PRC’s growth slows as officials attempt to reassure investors

Photo by the Associated Press

The People’s Republic of China reported economic growth sank to a post-global crisis low as finance officials launched a media blitz Friday to shore up confidence in its sagging stock market.

Growth in the quarter that ended in September slipped to 6.5 percent over a year earlier from the previous quarter’s 6.7 percent, official data showed. It was the slowest rate since early 2009.

The world’s second-largest economy already was cooling before a tariff war between Beijing and President Donald Trump erupted.

Beijing tightened controls on lending last year to rein in a debt boom. That has weighed on housing sales and consumer spending. Car buyers are steering clear of dealerships.

Credit controls and trade tensions are “taking a bite out of economic momentum,” said Bill Adams of PNC Financial Services Group in a report.

The impact of President Trump’s penalty tariffs of up to 25 percent on PRC goods in a dispute over Beijing’s technology policy has contributed. With the rest of their $12 trillion-a-year economy slowing, the communist leadership has reversed course and ordered banks to lend.

“Downward pressure has increased,” a government spokesman, Mao Shengyong, said at a news conference.

Officials led by Communist China’s economic czar, Vice Premier Liu He, tried Friday to reassure investors about a stock market that has sagged 30 percent since January.

The decline is “creating good investment opportunities,” Liu said in comments carried by the official Xinhua News Agency and business newspapers and websites.

“China’s current economic fundamentals are good,” the central bank’s governor, Yi Gang, said on its website.

The benchmark Shanghai Composite Index ended the day up 2.6 percent.

The government also said insurers will be allowed to create products to help stabilize the market by reducing “liquidity risk.” That refers to fears lenders that accepted stock as collateral for loans might sell, flooding the market and driving a new price collapse.

Retail sales, factory output and investment in factories and equipment—bigger drivers of growth than exports—all weakened in the latest quarter.

The conflict with the District of Columbia has prompted PRC leaders to step up a marathon effort to encourage self-sustaining growth driven by domestic consumption and reduce reliance on exports and investment though the country has recently strengthened economic ties with Russia.

Beijing has cut tariffs, promised to lift curbs on foreign ownership of auto producers and taken other steps to rev up growth.

But leaders have refused to scrap plans such as “Made in China 2025,” which calls for state-led creation of PRC champions in robotics and other technologies.

The United States, Europe and other trading partners say those violate Beijing’s market-opening commitments. But PRC leaders see them as a path to prosperity and global influence.

Regulators have ordered banks to step up lending, especially to entrepreneurs who create most of the PRC’s new jobs and wealth. Forecasters say it will take time for results to show.

Government support is “starting to gain traction,” but more will be needed to stabilize growth, Julian Evans-Pritchard of Capital Economics said in a report.

Washington has raised tariffs on $250 billion of PRC goods and President Trump says he might extend penalties to almost all imports from the PRC. Beijing responded with its own tariff hikes on $110 billion of American imports. But it is running out of goods for retaliation due to their lopsided trade balance.

Forecasters say that if all the tariff hikes both sides have threatened are imposed, that could cut Communist China’s 2019 growth by up to 0.3 percentage points.

The Trump administration argues that the PRC has more to lose in a trade war—and will face pressure to reach a truce because it exports more than it buys from the United States and because its economy is decelerating while the U.S. economy looks strong.

But Claude Barfield, scholar at the conservative American Enterprise Institute, noted that the PRC’s growth rate “doesn’t seem to be anything close to a crisis.”

Exports to the United States rose 13 percent in September despite the tariff hikes, down slightly from August’s 13.4 percent, helping push the PRC’s politically volatile trade surplus with the United States to a record $34.1 billion.

Exporters of clothes and other lower-value goods say American orders began falling in April as trade tensions worsened. But makers of less price-sensitive exports such as factory equipment and medical technology are confident they can keep their market share.

Trade has shrunk as a share of the economy but still supports millions of jobs.

The government is promising to help struggling exporters.

“In general, the impact is limited,” a Commerce Ministry spokesman, Gao Feng, said Friday. “Governments at all levels will also take active measures to help enterprises and employees cope with possible difficulties.”

The Associated Press contributed to this report.

U.S. home sales fell in September to slowest pace in 3 years

U.S. home sales fell for the sixth straight month in September, a sign that housing has increasingly become a weak spot for the economy.

The National Association of Realtors said Friday that sales declined 3.4 percent last month, the biggest drop in 2 ½ years, to a seasonally adjusted annual rate of 5.15 million. That’s the lowest sales pace since November 2015.

Hurricane Florence dragged sales in North Carolina, but even excluding the storm’s effects, sales would have fallen more than 2 percent, the NAR said. After reaching the highest level in a decade last year, sales of existing homes have declined steadily in 2018 amid rapid price increases, higher mortgage rates and a tight supply of available houses.

Still, analysts are mostly optimistic about the broader economy. Most forecast growth will top 3 percent at an annual rate in the July-September quarter, after a robust expansion of 4.2 percent in the second quarter.

“Housing is no longer a tail wind for the economy, but the headwinds are blowing very gently,” said Michelle Meyer, an economist at Bank of America Merrill Lynch, before the report was released.

Housing will likely weaken further in the coming months. September’s weakness came before mortgage rates jumped further this month to their highest levels in seven years. Sales fell 4.1 percent in September from a year ago.

“Without a doubt there is a clear shift in the market,” said Lawrence Yun, chief economist at the National Association of Realtors.

One sign of the shift is that demand for existing homes is slowing. Home prices are rising at a slower rate and the supply of available houses, while low, is increasing. Buyer traffic has also declined, Yun said.

And with rents also stabilizing in many cities, many would-be buyers may not feel as much pressure to buy a new home.

“Renting itself may be seen as a better bargain as rising mortgage interest rates, still-rising home prices and sluggish wage growth dent the affordability advantage of a typical mortgage,” said Aaron Terrazas, senior economist at real estate data provider Zillow.

Sales have fallen by the most in the West, where most of the nation’s hottest real estate markets are located and where prices have soared for several years. Sales tumbled 12.2 percent in that region in the past year, compared with just 5.6 percent in the Northeast and 1.5 percent in the Midwest. They dropped just 0.5 percent in the South from a year earlier, despite a sharp decline in September due to Hurricane Florence.

The highest-priced homes are also reporting slower sales, a shift from earlier this year, when sales slowdowns were concentrated in mid-priced and cheaper homes. Homes priced at $1 million and higher saw sales drop 2 percent from a year ago.

Higher borrowing costs are making housing less affordable. The average rate on a 30-year fixed mortgage slipped this week but remained near a seven-year high of 4.85 percent. A year ago, it stood at 3.88 percent.

There are also signs that home owners are increasingly unwilling to sell as mortgage rates rise. That’s because many have rates below 4 percent, so selling a home and buying a new one would require them to accept a higher rate.

The Realtors surveyed consumers and found that 16 percent are unwilling to give up their mortgage rate and buy a new home. That’s up from a typical level of 10 percent.

From the Associated Press.

National industrial production rose a solid 0.4 percent in August

Photo from the Associated Press

U.S. industrial production rose by a healthy 0.4 percent in August, boosted by gains in the production of autos, oil and natural gas.

The Federal Reserve said Friday that industrial production, which includes output at factories, mines and utilities, has climbed 4.9 percent over the past 12 months. Industrial production appears on track for its strongest annual growth since 2010, when it jumped 5.5 percent as the economy began to recover from the Great Recession.

Factory production increased 0.2 percent last month, lifted by a 4 percent rise in the making of vehicles and parts. Automakers assembled vehicles at their strongest pace since April.

Still, factory production has slowed over the past two months as trade conflicts have created uncertainty for the sector. The Trump administration is seeking to revamp the North American Free Trade Agreement with Mexico and Canada, has imposed tariffs on imported steel and aluminum and has slapped tariffs on goods from China.

The recent slowdown in factory output might stem from an 8 percent increase since April in the value of the U.S. dollar against foreign currencies, said Michael Pearce, senior U.S. economist at Capital Economics, an economic research firm. A higher-valued dollar makes U.S. exports less affordable overseas.

“The more modest 0.2 percent gain in manufacturing output provides further evidence that the appreciation of the dollar over the past six months is now beginning to weigh more heavily on output in the factory sector,” Pearce said.

Mining output posted a 0.7 percent monthly gain in August. A sharp increase in the production of oil and natural gas has caused mining output to soar 14.1 percent over the past 12 months. Increased oil and natural gas production can support factories that make pipelines, machinery and other equipment.

Production at utilizes advanced 1.2 percent in August, powered by a surge in electricity usage during the hot month.

Other reports suggest that manufacturing is healthy, despite signs that its job growth is slowing. U.S. factories grew at a faster pace in August as American industry continues to show robust health.

The Institute for Supply Management said its manufacturing index jumped rose to 61.3 in August from 58.1 in July. Anything over 50 points toward expansion and economic growth. The manufacturing index has pointed toward growth for the past two years.

Still, job growth at U.S. factories has decelerated in recent months. Manufacturers added just 36,000 factory workers for the three months that ended in August, according to the Bureau of Labor Statistics. That’s down from three-month gains of as many as 90,000 earlier this year.

From the Associated Press.

For homebuyers, mortgages are safer but tougher to come by

Keri Weishaar lives in a spacious, four-bedroom house near Tampa, Florida, thanks to the easy financing that prevailed during last decade’s housing boom.

“It was basically nothing to get into this house,” said Weishaar, 48, who bought the house in the spring of 2003 after obtaining a no-money down, adjustable-rate mortgage.

Then again, Weishaar and her husband are fortunate to still have their home. That same mortgage eventually morphed into a financial albatross and, for a time, the house in the suburb of Tarpon Springs was on a countdown to foreclosure.

As home values plummeted after the housing bubble burst in 2007, many borrowers with exotic types of loans were stuck, unable to refinance as lenders began to tighten their lending criteria. That set the stage for cascading mortgage defaults that eventually took down Lehman Brothers, Wall Street’s fourth-biggest investment bank at the time, 10 years ago this week. Lehman and other financial institutions were big buyers of securities backed by some of these dicey mortgages.

Today, getting a mortgage is tougher—and less risky. For one thing, no-money down mortgages and their ilk, which enabled many borrowers to initially lower the costs of buying a home but often saddled borrowers with far higher balances or steep monthly payment increases, have vanished.

Banks also remain a bit gun-shy after racking up billions in losses stemming from mortgages gone bad. That means homebuyers, especially those with less-than-stellar credit, face more hurdles qualifying for a mortgage than they did in the housing boom years. But the loans are safer, more transparent and actually take into account whether a borrower can afford to keep up with payments.

“The banks have certainly loosened underwriting criteria for low-risk borrowers; they haven’t loosened underwriting criteria for low-credit score borrowers,” said Aaron Terrazas, senior economist at Zillow. “The types of lending that we saw leading up to that crash in 2008, for the most part, we’re not seeing nowadays.”

When interest rates began to plummet at the start of the 2000s, lenders rushed in to make nontraditional loans that could be sold for hefty profits to Wall Street banks, as well as government-sponsored mortgage buyers Freddie Mac and Fannie Mae.

These riskiest of these loans required little proof that the borrower could afford to pay them back and an initial period of low payments and interest rates. Some let borrowers defer interest payments. Ultimately, these loans overwhelmed many borrowers’ ability to keep up with payments.

That’s what happened with Weishaar’s mortgage. The loan was scheduled to adjust to a higher rate after three years, but she was able to refinance it with another adjustable-rate mortgage. The next time it reset, however, was late 2007, as the housing downturn accelerated. Her husband had lost his job and she was making less money. The couple’s loan jumped from a 6.2 percent interest rate to 11 percent, jacking up the monthly payment from $2,101 to $3,417.

The easy financing, which had enabled the couple to buy their $346,800 house, backfired.

“We bought probably about $120,000 more home than we should have,” Weishaar said.

After missing a few payments, the lender agreed to modify the loan. The interest rate dropped to 6.2 percent and the couple’s missed payments and fees were tacked onto their unpaid principal.

The Weishaars rode out the turbulent economy and housing market in the years after the financial crisis and were able to refinance again in late 2014 into a 3.5 percent, 20-year fixed-rate loan. Now their payment is around $1,500, without taxes and insurance.

“I only have 15 years left on my house now and I’m in a good place,” said Weishaar, now director of sales for an IT consulting company. “The next house I buy will be paid for in cash.”

The private market for mortgage-backed securities, which helped fuel so much easy lending during the housing boom, is now a sliver of what it was back then.

Mortgage-backed securities issued by private firms now represent about 4.5 percent of the market, according to data from Inside Mortgage Finance and the Urban Institute. In 2006, the peak of the housing boom, it was nearly 60 percent.

Government-sponsored enterprises such as Fannie Mae and Freddie Mac now account for about 95.5 percent of the market.

Legislation aimed at averting another financial crisis set out certain guidelines that lenders must follow if they want to make their home loans eligible to be guaranteed by the government. The biggest change is a rule requiring lenders to establish the borrower’s ability to repay the loan.

In the case of a five-year adjustable-rate mortgage, that means ensuring the borrower can afford to pay the loan should it reset to a higher interest rate.

The law, known as Dodd-Frank, also nixed the types of risky loans offered during the housing bubble, among other changes.

“For the average consumer, the biggest thing that has changed is it’s a lot clearer at the closing table what kind of loan you’re getting and what you can expect to pay over the life of the loan, and that’s a very good thing,” said Jesse Van Tol, CEO of the National Community Reinvestment Coalition, which advocates for fairness in housing, banking and business.

The guidelines may offer lenders a clear path on how to gauge qualified buyers, but in many cases banks have overlaid stricter qualifying requirements, like higher credit scores.

That’s one reason the average FICO score on home purchase loans has drifted about 21 points higher over the past decade, according to data from the Urban Institute. The trend is more pronounced in metropolitan areas with high home prices. Consider that in San Francisco, the average FICO score for borrowers is around 774. In the Riverside-San Bernardino metropolitan area east of Los Angeles, FICOs average 717.

The average FICO score in America was 700 last year. A score of 740-799 is considered “very good.”

“The pendulum has swung too far in the other direction,” Van Tol said. “When you look at a Fannie Mae or Freddie Mac-backed loan with an average credit score in the high 700s, homeownership at a 50-year low, and a lot of people boxed out of the mortgage market, certainly credit is too tight. Too few people have the opportunity to become homeowners today.”

Buyers are seeing some relief from nonbank lenders such as Quicken Loans, United Wholesale Mortgage and Carrington Mortgage, which are growing players in the residential lending market.

The share of loans issued by nonbank lenders and backed by the government has been climbing since 2013. The median FICO scores for loans issued by nonbank lenders and sold to Fannie Mae and the other government mortgage buyers are lower than those of loans from banks, according to the Urban Institute.

Unlike many homebuyers enticed by the frenzy of easy lending during the housing boom, Christian Ray resisted pushing the limits of what he could afford when he became a homeowner last month.

A logistics manager for a beverage company, Ray bought a two-bedroom, two-and-a-half bath townhome in Tampa for $158,000, even though his lender qualified him for a $240,000 mortgage.

“I’m not going to be married to the house,” said Ray, 23. “I literally would just come home, pay the bills and just stay here and barely feed myself.”

Ray also opted for just about the most unexotic, vanilla home loan around: A 30-year, fixed-rate mortgage at 5 percent interest. And he put up a 10 percent down payment.

“I’m not going to take 30 years to pay it,” Ray said.

From the Associated Press.

How Apple’s Safari browser will try to thwart data tracking

Photo by the Associated Press

New privacy features in Apple’s Safari browser seek to make it tougher for companies such as Facebook to track you.

Companies have long used cookies to remember your past visits. This can be helpful for saving sign-in details and preferences. But now they’re also being used to profile you in order to fine-tune advertising to your tastes and interests.

Cookie use goes beyond visiting a particular website. As other sites embed Facebook “ike” and “share” buttons, for instance, Facebook’s servers are being pinged and can access your stored cookies. That means Facebook now knows you frequent celebrity gossip sites or read news with a certain political bent. Ads can be tailored to that.

Here’s how Safari is getting tougher in dealing with that.

NO MORE GRACE PERIOD

Safari used to wait 24 hours from your last visit to a service before blocking that service’s cookies on third-party sites. That effectively exempted Facebook, Google and other services that people visited daily. Now, Safari will either block the cookie automatically or prompt you for permission.

Apple says Safari will still be able to remember sign-in details and other preferences, though some websites have had to adjust their coding.

THWARTING FINGERPRINTING

Browsers typically reveal seemingly innocuous information about your device, such as the operating system used and fonts installed. Websites use this to make minor adjustments in formatting so that pages display properly.

Browsers have historically made a lot of information available, largely because it seemed harmless. Now it’s clear that all this data, taken together, can be used to uniquely identify you. Safari will now hide many of those specifics so that you will look no different from the rest.

It’s like a system that digitally blurs someone’s image, said Lance Cottrell, creator of the privacy service Anonymizer. “You can tell it’s a person and not a dog, but you can’t recognize a person’s face,” he said.

For instance, Safari will reveal only the fonts that ship with the machine, not any custom fonts installed.

MASKING WEB ADDRESSES

When visiting a website, the browser usually sends the web address for the page you were just on. This address can be quite detailed and reveal the specific product you were exploring at an e-commerce site, for instance.

Now, Safari will just pass on the main domain name for that site. So it would be just “Amazon.com” rather than the specific product page at Amazon.

CLOSING A LOOPHOLE

Some ad companies have sought to bypass restrictions on third-party cookies—that is, identifiers left by advertisers—by using a trick that routed them through a series of websites. That could make a third-party cookie look like it belonged to a site you’re visiting. Safari will now try to catch that.

The changes come Tuesday as part of the iOS 12 update for iPhones and iPads and a week later in the Mojave update for Mac computers.

Many of the safeguards will be limited to cookies that Apple deems to be trackers. That’s being done to reduce the likelihood of inadvertently blocking legitimate third-party cookies.

From the Associated Press.

Trump administration ready to ease rules on coal-fired power plants set by Obama

Photo by Gage Skidmore

The Trump administration is set to roll back the centerpiece of President Barack Obama’s efforts to slow what is commonly accepted as global warming.

A new move by the Trump administration is expected to propose regulations that give states broad authority to determine how to restrict greenhouse gas emissions from coal-fired power plants. The plan would let states relax pollution rules for power plants that need upgrades.

Combined with a planned rollback of car-mileage standards, the plan represents a significant retreat from Obama-era efforts to fight climate change, which President Trump has deemed a hoax on multiple occasions.

President Donald Trump has already vowed to pull the U.S. out of the Paris climate agreement as he pushes to revive the coal industry.

The plan is to be announced in the coming days.

Apples becomes first trillion-dollar company

Photo by Daniel L. Lu

Apple has become the world’s first publicly traded company to be valued at $1 trillion, the financial fruit of stylish technology that has redefined what we expect from our gadgets.

The milestone reached Thursday marks the latest triumph of a trend-setting company that two mavericks named Steve started in a Silicon Valley garage 42 years ago.

The achievement seemed unimaginable in 1997 when Apple teetered on the edge of bankruptcy, with its stock trading for less than $1, on a split-adjusted basis., and its market value dropping below $2 billion.

To survive, Apple brought back its once-exiled co-founder, Steve Jobs, as interim CEO and turned to its archrival Microsoft for a $150 million cash infusion to help pay its bills.

If someone had dared to buy $10,000 worth of stock at that point of desperation, the investment would now be worth about $2.6 million.

Jobs eventually introduced popular products such as the iPod and iPhone that subsequently drove Apple’s rise. The stock has been surging this week as anticipation mounts for the next generation of iPhone, expected to be released in September.

Apple hit the $1 trillion mark when its shares reached $207.04 around midday in New York. They rose to an all-time high of $208.32 before falling back slightly. The shares are up around 23 percent so far this year.

Another company, Saudi Arabian Oil Co. could eclipse Apple if it goes through with plans for an initial public offering. Saudi officials have said the IPO would value Saudi Aramco, as the company is often called, at about $2 trillion. But until the IPO is completed, Saudi Aramco’s actual value remains murky.

Jobs’ vision, showmanship and sense of style propelled Apple’s comeback. But it might not have happened if he hadn’t evolved into a more mature leader after his exit from the company in 1985. His ignominious departure came after losing a power struggle with John Sculley, a former Pepsico executive who he recruited to become Apple’s CEO in 1983 — seven years after he and his geeky friend Steve Wozniak teamed up to start the company with the administrative help of Ronald Wayne.

Jobs remained mercurial when he returned to Apple, but he had also become more thoughtful and adept at spotting talent that would help him create a revolutionary innovation factory. One of his biggest coups came in 1998 when he lured a soft-spoken Southerner, Tim Cook, away from Compaq Computer at a time when Apple’s survival remained in doubt.

Cook’s hiring may have been one of the best things Jobs did for Apple. In addition, that is, to shepherding a decade-long succession of iconic products that transformed Apple from a technological boutique to a cultural phenomenon and moneymaking machine.

As Jobs’ top lieutenant, Cook oversaw the intricate supply chain that fed consumers’ appetite for Apple’s devices and then held the company together in 2004 when Jobs was stricken with a cancer that forced him to periodically step away from work — sometimes for extended leaves of absences. Just months away from his death, Jobs officially handed off the CEO reins to Cook in August 2011.

Although Apple has yet to produce another mass-market sensation since that changing of the guard, Cook has leveraged the legacy that Jobs left behind to stunning heights. Since Cook became CEO, Apple’s annual revenue has more than doubled to $229 billion while its stock has quadrupled.

More than $600 billion of Apple’s current market value has been created while Cook has been CEO. That wealth creation exceeds the current market value of every publicly traded U.S. company except Amazon, Microsoft and Google’s parent, Alphabet.

Even so, Cook has encountered criticism, chiefly for the creative void left in Jobs’ wake. The Apple Watch has been the closest thing that the company has had to creating another mass-market sensation under Cook’s leadership, but that device hasn’t come close to breaking into the cultural consciousness like the iPhone or the iPad.

That has raised concerns that Apple has become far too dependent on the iPhone, especially since iPad sales tapered off several years ago. The iPhone now accounts for nearly two-thirds of Apple’s revenue.

But Cook has capitalized on the continuing popularity of the iPhone and other products invented under Jobs’ reign to sell services tailored for the more than 1.3 billion devices now powered by the company’s software.

Apple’s services division alone is on pace to generate about $35 billion in revenue this fiscal year — more than all but a few dozen U.S. companies churn out annually.

Apple had also come under fire as it accumulated more than $250 billion in taxes in overseas accounts, triggering accusations of tax dodging. Cook insisted what Apple was doing legal and in the best interest of shareholders, given the offshore money would have been subjected to a 35 percent tax rate had if it were brought back to the U.S.

But that calculus changed under the administration of President Donald Trump, who pushed Congress to pass a sweeping overhaul of the U.S. tax code that includes a provision lowering this year’s rate to 15.5 percent on profits coming back from overseas.

Apple took advantage of that break to bring back virtually all of its overseas cash, triggering a $38 billion tax bill. All that money coming back to the U.S. also spurred Apple to raise its dividend by 16 percent and commit to buy back $100 billion of its own stock as part of an effort to drive its stock price even higher.

From the Associated Press.