Moody’s Warns of Possible 2023 Recession, Volkswagen Mulls US Electric Vehicle Expansion, Jobless Cl
Moody’s Warns of Possible 2023 Recession
Moody’s Analytics has joined a chorus of analysts warning about a potential U.S. recession in the coming year, as the prominent financial data firm cites an evolving “danger zone” of perils facing real estate.
Victor Calanog, the firm’s head of commercial real estate research, predicted in a report Thursday that there’s a 30% chance of a recession in 2022, rising to a 50% probability in 2023. “Climbing mortgage rates, coupled with unaffordable housing, especially for first-time home buyers, will finally crack housing demand,” Calanog said.
Moody’s analysts said long-rising U.S. home prices, which have kept many households in the rental pool, are poised for a decline after 2022, with properties in some regions now overvalued at levels approaching those seen just prior to the popping of the mid-2000s housing bubble.
Analysts said declining consumer sentiment, spurred by rising gas prices and other inflation, will further weigh down prospects for retail real estate in the coming year, and lease terms for industrial real estate “are shrinking to match the spectacular growth” of rents and occupancies in the sector.
“After all, why would landlords want to lock themselves into a 10- or 20-year lease with 2% to 3% annual escalation clauses, when rents are rising that much in a quarter or two?” Calanog said.
In a sign that curbing inflation has become a top priority well beyond U.S. shores, the European Central Bank on Thursday laid out plans to raise its key borrowing rate by a quarter percentage point at its next policy meeting in July. That would mark the first hike by the European bank in more than a decade, coming after similar increases announced earlier this year by the U.S. Federal Reserve.
Volkswagen Mulls More US Electric Vehicles
Volkswagen is “actively” looking to expand its electric vehicle and battery production in the United States, another sign that the fast-growing industry is accelerating industrial real estate demand.
Volkswagen of America CEO Scott Keogh told CNBC Wednesday that the world’s second-largest automaker by 2021 sales is seeking to expand its assembly and battery operations for electric vehicles beyond the company’s current electric-focused operations in Tennessee. The German automaker is not disclosing sites that are being scouted.
“We are actively in the process of looking at another production facility and also looking at a battery facility," Keogh said.
Volkswagen joins several companies ramping up production of vehicles, batteries and other parts and infrastructure geared to the mainstreaming of electric-powered transportation. Global electric vehicle sales reached 6.75 million units in 2021, more than doubling the 2020 figure, according to industry data provider EV-Volumes.com, and some analysts have predicted further sales escalation amid rising gas prices.
Among other companies, automaker Tesla continues to expand vehicle and battery production facilities in Texas, South Korean automaker Hyundai picked Georgia for its first U.S. electric vehicle plant and electric truck maker Rivian is also planning significant facility investment in Georgia.
Jobless Claims Rise
Initial claims for unemployment insurance rose 27,000 from the prior week after several weeks of declines, reaching 229,000 for the week ended June 4, the Labor Department reported Thursday.
In a potential sign of cooling for a still tight job market, that number was slightly above the moving average of the past four weeks of 215,000 and the highest number for initial claims since late January. Claims have remained below pre-pandemic averages for most of 2022, with the May unemployment rate staying historically low at 3.6%.
The total for continued weeks’ claims, tracked on a more delayed basis, was approximately 1.3 million for the week ended May 21, down about 35,000 from the previous week and well below the approximately 15.4 million for the comparable week of 2021.
The latest numbers reflect an economy that is still producing jobs despite headwinds including rampant inflation. The Labor Department reported June 3 that the U.S. added 390,000 jobs in May, with big gainers including hospitality, food services and warehousing as retail jobs declined.