US ECONOMY & POLITICS

U.S. Annual Home Prices Gain a Record 18% in July – Bloomberg, 9/7/2021

• U.S. home prices increased 18% in July compared to a year earlier, according to a CoreLogic report released Tuesday.
• The jump is the largest 12-month gain in the index since the series began 45 years ago.
• On a month-over-month basis, home prices increased by 1.8% in July from June.
• The rate of growth is expected to slow considerably, according the CoreLogic projections.
• By July 2022, annual home prices are projected to decrease to a 2.7% pace as ongoing affordability challenges deter some potential buyers.

Goldman Cuts U.S. Growth Forecast as Consumer Sees ‘Harder Path’ – Bloomberg, 9/7/2021

• Goldman Sachs economists revised down their forecast for growth in the U.S. economy this year, pointing to a “harder path” ahead for the American consumer than previously anticipated.
• Overall expansion in 2021 is now seen at 5.7%, economist Ronnie Walker wrote in a report to clients on Monday.
• That compares with an expectation of 6% published at the end of August.
• Walker said the weaker growth will follow through into more of a pickup in 2022.
• Goldman raised its forecast for that year to 4.6%, up from 4.5% previously.
• The bank also lifted its projection for the unemployment rate to 4.2% at end of 2021 from a prior estimate of 4.1%.

Progressives’ Tax-the-Rich Dreams Fade as Democrats Struggle for Votes – Wall Street Journal, 9/7/2021

• Progressive Democrats, who had hoped unified party control of the government could spur transformative tax increases on multinational companies and wealthy individuals, look like they will have to settle for a more modest outcome.
• Democrats are weighing how far to go, particularly on taxing multinational corporations and capital gains. They had planned to use higher taxes, tax enforcement and other policy changes to pay for their $3.5 trillion, 10-year package.
• The corporate tax rate is likely to jump to 25% from 21%, fitting the preferences of Sens. Joe Manchin (D., W.Va.) and Mark Warner (D., Va.). That is below the 28% Mr. Biden proposed and the 35% that existed before 2017.
• Democrats also plan to return to the top individual tax rate to 39.6% from 37%. The Biden plan would start that top bracket at $452,700 in taxable income for individuals and $509,300 for married couples.
• The tax provision generating the most Democratic angst is capital gains. To progressives, it is their clearest chance to push back against wealth inequality they have spent years decrying.
• Mr. Biden’s plan would treat death like a sale and raise the top capital-gains rate to 43.4% from 23.8%. That change would affect billionaires and others who hold appreciated stock and can avoid income taxes by borrowing against their assets instead of selling.
• The Biden proposal offers a $1 million exemption to all and would let farm and business owners defer taxes as long as those entities remain owned and operated by the family.
• A Senate Finance Committee options list suggests the Biden plan but with a $5 million per-person exemption instead of $1 million along with a potential $25 million exemption for family farms.

U.S. Congress stuck between a rock and a hard place on raising debt limit – Reuters, 9/7/2021

• Democrats and Republicans will start what could become a monumental game of chicken this month over raising the limit on U.S. government borrowing, as Congress attempts to avert an historic debt default.
• Leaders of the Democratic-led Senate and House of Representatives are expected to force votes to lift the $28.4 trillion debt limit in late September.
• The limit was technically breached on July 31 but is being circumvented by Treasury Department “extraordinary” steps.
• Democrats control 50 votes in the Senate, 10 shy of the 60 needed to advance most legislation, including a debt limit increase, thus requiring at least some Republican buy-in.
• Adding to the pressure, Republicans aim to sit on the sidelines and let Democrats either take the heat for a default that could leave financial markets in chaos, among other things, or take full responsibility for raising what they call an out-of-control federal debt.

EUROPE & WORLD

Euro zone growth revised up as consumer spending rebounds sharply – Reuters, 9/7/2021

• The euro zone economy grew by more than initially forecast in the second quarter of the year, revised data from the EU’s statistics office showed, with consumer rebounding sharply after two quarters of decline during pandemic lockdowns.
• Eurostat said on Tuesday that gross domestic product in the 19 countries sharing the euro increased by 2.2% quarter-on-quarter for a 14.3% year-on-year rise. These compared with earlier estimates of respectively 2.0% and 13.6%.
• However, GDP volumes in the single currency bloc were still 2.5% below their pre-COVID peaks. The United States is already 0.8% higher than its end 2019 level.
• Eurostat said household consumption in the April-June period added 1.9 percentage points to the overall quarterly figure, with government spending and investment adding 0.3 and 0.2 points respectively.
• A draw-down of inventories pulled 0.2 percentage points off the overall figure, while the net impact of trade was zero.
• Eurostat said also employment rose 0.7% quarter-on-quarter in the second quarter and by 1.8% year-on-year. The former figure was above the previously reported 0.5% increase, the latter was the same as that released in August.

China’s Exports Strengthen, Despite Covid-19 Disruptions – Wall Street Journal, 9/7/2021

• China’s exports unexpectedly expanded at a faster clip in August, shrugging off the impact of a global resurgence of the coronavirus pandemic, port congestion and supply bottlenecks.
• China’s outbound shipments rose 25.6% in August from a year earlier, higher than the 19.3% increase in July, the General Administration of Customs said Tuesday.
• Exports to the European Union, China’s No. 2 trading partner, jumped 29.4% in August from a year earlier, accelerating from July’s 17.2% rise, while shipments to the Association of Southeast Asian Nations and the U.S.—China’s No. 1 and No. 3 trading partners, respectively—rose by 16.6% and 15.5%.
• Meanwhile, official data released Tuesday pointed to a strong increase of imports in August. Imports jumped 33.1% from a year earlier, accelerating from July’s 28.1% growth and beating economists’ anticipation for a 25.7% increase.
• That put China’s trade surplus at $58.34 billion in August, higher than $56.6 billion in July.

Toyota to Spend $9 Billion on Electric-Car Battery Plants – Wall Street Journal, 9/7/2021

• Toyota Motor said it would spend $9 billion over the next decade to build factories for electric-car batteries as it gears up to sell two million electric cars annually by the end of the decade.
• The company declined to say how many battery factories would be built but said it planned 10 production lines by 2025 and eventually around 70. A single factory can contain several production lines.
• Toyota has said it wants about 80% of its cars to include some battery power by 2030. Most of those would be hybrids but it also intends to sell about two million pure electric vehicles annually by then, a figure that includes battery-powered cars and those powered by hydrogen fuel cells.
• The roughly $9 billion investment in production is part of a plan to spend around $13.5 billion overall on batteries, with the remainder going into research, Toyota said.

China’s Great Wall to launch electric car and hybrid SUV in Europe in 2022 – Reuters, 9/7/2021

• Great Wall Motor, will launch an electric compact car and a plug-in hybrid SUV in Europe in 2022, it said on Monday, joining a growing number of Chinese carmakers trying their luck on the continent with low or zero-emission vehicles.
• The company said at the IAA car show in Munich it will start taking orders for the Coffee 01 plug-in SUV for the German market at the end of 2021.
• Deliveries of the vehicle, which will have an electric range of 150 kms (93.2 miles) and will be marketed under Great Wall’s WEY brand, will start in the first half of 2022.
• The Chinese carmaker said it will announce other European markets besides Germany for the Coffee 01 soon. The company will also launch its first European “brand experience center” in Munich in early 2022.

BMW CEO expects chip supply to remain tight for another 6-12 months – Reuters, 9/7/2021

• BMW expects supply chains to remain tight well into 2022, Chief Executive Oliver Zipse said on Monday, squashing hopes that a painful shortage of crucial semiconductors will end soon.
• “I expect that the general tightness of the supply chains will continue in the next 6 to 12 months,” he said at the IAA Munich car show.
• Zipse, who like other car executives is battling lower production due to a lack of semiconductors, said he saw no issues in the long-term, adding that the automotive industry was an attractive client for chipmakers.

Volkswagen brand sticks to margin target despite chip crunch – Reuters, 9/7/2021

• Volkswagen’s namesake brand on Monday confirmed its margin target, the division’s chief executive said, shrugging off the impact from a shortage of automotive chips as well as higher raw materials prices.
• The Volkswagen brand expects an operating margin of 3-4% for 2021. “It stays that way,” Ralf Brandstaetter told Reuters at the IAA Munich car show, also confirming the 6% margin goal set for 2023.
• At group level, Volkswagen targets an operating margin of 6-7.5%.
• Brandstaetter, who also sits on Volkswagen AG’s management board, said, however, that Volkswagen was feeling the impact of rising costs for raw materials, adding this would be passed on to customers.

Factmonster – TODAY in HISTORY

• Brazil declared its independence from Portugal. (1822)
• The Boxer Rebellion in China officially ended with the signing of the Peking Protocol (Peace of Beijing). (1901)
• Nazi Germany began its initial blitz on London during World War II. (1940)