US ECONOMY & POLITICS

U.S. New-Home Sales Declined in February for a Second Month – Bloomberg, 3/23/2022

• Sales of new U.S. homes fell in February for a second month, suggesting high prices and rising mortgage rates may be keeping prospective buyers on the sidelines.
• Purchases of new single-family homes decreased 2% to a 772,000 annualized pace following a downwardly revised 788,000 in January, government data showed Wednesday.
• The number of homes sold during the month and awaiting the start of construction — a measure of backlogs — rose from January to 209,000, Wednesday’s report showed.
• There were 407,000 new homes for sale as of the end of February, the most since August 2008, though roughly 91% were either under construction or not yet started.
• At the current sales pace, it would take 6.3 months to exhaust the supply of new homes, compared with 4.5 months one year ago.
• The new-home sales report, produced by the Census Bureau and the Department of Housing and Urban Development, showed the median sales price of a new home jumped 10.7% in February from a year earlier, to $400,600.

Fed’s Mester Says Some 50 Basis Point Rate Hikes Needed in 2022 – Bloomberg, 3/23/2022

• Federal Reserve Bank of Cleveland President Loretta Mester says she supports front-loading interest rate increases, including some 50 basis-point moves this year, to curb the hottest inflation in four decades.
• “I think we’re going to need to do some 50 basis point moves,” Mester said on a call with reporters Wednesday. “I don’t want to presuppose every meeting from here to July, but I do think we need to be more aggressive earlier rather than later.”
• During a separate event Tuesday, Mester said she supports raising the federal funds rate to 2.5% by the end of 2022, with further increases next year.
• She also said that a 50 basis point hike at some meetings this year shouldn’t be off the table.
• Mester’s comments come a week after Fed officials raised rates for the first time since 2018 and projected six more increases this year to 1.9%, rising to 2.8% by the end of 2023.
• Several of her colleagues including San Francisco Fed President Mary Daly and St. Louis Fed President James Bullard have also come out in favor of more restrictive policy in order to cool price pressures.

U.S., U.K. Strike Trade Deal to End Tariffs on British Steel and American Whiskey – Wall Street Journal, 3/23/2022

• The U.S. and U.K. struck a trade accord Tuesday that will remove U.S. tariffs on British steel and aluminum, while the U.K. will lift levies on American whiskey, motorcycles and tobacco.
• Biden administration officials said the agreement with the U.K. will allow the U.K to ship “historically-based sustainable volumes” of steel and aluminum products to the U.S. without levies imposed under the former Trump administration.
• In exchange, the U.K. will lift retaliatory tariffs on more than $500 million worth of U.S. exports to the U.K., including distilled spirits, farm products and consumer goods.
• The deal also requires any U.K. steel company owned by a Chinese entity to audit their financial records to assess possible influence from China, and share the results with the U.S., according to a statement from Commerce Secretary Gina Raimondo and U.S. Trade Representative Katherine Tai.
• Tuesday’s agreement follows similar deals the Biden administration signed with the European Union and Japan in recent months as part of its effort to mend trade ties with friendly nations strained during former President Donald Trump’s trade war.

March U.S. auto sales to tumble on rising inflation, Ukraine crisis- data – Reuters, 3/23/2022

• U.S. auto retail sales could decline in March as rising inflation hinders spending by customers already limited by slim inventories due to pandemic-led supply shortages, and now the Ukraine crisis, consultants J.D. Power and LMC Automotive said.
• “This year, with fewer than 900,000 units in inventory, it will be impossible for the sale pace to even approach last year’s level,” said Thomas King, president of the data and analytics division at J.D. Powers.
• U.S. retail sales of new vehicles could fall 27.8% to 1,044,500 units in March from a year earlier, according to a report released by the consultants on Wednesday.
• Total new-vehicle U.S. sales for the month, including retail and non-retail transactions, are expected to reach 1,188,300 units, a 28.9% decrease from last year, the report showed.
• With supply still lagging behind demand, the U.S. average of new-vehicle retail transaction price in March is expected to rise 17.4% to $43,737, dropping from the previous high in December 2021 at $45,283.
• Separately, research firm Cox Automotive said earlier this month that there is no indication that inventories will notably improve in March, and that the seasonally adjusted annual rate will drop well below January and February.

EUROPE & WORLD

European Gas Soars as Putin Says Hostile States to Pay in Rubles – Bloomberg, 3/23/2022

• European natural gas surged more than 20% after President Vladimir Putin said Russia will start demanding payments in rubles from buyers it deems “unfriendly.”
• Putin ordered the nations’ central bank to develop a mechanism to make ruble payments within a week at a meeting with his government.
• Russia earlier named the U.S., U.K. and members of the European Union unfriendly nations.
• Benchmark European  gas prices gained as much as 21% to 119 euros per megawatt-hour, the highest for a most-active contract in a week.
• The news comes just as the U.S. and partner nations are expected to announce a new action aimed at “enhancing European energy security and reducing Europe’s dependence on Russian gas” on Thursday.
• Still, Putin said Russia will continue to deliver supplies.

U.K. Sees Inflation Hitting Highest Since Falklands War in 1982 – Bloomberg, 3/23/2022

• U.K. inflation is set to hit a 40 year high of 8.7% at the end of the year as higher energy and commodity costs feed through to consumer prices, the government’s fiscal watchdog forecast.
• The projection is above the Bank of England’s current outlook for about 8% and would be the highest since 1982, when the Falklands War between Britain and Argentina ended and the country was still grappling with the aftermath of oil shocks in the 1970s.
• For 2022 as whole, the Office for Budget Responsibility now expects inflation to average 7.4%, almost double the 4% it forecast in October.
• High inflation will outpace wage growth and cause a 2.2% decline in real living standards in the 2022-23 fiscal year, which is “their largest financial year fall on record,” the OBR said.
• Living standards will not recover their pre-pandemic level until 2024-25, according to the forecast.

Biden to Sanction Hundreds of Russian Lawmakers, U.S. Officials Say – Wall Street Journal, 3/23/2022

• The Biden administration is preparing sanctions on most members of Russia’s State Duma, the lower house of parliament, as part of an effort to punish Moscow over its invasion of Ukraine.
• President Biden intends to announce the sanctions on more than 300 members of the Russian State Duma as soon as Thursday during his trip to Europe, where he will meet with allies from the North Atlantic Treaty Organization to formulate their next steps, according to U.S. officials and internal documents viewed by The Wall Street Journal.
• The sanctions will be announced in coordination with the European Union and members of the Group of Seven industrialized nations, U.S. officials said.

Russian Stock Market to Partially Reopen on Thursday – Wall Street Journal, 3/23/2022

• Russia’s stock market is set to have a partial reopening Thursday, nearly a month after it shut down following the invasion of Ukraine.
• The challenge for Moscow is that the resumption of trading could simply send Russian stocks back into free fall. On Feb. 24, the day when President Vladimir Putin began the assault on Ukraine, the main Russian stock index tumbled 33%.
• While the index regained a fraction of those losses on Feb. 25—its last day of trading—that was before Western sanctions hammered the ruble and sent the country into an economic crisis.
• The Russian stock market could ultimately look very different than it did before, with a plan under discussion to split it into separate markets for foreign and local investors, according to a person familiar with the matter.

Tencent’s Revenue Grows at Slowest Pace in Nearly Two Decades – Wall Street Journal, 3/23/2022

• Tencent Holdings, the Chinese social-media and videogame behemoth, said its revenue in the fourth quarter slowed to its weakest pace in nearly two decades, as a yearlong regulatory crackdown on China’s technology sector and weakening consumption weighed on sales.
• The world’s largest videogame developer said Wednesday revenue for the October-to-December period rose 7.9% to 144.19 billion yuan, equivalent to $22.65 billion.
• That missed expectations of analysts polled by FactSet and marked the company’s worst top-line growth since it went public in 2004.
• Tencent, which gets a large part of its sales from videogames, said growth in its domestic games revenue weakened to 1%, while revenue from another key business segment, online advertising, fell 13%, as China’s wide-ranging regulatory actions last year hurt demand from advertisers across industries, particularly those in the after-school-tutoring and internet-services sectors.
• Revenue from Tencent’s fintech and business services, which include its cloud business, grew 25% to 48 billion yuan.
• Tencent said it would be shifting the focus of its cloud operations from “revenue growth at all costs” to improving its margins.
• Still, net profit jumped 60% to 94.96 billion yuan, mainly driven by gains of about 86 billion yuan from Tencent’s recent sale of its stakes in investee companies including Chinese e-commerce firm JD.com Inc.

China’s Geely Automobile flags costs, chip shortage after 12% drop in 2021 profit – Reuters, 3/23/2022

• Geely Automobile expects rising raw material prices and global chip shortages to pressure its profitability and sales this year, the Chinese company said on Wednesday, after reporting a 12% fall in 2021 profit.
• The world’s highest-profile Chinese automaker, thanks to its investments in Volvo Cars and Daimler, reported a 2021 profit of 4.85 billion yuan ($761.64 million), compared with 5.53 billion yuan in the previous year.
• Revenue rose 10% to 101.6 billion yuan.
• In an earnings call on Wednesday, Geely Auto Group CEO Jerry Gan said the company’s reliance on custom chips and globalized supply chains meant the semiconductor shortage had a “quite large effect” on production, an issue Geely would tackle via localization and in-house chip development, among other measures.
• Geely Automobile is targeting to sell 24% more vehicles this year, at 1.65 million vehicles, saying it would look to further expand its export sales to new markets in Southeast Asia, the Middle East and western Europe.

Factmonster – TODAY in HISTORY

• Lewis and Clark began their return journey east. (1806)
• Benito Mussolini founded his own party in Italy, the Fasci di Combattimento. (1919)
• U.S. President Ronald Reagan proposed a space-based missile defense system called the Strategic Defense Initiative or “Star Wars.” (1983)
• Russia’s Mir space station ended its 15-year orbit of the Earth, splashing down in the South Pacific. (2001)
• President Barack Obama signed a health-care overhaul bill, called the Patient Protection and Affordable Care Act, into law. (2010)