Economy

BENGALURU (Reuters) – Burning U.S. house price inflation will cool to 10%, half its current rate this year, and slow further over the next two as already very expensive homes and climbing mortgage rates sideline more prospective homebuyers, a Reuters poll found.Supported by near-zero borrowing costs and a rush by existing homeowners to find more space, average U.S. house prices have soared by over one-third since the pandemic started. But that unexpected boom is petering out already.The Federal Reserve has raised its key interest rate by a cumulative 75 basis points since March, with more expected this year and next, pushing up the key 30-year fixed mortgage rate above 5% in April and to its highest in more than a decade. The May 10-30 poll of 28 property analysts showed U.S. house prices would rise 10.3% on an average this year based on the Case/Shiller index. That would be half their current pace of around 20%, the fastest since comparable records began in 2001. “The rise in home prices has been staggering, and we do expect a significant slowdown going forward, particularly in the wake of a near-doubling of mortgage rates,” said Brad Hunter, head of consultancy Hunter Housing Economics. “Young families are already struggling to find a single-family home they can afford, and the increase in mortgage rates will only worsen this problem.”House price rises were predicted to slow further to 4.4% next year and 3.9% in 2024, down from 5.0% and 4.1% in the March poll. However, only a handful of contributors predicted prices would fall next year or in 2024.The U.S. housing outlook was better compared to some other markets, including Australia and New Zealand, where prices were predicted to fall modestly at some point over the coming three years after rising exponentially too. [AU/HOMES]But the predicted increase in this year’s house prices was significantly higher than inflation and wage growth forecasts in a separate Reuters poll, meaning affordability is unlikely to improve anytime soon, especially for the first-time homebuyers. [ECILT/US]Indeed, nearly 90% of analysts, 26 of 29, who answered a separate question said affordability for first-time homebuyers would either worsen or significantly worsen over the next two years. Only three said it would improve.With consumer inflation at around a four-decade high and rising interest rates and 30-year mortgage rates, housing market activity has already slowed sharply.”Millennials have not seen the 30-year above 5% for more than a month in their adult lives,” said Matthew Gardner, chief economist at Windermere Real Estate. “The impact of higher rates will lower sales and new housing starts, and price growth…will slow.”Meanwhile, existing home sales, which make up about 90% of total sales and declined to a near two-year low of 5.61 million units last month, was predicted to fall further to reach 5.34 million units by the second quarter of next year.(For other stories from the Reuters quarterly housing market polls:) More

TOKYO (Reuters) -Japan’s economy will grow at a weaker rate than previously thought this quarter despite hopes for a strong rebound in consumption after showing resilience in the three months through March, a Reuters poll of economists showed.The world’s third-largest economy is at risk of being hobbled by slowing economic growth in China and a surge in global raw material prices – both issues that could hurt Japan’s key manufacturing sector, the poll showed.However, the slower expansion still indicates growth will be strong enough for the economy to recover to its pre-coronavirus pandemic levels of end-2019 this quarter, about 70% of poll respondents said.The economy was projected to expand an annualised 4.5% this quarter, below April’s estimate for 5.1% growth, according to the median forecast of 36 analysts in the May 18-27 poll.”The speed at which the economy is recovering at home is slow,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.”Corporate profit could be severely squeezed if raw material prices continue to rise as there’s limited pass-through of those costs into final prices.”A slowdown in Chinese economic growth was the most-frequently cited issue posing a risk to Japan’s economy in the latter half of the year, the poll showed.In recent weeks, China paralysed economic activity in major cities such as Shanghai with extreme COVID-19 lockdowns, disrupting supply chains and clouding the country’s economic outlook.China’s hard-handed measures against the pandemic have already led to a fall in Japan’s shipments to and from Asia’s top economy in April, Japanese trade data showed earlier this month.Asked when Japan’s economy would recover to pre-coronavirus levels of end-2019, 20 of 28 economists said it would happen this quarter, after shrinking less than expected in January-March.Five chose next quarter, while two opted for October-December and one picked April-June next year.But analysts also said that even if the economy were quick to recover to end-2019 levels, it was likely to still fall short of higher levels seen earlier that year, before taking a hit from a sales tax hike in October 2019.”The economy will likely exceed its pre-sales tax hike level in July-September next year,” said Tsunoda.Looking ahead, economists’ second-most frequently cited risk for the second half of 2022 was “soaring raw material costs”, followed by “faster than expected U.S. monetary policy tightening”.Other choices were “spreading of new coronavirus variants”, “semiconductor chip and parts shortages” and “negative impact of domestic price rises on private consumption”.But none cited a persistently weaker yen as the biggest risk to the economy in the second half of the year.The poll also found core consumer prices, which exclude volatile fresh food prices, will rise 2.0% this fiscal year, which runs through March next year, and 0.9% in fiscal 2023.The economy will grow 2.3% this fiscal year, followed by an estimated 1.5% growth in fiscal 2023. Both forecasts showed analysts expected growth to come in slightly weaker than what they expected in last month’s poll.(For other stories from the Reuters global economic poll:) More

Biden will meet Federal Reserve Chair Jerome Powell to discuss the state of American and global economy, the White House said late on Sunday. In a Wall Street Journal opinion piece published Monday, Biden said the Federal Reserve’s main role was to control inflation.Biden said his “predecessor demeaned the Fed, and past presidents have sought to influence its decisions inappropriately during periods of elevated inflation. I won’t do this.”He said he agreed with the Fed’s assessment “that fighting inflation is our top economic challenge right now.”Biden added the U.S. government should “take every practical step to make things more affordable for families during this moment of economic uncertainty.”Powell was formally sworn in last week to begin his second four-year term as head of the U.S. central bank.The Fed is under pressure to decisively make a dent in an inflation rate that is running more than three times its 2% goal and has caused a jump in the cost of living for Americans. It faces a difficult task in dampening demand in the economy enough to curb inflation while not causing a recession.There are already signs inflation has peaked. In the 12 months through April, the personal consumption expenditures (PCE) price index, the Fed’s preferred gauge of inflation, advanced 6.3% after jumping 6.6% in March, the Commerce Department reported on Friday. More

The plant in Rugby, in England’s West Midlands region, is Cemex’s first to fully operate on “Climafuel,” a mix of paper, cardboard, wood, carpet, textiles and plastics, the company said. Cemex Chief Executive Fernando Gonzalez said in a statement that the plant’s conversion served “as the model for the rest of our regions.”Concrete producers have been pressured by regulators and investors to lower CO2 emissions in recent years. Cement, key to producing concrete, contributes around 8% of CO2 emissions globally, according to estimates.Cemex did not give a time frame for the plant’s transition to alternative fuels, with the regional head saying in a statement the company “eventually (expected) to phase out” fossil fuels completely at the Rugby facility.The company said the move was part of its strategy to produce net-zero CO2 concrete by 2050. More

China has suffered its first setback in an escalating tug of war with western powers for dominance in the Pacific Islands after it failed to win support from countries in the region for a comprehensive partnership centred on security. At a virtual meeting yesterday with Wang Yi, the Chinese foreign minister, leaders from eight Pacific island nations agreed to co-operate in five areas including health, disaster management and agriculture. But Wang said that more discussion was needed on the China-Pacific Islands Countries Common Development Vision that Beijing had proposed. The blow to China came after the US and Australia strongly pushed back against Beijing’s efforts to entice more of the small, mostly impoverished Pacific Island nations into its embrace. The Chinese embassy in Fiji said Beijing would lay out its plans for the region in a “position paper” in response to the questions Pacific leaders had raised at the meeting. They had agreed to discuss the draft communique prepared by Beijing “until we have an agreement”, said Qian Bo, China’s ambassador to Fiji.Thanks for reading FirstFT Asia. Here’s the rest of today’s news. — EmilyFive more stories in the news1. Oil breaches $120 a barrel as petrol and diesel prices soar Oil rose higher than $120 a barrel on Monday as increasing prices for fuels, such as petrol and diesel, combined with lingering concerns over supplies from Russia to propel crude to its highest level in two months.Related read: EU leaders at a summit are struggling to agree an oil embargo against Russia that exempts a key supply route — a concession aimed at appeasing Hungary, which has been blocking the sanctions for nearly a month.2. US will not send Ukraine weapons that can strike Russia Joe Biden said the US would not send Ukraine long-range rocket systems that could be used to attack Russian territory, dealing a blow to Kyiv, which has repeatedly asked for such weapons.3. France apologises for chaos at Champions League final France has apologised for the botched security that marred the Champions League final in Paris on Saturday, but sharp differences over who was to blame risked turning into a diplomatic row after Downing Street called the scenes “deeply upsetting and concerning”.4. Tether has held some reserves at Bahamas bank The stable coin issuer has held some of its reserves at a small Bahamas bank called Capital Union, people familiar with the matter said, shedding further light on how the group manages the $73bn stablecoin that underpins the crypto market. Tether has generally declined to reveal where exactly it holds the assets that back its eponymous token.5. SoftBank cuts top executives’ pay SoftBank slashed the wages of its top executives after its Vision Fund posted a historic loss of ¥3.5tn ($27.6bn) caused by a rout in tech stocks, rising interest rates and a regulatory crackdown in China.The day aheadIndia GDP figures Economists expect that Tuesday’s gross domestic product report will show that India’s slowed in the fourth quarter. (The Economic Times) Japan economic data April unemployment rate, retail spending figures and flash industrial production data are set to be released today. The World Trade Organization meeting The group’s dispute settlement body will hold its monthly meeting.Eurozone inflation Eurozone inflation is expected to hit a new high of 7.7 per cent when figures for May are published on Tuesday — nearly quadruple the European Central Bank’s 2 per cent target.Join the FT for The Global Boardroom on June 7-9, featuring US secretary of state Gina Raimondo, Bank of Japan governor Haruhiko Kuroda, former Google chief executive Eric Schmidt and more. Register free today.What else we’re readingThe Bank of Victor Orbán Hungary’s prime minister has long sought economic influence to match his political power. Now his plan to merge three of the country’s largest banks into a single institution is coming to life, realising hopes of serving his political goals as much as its customers.Private equity cannot avoid the reckoning in markets Both the real economy and the financial system have entered a phase that is uncertain and destabilising. That spells trouble for private as well as public market investors, writes Mohamed El-Erian.Talk of doing good rings hollow among global elite Following the World Economic Forum in Davos, FT’s Rana Foroohar writes that she came away feeling that the 0.1 per cent was more out of touch with the state of the world than it has ever been in the 20-odd years she’s attended the conference.Hard lessons from the crypto crash Subbaiah, 29, an IT worker in Bangalore, made enough trading crypto that he started to dream about quitting his day job and trading full-time. He moved his entire $7,000 portfolio into luna — only to see it reduced to $150 when the coin’s value collapsed this month. FT’s Claer Barrett explores whether anything can challenge the belief that investing in digital assets is a guaranteed route to riches.How tech companies are betting on the metaverse The $180bn gaming industry, twice the size of the film business, already attracts hundreds of millions of players. But as tech leaders vie to create the next iteration of the internet, gaming has become a battleground. The FT explores how gaming got so big, and whether it really can be the gateway into this new world.

Video: Game on: how tech companies are betting on the metaverse | FT Film

FoodOur Summer Food & Drink special includes a definitive guide to cooking and preparing sardines, three strawberry desserts from Ravinder Bhogal and a fantasy dinner party by Ukrainian London-based chef Olia Hercules.

Fresh, frozen or tinned, sardines are the perfect match for a sunny evening © Carmen Palma More

TORONTO (Reuters) – The Canadian dollar rose to its highest level in more than five-weeks against the greenback on Monday, as data showed Canada’s current account surplus turning positive and ahead of an expected interest rate hike this week by the Bank of Canada.Canada’s current account surplus was C$5.0 billion in the first quarter, swinging from a revised C$137 million deficit in the fourth quarter. It was the widest surplus since the second quarter of 2008.”We expect the ongoing strength in commodities to support the current account in Q2 (second quarter), though offset by a deeper services deficit as travel recovers more fully,” said Shelly Kaushik, an economist at BMO Capital Markets.Canada’s GDP data, due on Tuesday, could help guide expectations for the Bank of Canada policy outlook. Money markets expect the central bank to raise its benchmark rate by half a percentage point for a second straight time at a policy decision on Wednesday.The Canadian dollar was trading 0.5% higher at 1.2657 to the greenback, or 79.01 U.S. cents, after touching its strongest since April 22 at 1.2651.Gains for the loonie came as world share markets rose and the U.S. dollar lost ground against a basket of major currencies, with investors betting on a possible slowdown in U.S. monetary tightening.The price of oil, one of Canada’s major exports, was up 1.8% at $117.17 a barrel as China eased COVID-19 restrictions and traders priced in expectations that the European Union will eventually reach an agreement to ban Russian oil imports. Canadian government bond yields were higher across the curve, with the 10-year up 3.5 basis points at 2.825%.(The story removes 8th paragraph showing incorrect move in oil prices.) More

Before the pandemic, Maz Karimian’s commute to Lower Manhattan was like that of many New Yorkers’: an often miserable 30-minute journey on two subway lines that were usually crammed or delayed.By comparison, when he returned to the office last week for the first time since the coronavirus began sweeping through the city, his commute felt serene: a leisurely bicycle ride from his home in Carroll Gardens to his company’s relocated office about 10 minutes away in Dumbo.“I love the subway and think it’s a terrific transit system but candidly, if I can be in fresh air versus shared, enclosed air, I’ll choose that 10 times out of 10,” said Mr. Karimian, the principal strategist at ustwo, a digital design studio.More than 26 months after the pandemic sparked a mass exodus from New York City office buildings, and after many firms announced and then shelved return-to-office plans, employees are finally starting to trickle back to their desks. But remote work has fundamentally reshaped the way people work and diminished the dominance of the corporate workplace.Companies have adapted. Conference rooms got a makeover. Personal desks became hot desks, open to anyone on a first-come basis. Managers embraced flexible work arrangements, letting employees decide when they want to work in person.And some are taking more drastic measures to make the return to work appealing: picking up their offices and relocating them closer to where their employees live. In New York City, the moves reflect an effort by organizations to reduce a major barrier to getting to work — the commute — just as they start to call their workers back.Before the pandemic, workers in New York City had the longest one-way commute on average in the country, nearly 38 minutes.About two-thirds of ustwo’s employees live in Brooklyn, so it made sense to move the office to Dumbo, on the Brooklyn waterfront, after a decade in the Financial District in Manhattan, said Gabriel Marquez, its managing director.The new space is about 11,500 square feet, slightly smaller than its former office, and was less expensive per square foot to lease than most offices in Manhattan. It is also better suited for when employees do come into the office, featuring an open-air rooftop with Wi-Fi for meetings, he said.“We didn’t need the same relationship with the office and have everyone in five days a week,” said Mr. Marquez, who said that employees are mandated to be there twice a week, on Tuesdays and Wednesdays. “It felt like, culturally, it is a good fit and for a lot of companies like ours in our area.”Before the pandemic, the morning commute for Maz Karimian, who works at ustwo, took about 30 minutes on two separate subway lines into Manhattan. Now, his company’s new office in Brooklyn is within biking and walking distance from his home.Jose A. Alvarado Jr. for The New York TimesAs New York City tries to climb out from the depths of economic turmoil, there are recent signs that the city is rebounding despite concerns about crime on the subways and rising coronavirus cases. Tourists are visiting New York at a greater rate than last year, hotel occupancy has increased and earlier this month, daily subway ridership set a pandemic-era record of 3.53 million passengers.Despite those promising signals, a vital piece of the city’s economy remains battered: office buildings.Before the pandemic, office towers sustained an entire ecosystem of coffee shops, retailers and restaurants. Without that same rush of people, thousands of businesses have closed and for-lease signs still hang in many storefronts.Despite pleas for months from Mayor Eric Adams and Gov. Kathy Hochul for companies to require people return to the office, so far, many have heeded demands by their employees to maintain much of the job flexibility that they have come to enjoy during the pandemic.Just 8 percent of Manhattan office workers were in-person five days a week from the end of April to early May, according to a survey from the Partnership for New York City, a business group.About 78 percent of the 160 major employers surveyed said they have adopted hybrid remote and in-person arrangements, up from 6 percent before the pandemic. Most workers plan to come into the office just a few days a week, the group said.The seismic shift in office building usage has been one of the most challenging situations in decades for New York real estate, a bedrock industry for the city, and has upended the vast stock of offices in Manhattan, home to the two largest business districts in the country, the Financial District and Midtown.About 19 percent of office space in Manhattan is vacant, the equivalent of 30 Empire State Buildings. That rate is up from about 12 percent before the pandemic, according to Newmark, a real estate firm. Office buildings have been more stable in Brooklyn, where the vacancy rate is also about 19 percent but has not fluctuated much since before the pandemic, Newmark said.Daniel Ismail, the lead office analyst at Green Street, a commercial real estate research firm, predicted that the office market in Manhattan would worsen in the coming years as companies adjusted their work arrangements and as leases that were signed years ago started to expire. In general, companies that have kept offices have downsized, realizing they do not need as much space, while others have relocated to newer or renovated buildings with better amenities in transit-rich areas, he said.Even before the pandemic, it was not uncommon for companies to move offices throughout the city or to open separate locations outside of Manhattan. The city offers a tax incentive for businesses that relocate to an outer borough, with up to $3,000 in annual business-income tax credits per employee.Nearly 200 companies received it in 2018, for a total of $27 million in tax credits, the most recent data available, according to the city’s Department of Finance. But some office developers are betting on neighborhoods outside Manhattan becoming attractive in their own right, luring companies that specifically want to avoid the hustle-and-bustle of Midtown.More than 1.5 million square feet of office space is under construction in Brooklyn, including a 24-story commercial building in Downtown Brooklyn.Two Trees Management, the real estate development company that transformed Dumbo, is turning the former Domino Sugar Refinery in Williamsburg into a 460,000-square-foot office building. Jed Walentas, its chief executive, said he had so much confidence in the project that it was being renovated on speculation, without office tenants lined up beforehand.“You can’t ignore the talent base that has shifted to Brooklyn and Queens,” Mr. Walentas said. “The notion that they will all take the F train or the L train or whatever train into the middle of Manhattan, that’s faulty.”“We didn’t need the same relationship with the office and have everyone in five days a week,” said Gabriel Marquez, the managing director at ustwo, which moved to the Dumbo neighborhood in Brooklyn.Jose A. Alvarado Jr. for The New York TimesTo be sure, the latest outer-borough office trend is still nascent, and the unpredictable whims of the pandemic could change its course in the future.Brian R. Steinwurtzel, the co-chief executive at GFP Real Estate, whose firm largely owns properties in Manhattan, said that office markets in Queens and Brooklyn could attract certain niches of companies, such as biomedical and life science companies in Long Island City, Queens, where GFP has several sites.But overall, Mr. Steinwurtzel offered a curt assessment of the outer-borough markets: “It’s terrible.”Still, just being able to have panoramic views of Manhattan is enough for some companies.When the European advertising firm Social Chain opened an office in the United States before the pandemic, the group settled in the Flatiron area, an epicenter of the marketing world made famous decades ago by advertising giants on Madison Avenue.But after the pandemic struck and the firm decided to revisit its location, the prestige of being in Manhattan lacked the same magnetism — or necessity, said Stefani Stamatiou, the managing director of Social Chain USA.She toured office locations in Manhattan but none felt like the right fit. Then she traveled across the East River into Williamsburg and found 10 Grand Street, also a Two Trees property. It checked all the boxes — unobstructed views of Manhattan, a flexible floor plan and, most importantly, a shorter commute for a large number of Social Chain’s 42 employees.That includes Ms. Stamatiou, who now walks to work from her home in Greenpoint.“There is actual outside activities and restaurants down below us just like in Manhattan but there’s a sense of space,” Ms. Stamatiou said. “It made sense to be where the creative is, where the people are.” More

FRANKFURT (Reuters) -The U.S. Federal Reserve should be prepared to raise interest rates by a half percentage point at every meeting from now on until inflation is decisively curbed, Fed Governor Christopher Waller said on Monday, underscoring tensions at the central bank about how aggressively to tighten policy as it battles to bring down high inflation.”I am advocating 50 (basis point hikes) on the table every meeting until we see substantial reductions in inflation. Until we get that, I don’t see the point of stopping,” Waller said following a speech to the Institute for Monetary and Financial Stability in Frankfurt, Germany, having earlier confirmed he wants that size of rate hike at the next “several” meetings.Waller’s comments came ahead of a meeting on Tuesday between Fed Chair Jerome Powell and U.S. President Joe Biden for a discussion called by the White House on state of the American and global economy. The Fed is under pressure to decisively make a dent in an inflation rate that is running more than three times its 2% goal and has caused a jump in the cost of living for Americans. It faces a difficult task in dampening demand in the economy enough to curb inflation while not causing a recession.Biden’s public approval rating fell this week to 36%, the lowest level of his presidency, as Americans suffered from high inflation, according to a Reuters/Ipsos opinion poll last week, raising alarms that his Democratic Party is on track to lose control of at least one chamber of Congress in the Nov. 8 midterm election.Fed policymakers raised the benchmark policy rate by half a percentage point earlier this month, to a target range of between 0.75% and 1%, and plans further increases of the same size at its next two meetings in June and July.Debate at the Fed has shifted to the interest rate hikes required for the remainder of the year. Most policymakers have said they want to wait and see how much inflation comes down over the summer before deciding whether they need to increase or reduce the size of an interest rate hike in September.One policymaker though, Atlanta Fed President Raphael Bostic, said last week that he was in favor of a “pause” at the September meeting to allow time to assess the impact of the Fed’s moves on the economy and inflation.By contrast, St. Louis Fed President James Bullard has said he wants the Fed to hike rates to 3.5% by year’s end, which would involve half percentage-point increases at all the Fed’s remaining meetings.Waller, on the hawkish wing like Bullard, said he wants to see the central bank raising its policy rate above neutral – the level that neither stimulates nor constrains economic growth – by year end. The neutral rate is seen around 2.5%, according to the median of Fed policymaker estimates made at the March meeting.Investors currently see the federal funds rate in a range between 2.50% and 2.75% at the end of this year.EMPLOYMENT CAN STAY STRONGThe Fed’s actions so far have been met with an equities sell-off and surge in U.S. Treasury yields and the dollar. Fears of an economic downturn have also been exacerbated by Russia’s war in Ukraine as well as China’s zero COVID-19 policy, which have further entangled supply chains.Waller said he is optimistic the strong labor market can handle higher rates without a significant increase in unemployment.”If we can get unemployment to just 4.25%, I would consider that a masterful performance,” Waller said. The unemployment rate is currently 3.6%.There are already signs inflation has peaked. In the 12 months through April, the personal consumption expenditures (PCE) price index, the Fed’s preferred gauge of inflation, advanced 6.3% after jumping 6.6% in March, the Commerce Department reported on Friday.So-called core PCE prices increased 4.9% year-on-year in April after rising 5.2% in March. It was the second straight month that the rate of increase reflected in the annual core PCE price index decelerated.But Waller remained unmoved by those readings. “No matter which measure is considered…headline inflation has come in above 4% for about a year and core inflation is not coming down enough to meet the Fed’s target anytime soon.” More