economic activity.

The energy giant on Friday posted a $680 million third-quarter loss and revenue tumbled to $46.2 billion, down from $65.05 billion during the same quarter last year.

The string of losses and what by almost all counts will be a money-losing year is new territory for Exxon Mobil, which has not posted an annual loss since Exxon and Mobil merged in 1999.

“This is a business that’s made a billion dollars a quarter on average from 2011 to 2018 and it’s had a rough go,” said Peter McNally, global sector lead for industrials, materials and energy at Third Bridge, a research firm.

Already struggling with weak prices from oversupply, the pandemic has intensified the pain for oil and gas companies. The price of U.S. benchmark crude has fallen 40% since the start of the year. The cost for a barrel of oil tumbled 10% just this week as coronavirus infections surged in the U.S. and abroad.

Commuting to work has largely ended for millions of people. Air travel this year fell to levels not seen in the jet age and the economy suffered its worst contraction in decades as factories and other big energy consumers shut down. All indications point to a Thanksgiving celebrated close to home, and in smaller numbers this year.

Exxon has begun slashing costs to offset falling energy demand, and that means jobs.

A day after announcing 1,900 job cuts, Exxon said on Friday that it plans to cut 15% of its global workforce by the end of next year, about 11,250 jobs. The company employed 75,000 people at the end of 2019.

Chevron also announced job cuts Thursday after closing on its acquisition of Noble Energy earlier this month, saying it would trim the headcount at that company by about a quarter.

“We remain confident in our long-term strategy and the fundamentals of our business, and are taking the necessary actions to preserve value while protecting the balance sheet and dividend,” said Exxon Mobil CEO Darren Woods in a prepared statement.

Exxon said Friday that it may divest $25 billion to $30 billion in North American dry gas assets, and that it would cut capital expenditures to between $16 billion and $19 billion next year.

That would follow a year in which Exxon reduced capital spending by 30%, to $23 billion.

“We are on pace to achieve our 2020 cost-reduction targets and are progressing additional savings next year as we manage through this unprecedented down cycle,” Woods said.

Those planned reductions might not be enough to appease some investors. Exxon was the only one of the super-majors to post a loss this quarter, and is behind its peers in cost-cutting, said Jennifer Rowland, senior analyst at Edward Jones. “Everyone else either stayed in the black or got back into the black from the abyss of the second quarter. I think it’s telling that they’re the only ones still running in the red.”

The Irving, Texas, company produced 3.7 million barrels of oil per day in the third quarter, up 1% from the second quarter. But production is down slightly from the same period last year.

“We are not cancelling any projects that are in execution or in the funding process,” said Andrew Swiger, chief financial officer, in a conference call Friday.

Several analysts on the call questioned why Exxon will continue paying a dividend given the losses it’s suffering.

“Our objective is to maintain the dividend, advance the highest value investments, and maintain the debt at a cost- competitive level,” Swiger said.

“It’s not going well,” McNally said about Exxon. “You have to squint at some of the things to find things that are good.”

And the third quarter was an improvement compared with the last, when oil futures crashed below zero. Exxon and Chevron lost a combined $9 billion.

Chevron on Friday swung to a loss of $207 million after a quarterly profit of $2.9 billion last year. Revenue fell by $11 billion, to $24 billion.

Oil prices appeared to stabilize during the third quarter, however, and better conditions enabled Exxon to recover some of the production it had curtailed, the company said.

Demand for refined products also improved, and chemical sales volumes rose as demand for packaging increased and automotive and construction markets recovered, Exxon said.

Oil demand is expected to fall 8% globally this year, according to the International Energy Agency. While some demand has recovered since oil futures fell below $0 a barrel in April, countries are again locking down as the coronavirus surges anew across Europe and the U.S.

Exxon’s stock fell almost 3% Friday, and it’s down more than 50% this year. Chevron was relatively unchanged, but its shares are down about 40% in 2020.

The energy sector is the only one in the S&P 500 to fall since President Donald Trump took office. Energy stocks in the index have lost nearly 57%, and the five worst-performing stocks since Trump’s presidency began were energy companies.

Cathy Bussewitz, The Associated Press


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