USA Outlook, September 26 to 30, 2022

Weekly newsletter September 26 to September 30

September 26, 2022

September 27, 2022

Consumers Grew More Optimistic in September Consumer confidence continued its upward swing in September despite worries about inflation and higher interest rates, according to the preliminary estimate released Tuesday by the Conference Board. The business organization’s consumer confidence index rose to 108 from its prior reading of 103.6.

Photo: CNN News

British pound plummets to record low against the dollar The British pound crashed to a record low against the US dollar on Monday on growing fears about the stability of UK government finances. The plunge of nearly 5% to just above $1.03 came during trading in Asia and Australia on Monday and extended a 3.6% dive from Friday, spurring predictions the pound could plunge to parity with the US dollar. It recovered slightly as European traders came online, rising back to $1.07.

The present situation index – a measure of how people feel about the current state of the economy – rose to 149.6 from 145.3. The expectations index – a gauge of how consumers see the economy behaving in the future – rose to 80.3 from 75.8. “Consumer confidence improved in September for the second consecutive month supported in particular by jobs, wages, and declining gas prices,” said Lynn Franco, senior director of economic indicators at The Conference Board.

Recent economic data has continued to show a slowing economy, buffeted by aggressive moves from the Federal Reserve to hike interest rates to arrest inflation. But other reports have shown the American consumer, who accounts for about twothirds of all economic activity, remains resilient.

The currency slump follows British Chancellor of the Exchequer Kwasi Kwarteng’s announcement on Friday that the United Kingdom would implement the biggest tax cuts in 50 years at the same time as boosting government borrowing and spending in the face of high inflation.

“Serious questions are already being asked about the economic competency of the new government,” said Craig Erlam, senior market analyst at Oanda. “So much so that markets are factoring in a strong chance of a substantial emergency rate hike from the Bank of England in order to shore up the currency and confidence in the markets.”

Photo: US News Source: https://edition.cnn.com/2022/09/25/business/british-pound-drops-record-low-intlhnk/index.html

Source: https://www.usnews.com/news/economy/articles/2022-09-27/consumers-grewmore-optimistic-in-september

September 28, 2022

September 29, 2022

Pending Home Sales Drop More Than Forecast in August, down 24% From a Year Ago Pending home sales fell 2% in August as the housing market continued its slowdown amid rising mortgage rates and inflation, the National Association of Realtors reported on Wednesday. The drop was more than the forecast 1.5% decline and brings sales down 24.2% from a year ago.

Photo: The Associated Press

Stocks Rise on Wall Street, U.K. Bond Yields Fall Back Bond markets around the world are relaxing after London’s central bank pledged to do whatever’s needed to restore calm in its financial markets. The move comes amid heightened concerns about the potential for economies worldwide slipping into a recession as the hottest inflation in decades burns businesses and consumers.

Stocks in the U.S. gained ground after wavering earlier in trading. Major indexes remain volatile amid recession risks and a long list of other worries. The S&P 500 rose 1.1% as of 11:37 a.m. Eastern. The Dow Jones Industrial Average rose 293 points, or 1%, to 29,428 and the Nasdaq rose 0.9%.

“The direction of mortgage rates – upward or downward – is the prime mover for home buying, and decade-high rates have deeply cut into contract signings,” said NAR Chief Economist Lawrence Yun. “If mortgage rates moderate and the economy continues adding jobs, then home buying should also stabilize.” The housing sector is undergoing a correction from its red-hot performance of 2021. Mortgage rates that have doubled to 6% and higher have made homes less affordable and while prices have begun increasing at a slower pace, they are still higher than many would-be buyers can afford.

New home sales unexpectedly rose in August, though that may have been buyers rushing to take advantage of homes that became available and builder discounts.

But that is not expected to last if mortgage rates remain elevated. “As a result of the current interest rate environment and weaker economic activity, NAR expects existing-home sales to decline 15.2% in 2022, to 5.19 million units, while new home sales are projected to fall by 20.9%,” the NAR’s Yun said.

The yield on the 10-year U.S. Treasury fell sharply to 3.78% from 3.95% late Tuesday, part of a global retreat in yields after the Bank of England said it would buy U.K. government bonds following a recent sell-off. U.K. bonds and the British pound had been plunging on worries that a U.K. government plan to cut taxes would lead to worse inflation.

U.S. markets have been volatile since the Fed raised interest rates last week and ahead of the upcoming round of corporate earnings as the quarter nears its close.

Source: https://www.usnews.com/news/business/articles/2022-09-28/asian-shares-sharplylower-after-wobbly-day-on-wall-street

Photo: US News Source: https://www.usnews.com/news/economy/articles/2022-09-28/pending-homesales-drop-more-than-forecast-in-august-down-24-from-a-year-ago

September 29, 2022

Photo: CBS News

Ian's economic toll in Florida could reach $60 billion to $70 billion Hurricane Ian will have a potentially devastating impact on the state's major industries, with the economic toll from the storm expected to reach tens of billions of dollars. The state's tourism and hospitality, citrus production. and phosphate mining businesses are likely to face weeks-long disruptions to their operations, according to experts.

The storm, which made landfall in Florida Wednesday as a Category 4 storm, is projected to deliver an $8 billion blow to the tourism sector alone, reflecting about 10% of the state's total tourism revenue. That figure reflects temporary theme park and hotel closures as well as reduced tourism. For example, ahead of the storm Disney announced its theme parks would close for at least two days and some of its hotels would temporarily shut down. "With respect to specific industries in Florida, you think of tourism and hospitality and that's likely to take two levels of hits," Chuck Watson, founder of Enki Research, which uses computer modeling to calculate the impact of natural disasters, told CBS MoneyWatch. "There is the physical damage and the disruption from people cancelling travel plans."

Ian is expected to regain strength and become a hurricane again on Thursday evening. The storm has left Florida and is forecast to hit South Carolina, where a hurricane warning was issued for the entire coast.

"Certainly, there will be a flurry of activity to repair and rebuild," he added. "But in the meantime, those affected businesses aren't producing anything."

Source: https://www.cbsnews.com/news/hurricane-ian-tropical-storm-citrus-miningtourism-economic-impact/