TPT November 2016

G LOBA L MARKE T P L AC E

“You’re seeing finally that builders are responding with more supply, and that’s been one of the big problems in the current cycle.” › The median sales price of a new house in the US was $294,600 in July, the Commerce report showed. The average rate on a 30-year fixed mortgage was 3.43 per cent in the week ended 18 August, close to the record-low 3.31 per cent reached in 2012, according to figures from Freddie Mac (the federal home loan mortgage corporation) dating to 1971. Hard times have this good effect at least: they keep bad drivers out from behind the wheel “Who says recessions are all bad? About 5,000 fewer people die every year in auto accidents [in the US] for each one percentage point increase in unemployment, because downturns keep dangerous drivers off the road.” The question posed by Peter Coy, economics editor of Bloomberg Businessweek , has respectable support. In a forthcoming study in the Journal of Risk and Uncertainty , researchers claim to have documented “an instance of a natural economic force [ie unemployment] that impels riskier drivers to drive less while not discouraging safer drivers.” Mr Coy noted that previous research had shown that people generally drive less during economic contractions, which naturally contributes to a reduction in fatalities. The innovation by Clifford Winston, a senior fellow at Brookings Institution, a Washington-based think tank, and Vikram Maheshri, an economist at the University of Houston, was to show that the biggest decline is in driving by the worst drivers. (“When Unemployment Falls, Thousands of Americans Die,” 25 August) Those who took to the road less often as unemployment rose included drivers who nevertheless had accidents during the course of the study. It also included drivers who have older cars, who are over the age of 60, and those living by themselves or with only one other person (who tend to have higher accident rates than family heads). Professors Winston and Maheshri do not present strong evidence as to why these particular groups did less driving. They do theorise that people with lower incomes might be more likely to lose their jobs and thus not need to commute to work. These drivers might also be likelier to have older cars and to live alone. According to Mr Winston, though, this cannot be the whole story since commuting accounts for only about 20 per cent of time behind the wheel. The research, which was supported by the AAA Foundation for Traffic Safety, found that auto fatalities in Ohio were 14 per cent lower when the jobless rate was one percentage point higher. With reference to a nationwide auto fatality toll of around 33,000 a year, the study arrived at a figure of roughly 5,000 saved lives. “In all fairness, this is by no means definitive,” Dr Winston acknowledged in the Bloomberg interview. “This is clearly a first cut.”

technology whereby the machines automatically detect and avoid buildings and other aircraft; and whether a single operator can safely command multiple drones at once. As first described in December 2013 by Amazon’s chief executive, Jeff Bezos, the plan by the e-commerce company to use drone delivery will rely on those functions. Mr Bezos has since pointed to regulation as the biggest obstacle to realising his vision, and Seattle-based Amazon has moved much of its drone research and development to Britain, Canada and the Netherlands. But the company views its partnership with Britain as its most important. The Civil Aviation Authority – the British equivalent of the FAA – has said it may also enter into similar partnerships with other commercial drone makers. The US economy With the American consumer ‘in decent shape’ in an improved labour market, sales of new homes are soaring Averaging roughly 3 to 5 per cent of gross domestic product (GDP), residential housing construction makes an important contribution to the US economy. If spending on related services (eg rents and utilities paid by lessors) is considered, that contribution is much higher, averaging roughly 12 to 13 per cent of GDP. By either calculation, a steep rise in sales of new homes is very good news, and that is precisely what the Commerce Department delivered on 23 August in Washington. According to the Commerce data, purchases of new homes in the US unexpectedly jumped in July to the highest level in almost nine years, led by soaring demand in the nation’s south and adding to signs of persistent housing-market strength. Sales increased 12.4 per cent to a 654,000 annualised pace, the fastest since October 2007. As noted by Michelle Jamrisko of Bloomberg News , that exceeded the most optimistic forecast in a Bloomberg survey. (The median forecast of 72 economists called for the pace of sales to decelerate to 580,000. Estimates ranged from 540,000 to 610,000.) Purchases in the south were the strongest since before the start of the last recession. (“US New-Home Sales Unexpectedly Surge to Almost Nine-Year High,” 23 August) To Ms Jamrisko, that suggests that employment gains and historically low borrowing costs are providing firm support for housing demand, helping to reduce inventory and probably keeping new construction elevated. The Commerce report showed an increase in the percentage of homes sold for less than $300,000, indicating builders are turning their sights to entry-level buyers. The increase “makes perfect sense when interest rates are low, credit continues to ease, and the consumer is in decent shape given the jobs market,” Brett Ryan, US economist at Deutsche Bank Securities Inc in New York, told Bloomberg .

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