Aurelia Butler

A strong labour market and limited housing stock helped to boost UK house price annual growth by double digits in July, despite rising interest rates, high inflation and lower affordability.UK house prices rose at an annual rate of 11 per cent last month, slightly up from the 10.7 per cent in June, according to the mortgage provider Nationwide.The increase took the average house price to £271,209, £55,000 more than in February 2020 before the Covid-19 pandemic.Although the month-on-month price increase slowed from 0.2 per cent to 0.1 per cent, July marked the 12th consecutive monthly rise, keeping annual price growth in double digits for the ninth month in a row.“Demand continues to be supported by strong labour market conditions,” said Robert Gardner, Nationwide’s chief economist. “At the same time, the limited stock of homes on the market has helped keep upward pressure on house price.”Housing stock remains low, with the average number of properties on sale per surveyor at a 40-year low, and both the effect of inflation running at a 40-year high of 9.4 per cent and record low consumer confidence were highlighted by a cooling of mortgage transactions managed by Nationwide.Total housing market transactions in the three months to May were about 20 per cent below the elevated levels that resulted from the stamp duty holiday, Nationwide reported, but they were still 5 per cent above pre-pandemic levels. In the same period, transactions involving home mover mortgages slowed more than others, while first-time buyer mortgage completions remained resilient.This is despite house price growth continuing to outpace earnings by a significant margin, increasing the required deposit. Nationwide data showed that the average house price was seven times greater than typical earnings in the second quarter, the highest ratio recorded since data began in 1983. Together with higher interest rates, higher prices have pushed up mortgage repayments relative to incomes.With mortgage rates due to rise further and the cost of living crisis set to worsen, experts said they expected the housing market to cool in the coming months. “We continue to expect the market to slow as pressure on household budgets intensifies in the coming quarters, with inflation set to reach double digits towards the end of the year,” said Gardner. Consultancy Oxford Economics forecast that house prices would start contracting on an annual basis from the middle of next year and continue to fall throughout 2024.

Andrew Wishart, senior property economist at Capital Economics, said the removal of the stress test in mortgage approval from August 1 could lead house price growth to regain momentum, but he warned that it would be short lived. “While limited stock has supported pricing so far, we think that it is just a matter of time before deteriorating demand causes house prices to fall,” said Wishart, adding that he forecast a 5 per cent drop over the next two years. More

Investing.com — Chinese markets tumble and risk assets struggle as Nancy Pelosi’s visit to Taiwan raises the risk of a U.S.-China confrontation. The Labor Department releases its monthly Job Openings and Labor Turnover Survey for June. Australia raises its key rate by 50 basis points. Oil falls on Taiwan-related fears, but BP and two U.S. shale producers report stellar earnings. And there’s been another hack of a crypto bridge protocol. Here’s what you need to know in financial markets on Tuesday, 2nd August.1. Pelosi’s Taiwan visit puts markets on edgeAsian stock markets tumbled and risk assets, in general, suffered as House Speaker Nancy Pelosi headed to Taiwan, where she is due to land within a couple of hours.She’s the most senior U.S. politician to visit Taiwan in nearly 30 years, and the development has elicited an angry response from Beijing, which sent fighter aircraft flying close to the island earlier Tuesday.Chinese stock markets fell over 2% on fears that Beijing’s threat that it “would not sit idly by” may lead to some kind of military confrontation. Reports suggest that a large part of China’s armed forces have been placed on high alert.2. JOLTS to show job market cooling?The Labor Department will publish its monthly Job Openings and Labor Turnover Survey for June at 10 AM ET (1400 GMT).While somewhat backward-looking, the survey should give insight into how quickly the job market may be cooling. The nationwide number of vacancies is expected to have fallen to 11 million in June, from 11.254 million in May. That would be the lowest number since November. Also of interest will be the ‘quit rate’, which is an indicator of the confidence people have in finding a new job.Since the survey’s cut-off date, there have been widespread reports of companies either freezing or slowing hiring.St. Louis Fed President James Bullard is due to speak, but well after the market close. Overnight, the global monetary tightening cycle continued with Australia raising its key rate by 50 basis points for a third month in a row.3. Stocks set to open lower on Pelosi; chipmaker earnings, M&A action eyedU.S. stock markets are set to open a little lower amid concern at the possible Chinese reaction to Pelosi’s visit.By 6:25 AM ET (1025 GMT), Dow Jones futures were down 180 points or 0.6%, while S&P 500 futures were down 0.8%, and Nasdaq 100 futures were down 1.0%.Chipmaker Advanced Micro Devices (NASDAQ:AMD) heads the day’s earnings roster, but only after the closing bell. Caterpillar (NYSE:CAT), a proxy for worldwide business investment, reports earlier. Already out with a significant beat is chemicals giant Dupont (NYSE:DD), while S&P Global (NYSE:SPGI), Marriott (NASDAQ:MAR), Molson Coors (NYSE:TAP) and Zimmer Biomet (NYSE:ZBH) are also up early.After the bell, AMD will be joined by PayPal (NASDAQ:PYPL), Starbucks (NASDAQ:SBUX), Gilead (NASDAQ:GILD) and Airbnb (NASDAQ:ABNB).In the meantime, there’s also M&A action in the air with reports about Toronto Dominion (TSX:TD) closing in on a deal for Cowen (NASDAQ:COWN).4. Nomad bridge exploitNomad, a bridge protocol for allocating crypto tokens across different blockchains, suffered a major hack, losing nearly $200 million in a security exploit on Monday, according to various reports, citing security firm PeckShield.The system was drained of funds in a raid that lasted hours, mainly in small batches by numerous accounts.Attacks on bridges have become more frequent this year, with nearly $1 billion going missing so far, according to some estimates. The trend makes for more bad publicity in a sector that has suffered an embarrassing spate of revelations about poor risk management and questionable business models so far this year.5. Oil falls further below $100; API inventories dueCrude oil prices fell along with other risk assets as markets priced in the chance of a confrontation between the U.S. and China. Even if Pelosi’s visit passes without violent incident, the episode risks upsetting progress toward any improvement in U.S.-China trade relations, which would underpin a slowing global economy.By 6:35 AM ET, U.S. crude futures were down 0.9% at $93.02 a barrel, while Brent was down 1.0% at $99.00 a barrel.Overnight, oil major BP (NYSE:BP) became the latest to report a massive windfall in earnings, announcing a big increase to its dividend and buyback program after second quarter results. That followed earnings beats by Diamondback (NASDAQ:FANG) and Devon Energy (NYSE:DVN) late on Monday.The American Petroleum Institute releases inventory data at 4:30 PM ET, as usual. More

SAN BERNARDINO, Calif. (Reuters) – America’s largest warehouse market is full as major U.S. retailers warn of slowing sales of the clothing, electronics, furniture and other goods that have packed the distribution centers east of Los Angeles. The merchandise keeps flooding in from across the Pacific, and for one of the busiest U.S. warehouse complexes, things are about to get worse.Experts have warned the U.S. supply chain would get hit by the “bullwhip effect” if companies panic-ordered goods to keep shelves full and got caught out by a downturn in demand while shipments were still arriving from Asia.In the largest U.S. warehouse and distribution market – stretching east from Los Angeles to the area known as the “Inland Empire” – that moment appears to have arrived. “We’re feeling the sting of the bullwhip,” said Alan Amling, a supply-chain professor at the University of Tennessee.The sprawl of Inland Empire warehouses centered in Riverside and San Bernardino counties grew quickly in recent years to handle surging demand and goods imported from Asia. That booming area, visible from space, anchors an industrial corridor encompassing 1.6 billion square feet of storage space that extends from the busiest U.S. seaport in Los Angeles to near the Arizona and Nevada borders. That much storage space is nearly 44 times larger than New York City’s Central Park and 160 times bigger than Tesla (NASDAQ:TSLA) Inc’s new Gigafactory in Texas. But a consumer spending pullback now threatens to swamp warehouses here and around the country with more goods than they can handle – worsening supply-chain snarls that have stoked inflation. Retailers left holding unwanted goods are faced with the choice of paying more money to store them or denting profits by selling them at discount. Inland Empire warehouse vacancies are among the lowest in the nation, running at a record 0.6% versus the national average of 3.1%, according to real estate services firm Cushman & Wakefield (NYSE:CWK). [graphic: https://tmsnrt.rs/3oHaiXu] GRAPHIC: No room in the Empire (https://graphics.reuters.com/SUPPLY-CHAIN/egpbkxrxzvq/chart.png) The market is poised to get even tighter as shoppers at Walmart (NYSE:WMT), Best Buy and other retailers retreat from early COVID-era spending binges. BINGE TO BACKLOG While U.S. consumer spending remains above pre-pandemic levels, retailers and suppliers are raising alarms about backlogs in categories that have fallen out of fashion as consumers catch up on travel and struggle with the highest inflation in 40 years.Last week, Walmart said surging food and fuel prices left its lower-income customers with less cash to spend on goods, and Best Buy said shoppers were curbing spending on discretionary products like computers and televisions. Those cautionary signals followed Target Corp (NYSE:TGT)’s alert that it was saddled with too many TVs, kitchen appliances, furniture and clothes. Suppliers – ranging from barbecue grill maker Weber Inc to Helen of Troy Ltd, a consumer brands conglomerate that includes OXO kitchen tools – also have warned of slowing demand and an urgent need to clear inventories.While the U.S. economy was downshifting, goods kept pouring in at near-record levels.Imports to U.S. container ports that process retail goods from China and other countries jumped more than 26% in the first half of 2022 from pre-pandemic levels, according to Descartes (NASDAQ:DSGX) Datamyne. Christmas shipments and the reopening of major Chinese factory hubs could goose volumes further.Meanwhile, cargo keeps flooding in to the busiest U.S. seaport complex at Los Angeles/Long Beach. During the first half of this year, dockworkers there handled about 550,000 more 40-foot containers than before the pandemic started, according to port data.Christmas toys and winter holiday decor landed on those docks in July, along with some patio furniture for Walmart and stretch pants, jeans and shoes for Target, said Steve Ferreira, CEO of Ocean Audit, which scrutinizes marine shipping invoices.Retailers ordered most of those goods months ago and many are destined for the Inland Empire’s already jam-packed warehouses.”It’s a domino effect. Now the inventory is going to really build up,” said Scott Weiss, a vice president at Performance Team, a Maersk company with 22 warehouses in greater Los Angeles. Demand for space in the Inland Empire is so intense that when 100,000 to 200,000 square feet of space frees up, it “gets gobbled up in a second,” said Weiss. SEARS AND PARKING LOTS Investors have almost 40 million square feet under construction in the Inland Empire – including Amazon.com Inc (NASDAQ:AMZN)’s biggest-ever warehouse – and at least 38% is spoken for, said Dain Fedora, vice president of research for Southern California at Newmark, a commercial real estate advisory firm. While Amazon’s 4.1 million square-foot facility rises on former dairy land in the city of Ontario, the online retailer has been shelving construction plans in other parts of the country. Amazon is the biggest warehouse tenant in the Inland Empire and the nation. Its decision to scale back on building, coupled with rising interest rates and the slowing economy, is sidelining other would-be Inland Empire warehouse builders, area real estate brokers and economists told Reuters. Meanwhile, the scramble for space continues. Trucking company yards and spare lots around the region have already been converted to makeshift container storage, so entrepreneurs are marketing vacant stores as last-resort warehouses in waiting. Brad Wright is CEO of Chunker, which bills itself as an AirBNB for warehouses, and works with everyone from state officials to the owners of vacated big-box stores to find new places to stash goods. During a recent tour at the former Sears anchor store in San Bernardino’s Inland Center mall, Wright and a potential tenant strolled past collapsed ceiling tiles, sagging wall panels and idled escalators while working out how forklifts would navigate the abandoned space. Wright sees the empty stores as one answer to easing the log jams.”There’s a lot of them sitting around, and they’re in good locations,” he said. More

The writer is professor of public policy at the University of CambridgeThe IMF has made it official: growth will be slow and inflation high for the foreseeable future. For the UK, expected to be one of the worst-performing major economies, this grim outlook comes on the heels of slow growth since the financial crisis. There has been little increase in household disposable incomes for well over 10 years and the squeeze on living standards in the next 12 months will be painful. What is to be done? You would not have picked this up from the Conservative party leadership contest, but the biggest issue facing the UK economy is the absence of productivity growth. Productivity does not get pulses racing among Tory members, but it is essential if living standards are to improve. While many OECD economies have experienced a post-2008 productivity slowdown, it has been more severe in Britain than in comparable countries. It is essential to restart productivity growth.If this were easy, it would have happened already. The challenge is all the greater when any money the Treasury can find in public coffers is being pledged on tax cuts that attract headlines but whose impact on long-term potential growth will be minuscule. That rules out some obvious productivity boosts such as additional funding for research, early years education or skills. One silver lining to the economic storm clouds is the boost that might come from less productive companies either improving or going under during an economic downturn. Recessions often raise average productivity through their effect on the weakest firms. But rather than relying on the destruction part of Schumpeter’s dynamic of capitalism, what might encourage some creative productivity enhancement? Here are some low-cost suggestions.First, ask the new chief executive of the Competition and Markets Authority — when finally appointed — to act on the worrying indications it flagged in its recent State of Competition report. It said markets have become increasingly concentrated, corporate mark-ups are elevated and the poorest households are likely to suffer the most harm. Businesses will complain that this is the wrong time to make their life tougher, but it will do no harm for pressure from market forces to be augmented by competition enforcement.Second, focus on productivity in public services. The public sector makes up about a fifth of UK gross domestic product and public services form the “soft” infrastructure enabling the market economy to operate. Rather than cutting their funding further, empower managers to improve their processes through more flexible budgets, devolved decision-making and above all policy stability. A forthcoming report from the Productivity Institute has some excellent practical advice, but it will require politicians and Whitehall to stop undermining the capacity of those charged with delivering services. Further devolution of Whitehall and Westminster powers is also essential if productivity is to grow faster outside London and the south-east. While unbalanced funding helps explain why the UK economy can only fly on one engine, over-centralised decision-making plays a part. Local authorities cannot respond properly to local needs, such as the mismatch between skills and employers’ demands. Among the other low-cost options is encouraging technology start-ups through regulation and policy. This does not mean brainless demands to “cut red tape” or deregulate. Rather, the need is for clear and stable regulation and standards that will enable market growth and de-risk investment for the private sector. Again, this calls for sufficiently stable policies. The transition to net zero energy, transport and construction, for example, needs technical and safety standards to be set early enough, and may require future minimum market guarantees or the use of public procurement to steer investments. There are ample opportunities for digital enterprise if a framework is set that enables access to data in a competitive environment, and sets a clear legal framework for privacy, security and sharing. There is little point calling for additional public spending at exactly the time when such calls will have no traction with whoever becomes the next prime minister, but not all productivity-boosting policies require governments to spend much money. Unfortunately, though, they may need something seemingly even harder for the government to deliver: a strategic view of what the economy needs and a stable policy framework. More

The airport will also continuing other measures, such as asking passengers to show up no more than four hours before their flights, it said in a statement. Schiphol said it had warned airlines that it expects more passengers than it can handle during the Dutch autumn break in late October.KLM, the Dutch arm of Air France-KLM, said the decision meant it would have to limit some ticket sales in the autumn.”KLM does not expect cancellations to be necessary to meet the limit on the number of passengers boarding locally,” the company said. “However, fewer seats than usual will be available in the Dutch market.”The carrier said in June that it would hold Schiphol responsible for financial damages resulting from the passenger caps. More

Greggs has raised prices for the second time this year and warned of further increases, despite attempts by the bakery chain to mitigate the impact of inflation on customers.The retailer, which runs about 2,200 shops across the UK, reported £694.5mn in total sales in the first half of the year, up about 27 per cent on 2021 and before the coronavirus pandemic in 2019.Pre-tax profit increased by just 0.5 per cent over the same period to £55.8mn, with the chain blaming the reintroduction of business rates, an increase in value added tax and higher costs. Greggs said it had increased prices again even though it had “worked hard to mitigate the impact of rising costs on customers”. Product prices have risen by a further 5p to 10p, including the bakery chain’s signature sausage roll, which has increased from £1.05p to £1.10p. Cost inflation “increased significantly” in the first half “driven by food, packaging and energy commodities”, Greggs said. The biggest production cost increases in recent months have come from dairy products. The company now predicts overall cost inflation of about 9 per cent in 2022. However, the retailer said the small price increases it had made so far have not appeared to have affected sales. Finance director Richard Hutton stressed that Greggs was “fiercely defensive” of its affordable prices, adding that it tries to “avoid moving the prices any more than we have to” in order to retain customers.In an attempt to limit a further impact from inflation, the retailer has fixed production costs for food, packaging and energy for the next five months.However, Hutton admitted that further price rises were inevitable. “I can’t guarantee when it will be, but I do know that prices will move again one day,” he said. Despite fears over a consumer downturn, Greggs said it was pushing ahead with plans to expand its UK estate to as many as 3,000 shops. The retailer opened 70 stores in the first half of the year and plans to open a further 80 by the end of the year, focusing on expanding its presence in retail parks and railway stations and airports. Greggs has also added 13 Central London stores over the past 18 months, taking advantage of cheaper rents in the fallout of the pandemic.

The retailer said it could sustain a net increase of 150 shops a year beyond 2022.“We are well positioned to navigate the widely publicised challenges affecting the economy and continue to have a number of exciting growth opportunities ahead, with a clear strategy for expansion,” said Roisin Currie, who took over as chief executive from industry veteran Roger Whiteside in May this year.Greggs’ share price closed up 2.4 per cent to £21.26 in London on Tuesday. Currie said the “exceptional value” of Greggs would help it succeed “in a market where consumer incomes are under pressure”. More

The 19 countries that share the euro approved support measures worth 0.9% of their gross domestic product, predominantly on measures to offset a surge in energy prices.But this should only increase euro area GDP growth by about 0.4 percentage points this year and reduce inflation by slightly less than that, mainly via lower energy prices, the ECB said.In the study, which was used an input for the ECB’s 2022-24 economic projections, the bank estimated the impact on growth to fade next year and that on inflation to reverse.Over 2022-24, stimulus measures approved in response to the war are estimated to add slightly less than 0.4 percentage points to growth and curb inflation by just over 0.1 percentage point, the ECB said.It also found that half of the fiscal stimulus was aimed at supporting short-term fossil fuel consumption while only a minimal part contributed directly to the green transition.”Looking ahead… efforts should be made to increasingly target energy related compensatory measures to the most vulnerable households,” the ECB said.”Moreover, incentives should be geared towards reducing the use of fossil fuels and dependence on Russian energy, while maintaining sound public finances.” More

Ukraine’s infrastructure minister has warned it will take months before grain exports from Odesa and neighbouring ports reach prewar levels and alleviate the global food crisis despite the relaxation of a Russian blockade in the Black Sea.Speaking after the departure on Monday of a ship transporting corn from Odesa to Lebanon — the first under a deal between Russia and Ukraine brokered by the UN last month — Oleksander Kubrakov said he expected no more than five vessels to leave in the next two weeks from Odesa, Chornomorsk and Pivdennyi. Last August, 194 grain-carrying vessels departed Ukrainian ports, including now Russian-controlled Mariupol, according to London-based shipbroker Braemar. Odesa, Chornomorsk and Pivdennyi previously handled about 60 per cent of all Ukrainian grain exports.“The first two weeks will be a pilot regime, when we will have one, two, three vessels out, and then we will receive the first one, two, three vessels coming inward,” Kubrakov said in an interview.“In one to one and a half [months], I hope that if everything goes to plan, the market will see this mechanism is working, that insurance is available, that it’s cheaper and it will simplify the entire process.” At least 16 ships are trapped in Ukrainian ports with shipments and crew waiting for authorities to test a safe passage through sea mines — laid by both Russia and Ukraine — and the threat of Russian missiles. Moscow has pledged not to target ships transporting food if it can carry out joint inspections to make sure returning vessels do not contain weapons.Prices of wheat, corn and vegetable oils soared in the wake of Russia’s invasion of Ukraine in February. But the prospect of a reopening of the Black Sea corridor, along with global recession fears and record crops in Russia, have recently pushed down agricultural commodity prices.Chicago wheat, the international benchmark, has declined to under $8 a bushel, or levels preceding Moscow’s invasion. Corn has lost almost 30 per cent from its April high.However, many vulnerable countries reliant on Ukrainian grain are facing acute food insecurity. Ukraine accounts for 80 per cent of Lebanon’s wheat imports and is a big supplier for countries including Somalia, Syria and Libya. Moving the 20mn-25mn tonnes of grain trapped in Ukraine will take at least 371 loadings of medium-sized vessels that can carry 40,000-69,000 deadweight tonnes — or nearly twice as many of the smaller “Handysize” vessels such as the Razoni, which set sail on Monday, according to Braemar. Kubrakov said he hoped a few safe passages would allow “free markets” to step in and pick up the tempo of exports.A UN official said that the commercial shipping world was “waiting to see” how the initial voyages went. “That’s why this trial ship is so important: to build trust, to show ships can go in and out safely,” she said.Chris McGill, head of marine cargo underwriting at insurer Ascot, said he was “worried about the accuracy of the safety corridors” because the tide in the Black Sea could move the mines.Allowing stranded ships to depart is also vital to creating space in Ukrainian ports for vessels to arrive, the UN official said. “The ambition here is to get the ships out, get new ships coming in and have regular traffic.”

The complicated logistics of navigating the Black Sea and the Bosphorus to sub-Saharan ports, which tend not to be very deep, means that a large number of smaller vessels will be required to ferry out the trapped grain, raising the prospects of long queues while vessels are being checked.Intercargo, the trade group for dry bulk shipowners, said that the industry needed greater certainty that merchant ships would not be bombed. Shipowners would also be loath to send their vessels into the ports if the situation remains volatile.“I understand that nobody can make guarantees,” said Kubrakov, pointing out that Odesa was hit by Russian rockets just a week ago. “We hope this won’t be repeated, but such attacks could make problems for the future.” More