Economy

Americans are stretching their budgets to buy new homes, hustling to strike deals quickly to avoid higher mortgage financing costs later, according to the latest industry data.Lenders and realtors said the willingness of buyers to devote more of their income to mortgage payments was providing support for housing prices just as rising rates were eroding affordability.Determined consumers are driving a “very, very aggressive, fast-moving spring market as we head into the homebuying season”, said Matt Vernon, head of retail lending at Bank of America.,He said expectations of higher rates are “pushing these buyers into the market”, and they are “getting more aggressive in their pursuit of home ownership from a timing perspective”.Mortgage rates have reached their highest levels in more than a decade, according to the latest Freddie Mac survey published on Thursday. The average for a 30-year fixed-rate mortgage hit 5.27 per cent, up from 2.96 per cent a year ago. Rising interest rates typically lead to a decrease in mortgage applications, but applications for new mortgages rose 4 per cent from the previous week, according to data released by the Mortgage Bankers Association on Wednesday.The MBA’s latest affordability index highlighted the determination of homebuyers. The average payment from new mortgage applications in March accounted for 42 per cent of an average American’s income, compared to 34 per cent a year before, according to an FT analysis of MBA and federal data.“If we can make it happen now, we want to make it happen now,” said Brittany Majors, a 37-year-old resident of New York City who said that she has been outbid 10 times on homes in the New Jersey suburbs in the last six months.Another sign of homebuying demand comes in the form of a rise in mortgage pre-approvals, which are the first step for homebuyers who need to take out a loan to finance their purchase. The process requires borrowers undergo an investigation into their finances in exchange for a letter they can show to sellers to prove they are qualified to buy a home.Increasingly, prospective buyers are seeking to be approved before they have identified a house to buy. Maxwell, a mortgage software provider that works with more than 300 US lenders, said pre-approvals without associated addresses hit 80 per cent of all applications in March, up from 50 to 60 per cent typically, in its network.“These are the months where all these folks should be going under contract, and you’re just not seeing it,” Maxwell chief executive John Paasonen said.Two-thirds of house shoppers in the market say they are willing to make an offer on a house immediately or within three days of viewing a home, according to a BofA study released last week. Additionally, more than 70 per cent of shoppers said they are willing to settle for homes in less-desirable neighbourhoods, with less space, to get a deal done, and 56 per cent are considering taking on a second job to earn extra income to achieve their home ownership goals, the report found.The national median single-family existing-home price was $368,200 in the first quarter, up 15.7 per cent on year, the National Association of Realtors reported this week. Majors, the prospective New Jersey homebuyer, said she has been in constant communication with her loan officer as rates have risen. “I ask him, ‘What’s my wriggle room? What’s my ceiling?’ and then we pick a number based off of that,” she said.So far, she increased her budget by $150,000 and knocked an extra bathroom off her list of requirements for a home in the suburbs.“I don’t know what to do because I know that financially it is probably not smart for me to go any further than I have gone,” she said. More

UK retail investors have rushed to withdraw money from investment funds this year, with net outflows in the first three months hitting £7.1bn, the highest level since the fourth quarter of 2018.The pace of the withdrawal accelerated rapidly over the three-month period, as concerns about inflation and rising interest rates were compounded by the impact of the Ukraine war, according to data released on Thursday by the Investment Association, the fund industry group.While the data cover a period that ended over a month ago, analysts expect investors to remain nervous. Inflationary fears have only grown in the light of the conflict, prompting both the US Federal Reserve and the Bank of England to raise official interest rates this week. Meanwhile, the fighting in Ukraine shows no sign of abating, causing human and economic havoc and disrupting global trade, especially in grain.“If inflation remains high, further rate rises look inevitable,” said Nicholas Hyett, analyst at investment broker Wealth Club. “Higher rates are bad news for property, stocks and shares and bonds, especially if paired with an economic downturn. But rising inflation means cash is no safe haven either. Investors, like rate setters, could be left looking for a least worst option.”According to the Investment Association, the March outflow of retail funds was net £3.4bn — the highest monthly figure since the UK’s first pandemic lockdown in March 2020, when £10bn was withdrawn. The March 2022 total topped February’s £2.5bn, which itself exceeded the £1.1bn recorded in January.The withdrawals were led by particularly large moves in fixed income funds, which saw outflows of £3.4bn in March. This took the quarterly figure to £6bn, the highest recorded quarterly fixed income outflow. Retail withdrawals from equity funds hit £3.8bn for the three months, including £1.2bn for March, with a net outflow of £505mn from European funds, reflecting the region’s exposure to the Ukraine conflict. That made the net outflow from equity funds the biggest for any quarter for almost three years.“Investors remained cautious in March in light of monetary tightening and Russia’s invasion of Ukraine,” said Chris Cummings, chief executive of the Investment Association. “Although Russia launched its invasion of Ukraine in February, the economic ramifications of the conflict became clearer in March.”

However, the outflows were partly offset by inflows into diversified funds, which are widely seen as safer havens, and into sustainable investment funds, with savers keen to act before the end of the UK tax year on April 5 to make use of Isa allowances. Cummings said managers saw “many investors rushing to use their Isa allowance and seeking potentially safer havens in diversified funds, with multi-asset strategies benefiting in particular”. Laith Khalaf, head of investment analysis at platform AJ Bell, predicted that the flight from bonds evidenced in the data would persist.“Bond investors will be wary of the continued pressure exerted by rising interest rates and quantitative tightening on bond prices, and will be thinking that by waiting it out, they can protect some capital and lock into a higher yield further down the road,” he said.He added: “At some point yields will become tempting enough to lure investors back into bonds, but until they are able to see past a spell of rising interest rates, bond fund sales are likely to remain under the cosh.”Emma Wall, head of investment analysis at platform Hargreaves Lansdown, said: “The market reaction to the devastation in eastern Europe was extreme volatility, and while many investors took the opportunity to take speculative bets, many chose to take their money off the table and turn to the perceived safe havens of cash and gold. “[Our] clients have also turned to multi-asset funds which prioritise capital preservation, outsourcing asset allocation in the face of market uncertainty.” More

Good morning. On Wednesday, stocks and bonds rose merrily after the Fed chair said that 75 basis point rate increases were not under active discussion by the Open Market Committee. This struck us as weird, given that chair Jay Powell was at pains to emphasise his focus on inflation and his willingness to be more aggressive if needed. He just didn’t sound dovish to us. Thursday, both stocks and bonds fell hard, more than reversing the prior day’s moves. For a moment we felt vindicated. Closer examination of the facts left us puzzled once again. Below, we try to make sense of the gyrations, to the degree possible. Email us: [email protected] and [email protected]. We’re taking Monday off. While we’re away, read the FT’s Asset Management newsletter, which comes out on Mondays. Very bad day follows very good dayHere’s a thumbnail sketch of what happened Thursday:The S&P 500 fell 3.5 per centThe Nasdaq fell 5 per centLong-dated Treasury yields rose — the 10-year by 14 basis points, to hit 3.06 per centShort-dated treasuries rose, but by less — the 2-year rose 8 basis points, to 2.71 per cent Inflation-protected Treasury yields rose — the 10-year by 13 basis points, to hit 0.184 per centCommodities were stable to up — oil, gold and copper all rose slightlyThe Vix volatility index hit 31 — high, but no higher than the peaks of recent weeks. Indeed it hit 36 on Monday.All of these moves, except for commodities, were meaty. This was a big across-the-board sell-off. Bonds provided no shelter from the carnage in stocks. What happened? Is there a coherent and compelling narrative here? There doesn’t have to be. When the trend is downward, volatility is up, and liquidity is patchy, markets reflect portfolio decisions made under duress more than they reflect stable economic realities. Still, amid the wreckage, the market might be telling us something useful. A few broad possibilities:Market participants realised Wednesday, en masse, that the Fed was much more hawkish than they had concluded initially. So short rates must rise, and with them, the possibility of a recession. Stocks do not like recessions. Market participants realised Wednesday, en masse, that the Fed was even more dovish than they concluded initially, so inflation was more likely to be higher for longer. So long rates must rise, commodities look more attractive. Stocks do not like runaway inflation, either.It’s not all about the Fed. Maybe investors are simply realising that the outlooks for the economy, corporate earnings and speculative appetite are not very good. Possibility #1 makes sense inasmuch as short rates fell hard as Powell spoke Wednesday, and then rose Thursday. And stocks got killed, which fits. But short rates didn’t rise that much, and long yields rose even more, an odd response to a recession.If the idea here is that, inspired by the ghost of Paul Volcker, Powell is going to push us into a recession, the yield curve should be flattening. But it’s steepening. Possibility #2 makes sense in that the difference between nominal and inflation-protected yields widened, increasing so-called “inflation break-evens”. Also the relative strength of commodities amid the chaos makes sense if more inflation is coming. Higher long rates fit higher inflation as well. But 10-year break-evens rose only a little, and only did that because nominal yields rose like mad. Five-year break-evens actually fell a smidgen. If inflation panic were worsening, I’d expect inflation-protected yields to fall, or at least not rise as much as they did Wednesday. Further, the two-year closely tracks expectations for the fed funds rate. Why did it rise if we’ve all decided Powell is a terrible wimp? If the pieces don’t quite fit for #1 and #2, we can turn happily to #3, which is flexible and all-purpose. Let us briefly recall the five most salient features of this investing environment:Strong consumer and corporate balance sheetsInflation, which is driven in some significant part by supply shocks from Covid and war, which central bank monetary tools cannot solveSlowing economic growth, as seen in everything from global PMIs to falling trucking ratesCentral banks that are tightening despite the supply issues and slowing growth — as personified Wednesday by the Bank of England, which yesterday both warned of recession and increased interest rates Very high stock valuations Only the first item is supportive of risk assets. The others are negative, and compound one another. Very bad days just happen when the backdrop is this poor.The last point on that list is likely becoming more important. We have not spoken very much about high valuations at Unhedged, because for many years most valuation measures have been sending bad signals. Stocks have looked expensive on traditional metrics for much of the last decade, but they have continued to rise. Referring to, say, Robert Shiller’s cyclically adjusted P/E ratio has been liable to get a person made fun of online. But now that the momentum is downward, and we are wondering how low stocks can go rather than how high they can reach, it may be time to think about valuations again. Here is Shiller’s ratio, which divides the price of the S&P 500 by 10-year average earnings:There has been a fair amount of talk from brokers recently about how recent price declines have made valuations more attractive. But this ignores cyclicality. Specifically, it ignores the fact (which we recently discussed here) that Covid-era margins have been extraordinarily high and seem likely to come down. Adjust for this, as the Shiller ratio does, and stock prices still look very high. This doesn’t tell you that they have to come down, but it removes a key psychological support in a stressful time.We are left with a final puzzle. After a stomach-churning few days, why isn’t the Vix higher? Garrett DeSimone, head of research at OptionMetrics, likes to say the Vix can be seen as the cost of insuring a stock portfolio against declines. If things are so bad, why isn’t the price of insurance rising more? DeSimone thinks it suggests that things might calm down in the coming days. But there is another possibility: that people don’t want insurance. They’d rather just sell.One good readAmerican nationalists have a thing about cat ladies. This makes perfect sense. More

Immediately after concluding his first monthly monetary policy meeting as chancellor and raising interest rates by a quarter point to 6.25 per cent, Gordon Brown dropped a bombshell. The first monetary policy meeting of the new Labour government with Bank of England governor Eddie George was also to be its last. From that moment on May 6 1997, the BoE would be independent to set interest rates through its newly created Monetary Policy Committee. Now, 25 years later, the independence of the central bank has not been seriously questioned under five prime ministers and six chancellors of the exchequer. “It’s amazing how [BoE] independence has become part of the [UK’s] institutional furniture,” Ed Balls, then Brown’s adviser and architect of the plan, told the FT.But with UK prices likely to rise at their fastest rates in over 40 years as sustained double-digit inflation becomes possible for the first time since the 1970s, former officials and economists say the independent BoE faces challenges that it has not encountered the past quarter of a century.

Labour chancellor Gordon Brown, left, with governor of the Bank of England Eddie George in 1998. © Gerry Penny/EPA

These include preventing inflation from spiralling out of control; avoiding distraction by fashionable ambitions, such as tackling climate change and inequality; ensuring transparent policy debate; and maintaining the legitimacy of its unelected officials to take the steps needed to defend the stability of the financial system.Lord King, governor between 2003 and 2013, insisted that the process of granting the central bank more autonomy from the early 1990s to full independence to set interest rates in 1997, was a success and enabled the BoE “to have an independent voice and one for which it was accountable”.The central bank’s post-independence history splits into two broad periods. The first decade was one of apparent triumph, with financial markets’ reassured that New Labour would not be profligate with the public’s money and generate inflation. Government borrowing costs declined, giving Brown more room to raise spending on social welfare and other priorities, while economic growth was strong and inflation stayed within 1 percentage point of the BoE’s inflation target. Such was the strength of the economy that Brown regularly boasted of not returning to “boom and bust”. On the 10th anniversary of independence in 2007, King said, “it is not, I believe, credible to dismiss [the good economic performance] solely as the result of luck”. However, the good times did not last. Economic growth per capita, which averaged 2.2 per cent a year in the UK over the first decade of BoE independence, has slumped to average just 0.4 per cent a year since. The economy suffered huge recessions following the global financial crisis in 2008-09 and the coronavirus crisis in 2020, which sandwiched years of grinding austerity as the UK faced up to being poorer than everyone hoped. Now, it faces a fourth shock following Russia’s invasion of Ukraine, which is pushing inflation higher and creating a cost of living crisis. Inflation has been much more volatile than in the first decade, briefly spiking above 5 per cent in 2008 and 2011 and threatening deflation after 2014 before climbing to 7 per cent in March this year. Price rises are now heading towards double-digit rates not seen since the oil price shocks of the 1970s.

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Mark Carney, governor between 2013 and 2020, said uncertainties over how far productivity growth had fallen — and whether this was permanent — made monetary policy much more difficult to manage.“The extent [productivity growth] went away was an open question . . . and then we had a prospective supply shock because of the Brexit decision that was relevant for monetary policy over our forecasting horizon,” he said. Over the 25 years as a whole, however, the inflation record is good, according to Jagjit Chadha, director of the National Institute of Economic and Social Research. “However you measure it, [MPC members have] hit their inflation target and this needs to be remembered amid all the criticisms — it tells us something about the value of having experts involved,” he said. King famously described the UK’s economic performance in the 10 years to 2003 as the “nice decade”, which he said was a warning that the good times could not last. “If we’d not had independence, there would still have been a global financial crisis,” he told the FT.

October 2008 — the global financial crash. © Ray Tang/Shutterstock

But the central bank did face serious criticism in the wake of the crisis. George Osborne, chancellor between 2010 and 2016, believed that the UK authorities’ failure to supervise its financial system adequately before 2007 required the BoE to have more power to regulate banks and the financial system, and a new governor, Carney, not tainted by the crash. With poor economic performance, accusations of flip-flopping guidance on interest rates and allegations of politicisation in the Scottish and Brexit referendums, scrutiny of the BoE has only increased in recent years. But it is Andrew Bailey, the governor since 2020, who faces the most difficult task of leading the central bank through a period of renewed inflation, according to former officials and external analysts. After the Lords’ economic affairs committee last year accused the BoE of having a “dangerous addiction” to quantitative easing and pumping up spending each time things looked difficult, the central bank needs to decide how quickly to withdraw stimulus to rein in inflation. “I think this is a big moment for [central banks] because they really have to demonstrate that they are determined to restore price stability,” said King. “It’s too late to argue that we’ve got a few months of high inflation and it will go away — it’s more a question of a few years,” the former governor said. Adam Posen, president of the Peterson Institute for International Economics and a former member of the MPC, believes the BoE has little choice but to raise interest rates even if it generates a recession at a time household incomes are squeezed by higher energy prices. “If real-income [declines] drove inflation cycles, we wouldn’t need monetary policy,” he said. “The whole reason you need a monetary policy-induced recession — probably necessary in the UK — is that the real-income effect doesn’t diminish inflation unless and until labour market conditions ease.”

Pedestrians walk past the Bank of England during the first Covid lockdown of March 2020. © Matt Dunham/AP

Paul Tucker, former deputy governor and author of Unelected Power, a book that questioned whether central banks have been given too broad a remit, thinks the BoE can address the challenge of higher inflation if it sticks to its core purpose. “Independence was a success, which wasn’t blown away by the global financial crisis,” he said. “But the BoE does now need to be focused on controlling inflation and stability of the wider banking system and that is it.” But there is concern that the BoE is shying away from holding the same open and public debate about difficult economic issues it did when it first become independent, possibly undermining public confidence that its independent officials will address tough choices in ways politicians would avoid.When inflation is heading towards double digits, Chadha said, “the MPC is far too quiet” about airing the big issues in public. Balls agreed that “over time, the [monetary policy] debate has become more muted” and that it would benefit the public to see the differences between experts aired in public. But as the independent central bank hits its 25-year anniversary, there are almost no calls for government to take back control and few think politicians would risk removing independence. “You can never take anything for granted,” said Carney. “But I think the structure of the MPC — enshrined in legislation, with explicit processes and personal accountability — greatly reduces that risk”. More

TOKYO (Reuters) – Core consumer prices in Tokyo, considered a leading indicator of Japanese price trends, rose 1.9% in April from a year earlier, marking the fastest annual pace in seven years, government data showed on Friday.The increase in inflation, driven mostly by food costs and the dissipating effect of past cellphone fee cuts, underscores a common view among economists that Japan will see price rises accelerate to the central bank’s 2% target in coming months.”The nationwide (core) inflation may rise above 2% in April-June…as the picture has been the same in recent months – food price hikes have been widening,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.”Meanwhile, it may not keep accelerating further as the pace of the energy price inflation is slowing.”The rise in the Tokyo core consumer price index (CPI) was faster than a median market forecast for a 1.8% gain and followed a 0.8% increase for March. The index excludes fresh food, which is a volatile factor, but includes energy items.That marked the fastest gain since March 2015, when the index rose 2.2%.In the overall reading, which includes fresh food costs, Tokyo CPI increased 2.5% in April from a year before, the fastest growth since October 2014.The fading effect of cellphone fee cuts last year pushed up the overall CPI by 0.80 points, while non-fresh food prices drove it up by 0.17 points, the data showed.To-go sushi packages, hamburgers and breads saw the biggest price hikes among food items in April, according to a government official.Energy prices in Tokyo rose 24.6% year-on-year in April, slower than in March, thanks to the government’s fuel subsidy programs to lower gasoline and other energy costs.The so-called core-core CPI in Tokyo excluding food and energy items rose 0.8% in April, posting the first increase since March 2021.The Bank of Japan (BOJ) last week raised its forecast for this year’s inflation rate but kept its ultra-loose monetary policy unchanged, stressing its resolve to maintain massive stimulus until inflationary pressures were accompanied by wage rises and stronger demand.Unlike in the United States, Japan’s underlying inflation would not last when the rise in energy costs slows without broad-based price and wage hikes, said Shinkin’s Tsunoda.”Such a scenario would exactly be the BOJ’s current projection, where the bank would never dare to tweak its policies,” he said. More

(Reuters) – Australia’s Macquarie on Friday warned of significantly lower income from its commodities trading arm and forecast transaction activity at its capital business to ease from record levels in the near term, sending its shares almost 6% lower.The company also said it expects its short-term projection to be affected by geopolitics, surging inflation, and rising interest rates.”We continue to maintain a cautious stance, with a conservative approach to capital, funding, and liquidity that positions us well to respond to the current environment,” Chief Executive Officer Shemara Wikramanayake said.Shares of the company were down 5.6% at A$191.34 by 1207 GMT, while the broader market slipped 2%.Macquarie’s dim outlook came even as volatility in the commodities market, caused by the Russia-Ukraine war, and higher fees and income from advising on deals helped the financial conglomerate beat annual profit estimates.Its commodities and global markets (CGM) arm was boosted by a Ukraine crisis-led volatile rally in oil and natural gas prices, while its Macquarie Capital unit benefited from advising on some of the biggest deals in Australia, including the $17 billion buyout of Sydney Airport and Santos’ $6 billion purchase of rival Oil Search (OTC:OISHY).Macquarie, the world’s top infrastructure investor, had said earlier this year that it also profited from significant asset sales in infrastructure and other sectors.Income from its CGM business jumped 50% to A$3.91 billion ($2.78 billion) in the year to March. Earnings at Macquarie Capital more than tripled to A$2.40 billion.That helped the company’s attributable profit surge 56% to A$4.71 billion and top a Visible Alpha consensus of A$4.45 billion.It declared a final dividend of A$3.50 per share, up from A$3.35 per share a year earlier.($1 = 1.4049 Australian dollars) More

(Reuters) -Air Lease Corp on Thursday pointed to strong demand for the industry’s most popular jet models as travel recovers from the pandemic but warned of potential risks to jet production from stretched global supply chains. The Los Angeles-based leasing giant issued the remarks after reporting a quarterly loss driven by an $800 million write-off of jets stranded in sanctions-hit Russia.Global aircraft leasing companies have been scrambling to repossess more than 400 jets worth almost $10 billion from Russian airlines, which have mostly been unresponsive to demands for surrendering the jets.”We are vigorously pursuing our insurance coverage and believe we have strong and valid claims,” Air Lease (NYSE:AL) Chief Executive John Plueger told analysts after posting results. Air Lease Chairman Steven Udvar-Hazy added that future aircraft destined for customers in Russia have been placed with airlines in the Americas and Europe, at similar or in some cases higher lease rates.Air Lease said air travel demand was driving the need for both new and young used aircraft, supporting higher lease rates and boosting the value of jets in its fleet. But they said rising demand for medium-haul jets post-pandemic coupled with industrial and certification risks at top planemakers Boeing (NYSE:BA) and Airbus raises the potential for a jet shortage.”We believe this is a likely outcome that will manifest in 2023 and beyond,” Plueger said. Plueger noted Boeing was fighting problems across its jet portfolio, including frozen 787 deliveries and certification delays on Boeing’s 777X mini-jumbo and 737 MAX 10. The industry is also facing shortages of parts, materials and labor and uncertainties exacerbated by the war in Ukraine.”Any one of these challenges alone would prove burdensome, but to have all at once is clearly taxing for the organization,” Plueger said. Plueger’s comments came hours after Domhnal Slattery, the head of Irish lessor Avolon, told a conference Boeing has “lost its way” and might need new leadership.Both Airbus and Boeing typically sell planes to leasing companies to stay afloat when economic concerns deter airlines from purchasing. Hazy said that, over the next 12 to 18 months, Boeing could offer at a discount newly built aircraft whose delivery has been put in jeopardy by canceled orders or certification setbacks. “So there could be pop-up opportunities for brand-new aircraft with airlines that we already have a good relationship with,” Hazy said. Air Lease reported net loss of $479.4 million, or $4.21 per share, in the three months ended March 31, compared to a profit of $80.2 million, or 70 cents per share, a year earlier.Excluding its jet write-off, Air Lease said its adjusted net earnings before income taxes rose by 72% to $201 million from the year-ago period. Revenue rose 25.7% to $596.7 million in the quarter. More

WASHINGTON/SEATTLE (Reuters) -Boeing Co said on Thursday it will move its headquarters from Chicago to Arlington, Virginia, as the crisis-plagued U.S. planemaker works to repair relationships with customers, federal regulators and lawmakers. Boeing (NYSE:BA) also plans to develop a research and technology hub in the Arlington area, home to the Pentagon and across the Potomac River from the U.S. capital.Senator Mark Warner of Virginia told Reuters in an interview the headquarters move “is great for bragging rights — what maybe a long-term bigger boost to (Virginia) may be the research and development center.”Last October, Reuters reported that sources close to the company said cost cuts and a more hands-on corporate culture had raised questions about Boeing’s future in Chicago, and in turn the broad direction Boeing intends to take as it tries to regain its stride.”The region makes strategic sense for our global headquarters given its proximity to our customers and stakeholders, and its access to world-class engineering and technical talent,” Boeing President and Chief Executive Officer Dave Calhoun said. Boeing said it will maintain a significant presence at its Chicago location and surrounding region. Mayor Lori Lightfoot said Chicago has “a robust pipeline of major corporate relocations and expansions, and we expect more announcements in the coming months.”Boeing has been working to repair its relationship with the U.S. Federal Aviation Administration (FAA) and lawmakers. Prior CEO Dennis Muilenburg was fired in 2019 after clashing with the FAA over its review of the 737 MAX following two fatal crashes that killed 346 people.Boeing, a key supplier to the U.S. Defense Department, last week unveiled more than $1 billion in charges on its Air Force One and T-7A Red Hawk trainer jet programs.Boeing already has an Arlington office that opened in 2014 and has significant unused space, blocks from Amazon.com Inc (NASDAQ:AMZN)’s HQ2 building that is under construction.Boeing shares closed down 4.1% as U.S. stocks broadly fell sharply.The Chicago headquarters – a 36-floor, $200 million riverfront skyscraper – has also been at the crossroads of a cost-cutting campaign for Boeing which has shed real estate, including its commercial airplane headquarters in Seattle. Boeing moved its headquarters to Chicago in 2001, leaving its Seattle home after 85 years following its 1997 merger with St. Louis-based rival McDonnell Douglas. That move angered rank-and-file mechanics and engineers. Boeing was seeking a post-merger headquarters in a neutral location separate from those existing divisional power centers. Chicago, Cook County and Illinois awarded Boeing more than $60 million in tax and other incentives over 20 years to relocate. Those credits have expired, though Boeing was set to receive 2021 funds this year. House of Representatives Transportation Committee Chair Peter DeFazio blasted Boeing’s decision to move to Arlington.”Moving their headquarters to Chicago and away from their roots in the Pacific Northwest was a tragic mistake,” DeFazio said. “Moving their headquarters again, this time to be closer to the federal regulators and policymakers in Washington, D.C. is another step in the wrong direction. Boeing’s problem isn’t a lack of access to government, but rather its ongoing production problems and the failures of management and the board that led to the fatal crashes of the 737 MAX.”Some critics viewed the Chicago move as indicating that Boeing prized near-term profits over long-term engineering dominance. After the two fatal 737 MAX crashes, Boeing’s imperative became prowess and repairing relationships with customers and regulators.Calhoun has made repeated trips to its 787 Dreamliner factory in South Carolina to deal with production-related defects and certification delays that have hobbled the program.Calhoun is also working to win FAA certification by year end of the largest model of the 737 MAX. If not, he hopes Congress will grant an extension for the MAX 10 or else the plane would need to meet a safety standard on cockpit alerts.The deadline for changes was mandated by Congress in late 2020 as part of regulatory reforms at the FAA following the fatal crashes. More