December 4, 2022

Consumer Prices Fall 0.3% on Lower Gas Costs

Gas prices fell 7.4 percent, the biggest drop in nearly four years, offsetting a 0.2 percent rise in food prices.

The seasonally adjusted Consumer Price Index dropped 0.3 percent in November from October, the department said.

In another report on Friday, the Federal Reserve said that factory output increased 1.1 percent in November from October as factories rebounded from Hurricane Sandy. But after factoring out the storm’s impact — output declined 1 percent in the previous month, a drop that was blamed on the hurricane — the broader trend in manufacturing remained weak.

Auto production jumped 4.5 percent last month, the first increase since July. Production of primary metals, wood products, electrical equipment and appliances all showed gains.

Total industrial output at factories, mines and utilities also rose 1.1 percent last month, after a 0.7 percent decline in October.

In the consumer price report, priced ticked up 0.1 percent in November, excluding the volatile food and gas categories. Core prices have risen 1.9 percent in the last year, below the Federal Reserve’s annual target of 2 percent. Higher rents, airline fares and new cars pushed up core prices last month. The cost of clothing and used cars fell.

“In simplest terms, inflation is not a problem,” Jim Baird, chief investment strategist at Plante Moran Financial Advisors, said. Lower inflation “is a real positive that should provide modest relief for households dealing with limited income growth.”

High unemployment and slow wage growth have made businesses reluctant to raise prices, for fear of driving away customers. That has helped keep inflation tame.

Gas prices have fallen sharply in the last two months after spiking in the late summer. A gallon of gas cost an average of $3.29 nationwide Friday. That’s 15 cents less than a month ago and 50 cents less than in mid-October.

The increase in food prices was smaller than many economists expected. This summer’s drought in the Midwest, which scorched corn and soybean crops, has pushed up food prices, but not sharply. Food costs have risen 1.8 percent in the past 12 months.

The cost of milk, cheese and other dairy products, however, have risen 0.8 percent in each of the last two months. That could reflect the higher cost of animal feed, which usually includes corn and soybeans. Cereals and baked goods rose 0.3 percent last month.

But prices for the broad category of meat, chicken, fish and eggs fell in November after a big gain the previous month.

Shoppers may face further increases soon. Wholesale food costs jumped 1.3 percent last month, according to a separate report Thursday, the most in nearly two years.

Beef prices jumped the most in four and a half years, and vegetable costs rose sharply. Grocery stores may pass on some of those costs in the coming mons.

With inflation in check, the Fed said on Wednesday that it now planned to keep the short-term interest rate at nearly zero until the jobless rate fell to at least 6.5 percent, as long as inflation was not expected to top 2.5 percent.

It was the clearest sign yet that the Fed will keep rates low even after unemployment falls further and the economy picks up.

Article source:

U.S. Consumer Inflation Subdued, Housing Starts Up

The report from the Labor Department showed that the overall Consumer Price Index rose 0.3 percent last month compared with a 0.4 percent rise in August. Gasoline prices rose at a faster pace, while the increase in food prices slowed.

The core C.P.I., which strips out such volatile categories, recorded a 0.1 percent rise in September, its smallest since March, compared with 0.2 percent in August. It was kept in check by some of the prices of its key components, such as rents, which rose moderately, and automobiles, which did not rise at all. The indexes for apparel, used cars and recreation declined.

The report, which reflects seasonally adjusted figures, showed that inflationary pressures were contained despite a rise in wholesale prices. Still, some commodity prices are expected to moderate in the months ahead as lower energy costs start to filter through the data, according to Russell Price, a senior economist with Ameriprise Financial.

“That is the lagging impact of petroleum prices,” he said.

The overall C.P.I. was 3.9 percent in the 12 months to September compared with 3.8 percent in August. Gasoline rose 2.9 percent in September, compared with 1.9 percent the month before. Food prices were up 0.4 percent, compared with 0.5 percent in August.

In the 12 months to September, the core C.P.I. was up 2 percent, the same rate as the 12-month period through August.

“The core prices are starting to show that they are easing,” said Chris Christopher, the United States economist for IHS Global Insight. “So hopefully for consumers in particular prices will start moderating significantly.”

The report also showed that the Consumer Price Index for Urban Wage Earners and Clerical Workers increased 4.4 percent over the past 12 months. That measure is used as a basis, in the third quarter, for cost of living adjustments in Social Security payments, which the government said on Wednesday would reflect an increase of 3.6 percent starting in January, the first adjustment since 2009.

Still, Mr. Christopher noted that actual net checks to retirees would probably not rise by that percentage because of increases in Medicare premiums.

“At least it is mitigating,” he said. “It does not really amount to much.”

Government reports released on Wednesday also provided a glimpse of other sectors of the economy, including the job market and the housing sector, which continues to be challenged by financial pressures on households and a large supply of existing homes.

The Federal Reserve said in its beige book, which is a survey of regional economic conditions, that overall economic activity was expanding in September, although many of the 12 districts described growth as “modest” or “slight.”

The beige book reported limited demand for new employees, although some districts noted difficulties finding skilled workers or said that hiring was hampered by an uncertain outlook for business or lower expectations for future growth. Residential construction remained at low levels, it said, particularly for single-family homes, while there was a moderate increase in the building of multi-family dwellings. In contrast, the report said, rental demand continued to rise.

Those observations were consistent with government statistics that showed housing starts, which reflect the commitment of builders and suggest that consumer spending could follow on durable goods, were up 15 percent, mostly for multiple family units. But there was no significant rise in the trend for the start of construction on single family units.

“This is consistent with reports that homebuilder confidence remains severely depressed,” Joshua Shapiro, chief United States economist at MFR, said in a research note.

Celia Chen, a senior director at Moody’s Analytics, said uncertainty about jobs and problems with foreclosures have affected the single family housing sector. Home values have fallen and it is still difficult for many people to get a mortgage.

“Many of the households forming right now are just not going to have the wherewithal to purchase a home,” said Ms. Chen.

“The ownership market faces many headwinds,” she added. “All the strength we are seeing is on the multi-family side.”

Article source:

Square Feet | The 30-Minute Interview: Thomas W. Toomey

Interview conducted and condensed by VIVIAN MARINO

Q UDR has been moving into Manhattan in a big way.

A It’s part of our long-term growth strategy. Manhattan has a lot of the attributes I’m looking for in a market: Over 70 percent of the people rent; housing is not very affordable; it has a large cohort of 20- to 35-year olds; and lastly, there are a lot of value-created opportunities.

All four of our acquisitions have similar characteristics — they’re well occupied but operating below optimal level. Rents are below market, and expenses are above. We saw in all four an opportunity to enhance the quality of the community. We actually redevelop these properties. And then we raise the rent.

Q Have you done much work on these buildings yet?

A In 10 Hanover we certainly have. Physically it’s been hallways and interiors. And we’re modifying at the service level. We have an electronic platform that lets residents do business with us 24/7 on any device: pay rent, renew a lease, have anything fixed.

We’re in the planning phases for Rivergate. We will put in a fitness center 7,000 to 10,000 square feet; new interiors; new windows; and change out the lobby and hallways.

Chelsea has just begun. We’re mocking up and testing different kitchen scenarios. We have to change out the lobby fixtures, put in more bike-friendly storage, and then we’ll go into the individual apartment homes and give them kitchens.

At Wall, we’re still in the planning phases. It was rehabbed in 2008. We don’t see much physical needs — we see service needs.

Q How much do you expect to spend on these projects?

A Over all we’re looking at probably $75 million, and it’ll be over the next three-year period.

Q By how much will rents be raised afterward?

A The average rent that we’ve been raising on things after we’ve changed them have been somewhere around 14 percent.

Q So no more concessions?

A Not in Manhattan.

Q How does New York compare with other markets?

A I’m in 20 markets. I would rank it in probably in the top quartile in terms of stability. Right now the best markets are probably San Francisco and Seattle, primarily driven by the tech jobs re-emergence, followed by D.C. and Boston, and then New York. Our weakest is probably Florida.

Q Do you have long-term goals for the New York market?

A Absolutely. Today we’re a $10 billion enterprise with low leverage, and we see ourselves growing to $12- to $15 billion. Manhattan would be 15 percent of that, and so as the entire enterprise grows, part of it will grow here in Manhattan. I think we’ll mostly stay on Manhattan — we probably won’t go off in the boroughs.

Q What are your renters looking for these days?

A Our target renter is 20 to 35. I think what they’re really looking for is flexibility, to be able to conduct business on their own terms. That means that it’s self-service, and that it’s 24/7. Now, physically, I think the millennium generation is looking for what they grew up in: big common areas full of amenities like pools and fitness centers and social areas, and they’re looking for connectivity and socialization. We give the Wi-Fi away for free.

Q Are you flexible with lease lengths, too?

A The resident can pick any number of lease terms, from 3 to 13 months. We try to incentivize you to have your leases mature. Rent is probably 5 to 7 percent higher for a short-term lease, because our costs are higher.

Q Economic conditions seem to have made renting more popular.

A We’re seeing a greater number of renters who don’t want to be tied down by a home. They want to be able to move wherever the jobs are, whatever opportunities are. Consumers are also deleveraging themselves and do not want to commit to a home.

Q So business is good?

A On a scale of 1 to 10, business is about an 8, and trending up.

I’ve had $2 billion in acquisitions over the last 12 months, with $1.3 billion in Manhattan.

And I have about $1 billion in development — that’s about 4,000 apartment homes. It will be D.C., Seattle, San Francisco and Southern California.

Q What will be your next acquisition in New York?

A We’re still shopping.

Article source:

Square Feet | The 30-Minute Interview: Gary Jacob

Q Exactly how many apartments are in Glenwood’s portfolio?

A I’m not at liberty to share that. Leonard Litwin is very private about that, although you could go on the Web site and pretty much figure out the number of buildings. I go to meetings with him with banks, and they ask, ‘How many units do you have?’ His answer is ‘thousands,’ or ‘many.’

Q How involved is Mr. Litwin, in his mid-90s, in the company?

A He’s still actively involved in everything we do. He comes to the office every day, goes to all of our meetings and has final say on almost everything. He’s actively involved in our new construction projects — he pores over the architectural plans to make sure we have the proper amount of closet space and is very detail-oriented. He certainly won’t retire.

Q Was Mr. Litwin your mentor?

A Absolutely.

Q What are your duties?

A I’m the face to the public of Glenwood. I’m the person who handles all the site acquisitions and financing. His daughter, Carole Pittelman — she’s technically an executive vice president — handles the construction projects and oversees the management division as far as expenses and renovation of units. I work hand in hand with her and Mr. Litwin helping to run the company.

Q So how is business?

A Business is, knock on wood, very good. We did end up taking a dip in rental prices. We had to give concessions, and we were paying the brokers for a few years as rents started going down in 2008. By January 2009 they hit a low point. The rental market has since come back — the demand is there.

Q When the market was booming, did Glenwood ever consider converting to condos?

A We’ve never, ever converted any of our buildings. Leonard Litwin did have some experience building co-ops before I joined the company in 1973. But in my 38 years here we’ve never contemplated building a condo, and we never even thought about converting anything. He really enjoys his buildings. He also feels that over time the value goes up, and he’s been proved right.

Q What’s your vacancy rate portfoliowide?

A We now have the lowest vacancy in three years: it’s 1 percent. It might have been 2.5 percent a year and a half ago.

Q Is the new Emerald Green building fully occupied?

A Yes. We’ve been renting them rapidly, without concessions and without paying broker fees.

Q You have applied for LEED certification there.

A We’re hoping to get a silver certification.

Q What’s the status of the Crystal Green?

A We finished the excavation, and now we’re coming out of the ground to get to the ground-floor level. We should be able to start renting maybe next spring, with completion by next summer.

The Crystal Green will have 199 units on 39th Street, and as part of the same project, we’re building a six-story, six-unit building, which will be very high end, on the 38th Street side. It’ll stand on its own, and we might give those tenants the services of Emerald Green, which is right across the street.

Q Glenwood recently closed on a parcel from Fordham University on Amsterdam Avenue and 62nd Street, with the plan to build another residential tower. What’s the status of that?

A We’re hoping to break ground in October. It’s going to be a 54-story building — very deluxe with lots of glass. This is adjacent to Lincoln Center.

Q What else are you working on?

A We’re working on two other projects — also residential rentals, both on the West Side — but it’s too soon to talk about them. We’re in the process of acquisition. One of them is a distressed opportunity; the other one is not.

Q Your focus has been on sustainable construction.

A We believe it’s the right thing to do for the environment. It’s also a good marketing tool, and to some extent tenants ask about it.

Q Glenwood has also invested in electric car chargers.

A We’re outfitting some of our garages with outlets for electric cars. We already have three chargers in Emerald Green. But there aren’t enough electric cars out there yet — I think the auto companies have to catch up — so they’re not getting a lot of use. But we’re ready for it.

Article source: