The U.S. economy posted its first period of positive growth for 2022 in the third quarter, at least temporarily easing recession fears, the Bureau of Economic Analysis reported Thursday.

GDP, a sum of all the goods and services produced from July through September, increased at a 2.6% annualized pace for the period, according to the advance estimate. That was above against the Dow Jones forecast for 2.3%.

That reading follows consecutive negative quarters to start the year, meeting a commonly accepted definition of recession, though the National Bureau of Economic Research is generally considered the arbiter of downturns and expansions.

The growth came in large part due to a narrowing trade deficit, which economists expected and consider to be a one-off occurrence that won’t be repeated in future quarters.

GDP gains also came from increases in consumer spending, nonresidential fixed investment and government spending. The report reflected an ongoing shift to services spending over goods, with spending on the former increasing 2.8% while goods spending dropped 1.2%.

Declines in residential fixed investment and private inventories offset the gains, the BEA said.

“Overall, while the 2.6% rebound in the third quarter more than reversed the decline in the first half of the year, we don’t expect this strength to be sustained,” wrote Paul Ashworth, chief North America economist at Capital Economics. “Exports will soon fade and domestic demand is getting crushed under the weight of higher interest rates. We expect the economy to enter a mild recession in the first half of next year.”

Markets were higher following the release, with the Dow Jones Industrial Average gaining more than 300 points in early trading on Wall Street.

In other economic news Thursday, weekly jobless claims edged higher to 217,000 but were still below the 220,000 estimate. Also, orders for long-lasting goods increased 0.4% in September from the previous month, below the 0.7% expectation.

The report comes as policymakers fight a pitched battle against inflation, which is running around its highest levels in more than 40 years. Price surges have come due a number of factors, many related to the Covid pandemic but also pushed by unprecedented fiscal and monetary stimulus that is still working its way through the financial system.

The underlying picture from the BEA report showed an economy slowing in key areas, particularly the consumer and private investment.

Consumer spending as measured through personal consumption expenditures increased at just a 1.4% pace in the quarter, down from 2% in Q2. Gross private domestic investment fell 8.5%, continuing a trend after falling 14.1% in the second quarter. Residential investment, a gauge of homebuilding, tumbled 26.4% after falling 17.8% in Q2, reflecting a sharp slowdown in the real estate market.

On the plus side, exports, which add to GDP, rose 14.4% while imports, which subtract, dropped 6.9%. Net exports of goods and services added 2.77 percentage points to the headline total, meaning GDP essentially would have been flat otherwise.

There was some good news on the inflation front.

The chain-weighted price index, a cost-of-living measure that adjusts for consumer behavior, rose 4.1% for the quarter, well below the Dow Jones estimate for a 5.3% gain, due in large part to falling energy prices. Also, the personal consumption expenditures price index, a key inflation measure for the Federal Reserve, increased 4.2%, down sharply from 7.3% in the prior quarter. Core prices, excluding food and energy, increased 4.5%, about in line with Wall Street expectations.

Earlier this year, the Fed began a campaign of interest rate hikes aimed at taming inflation. Since March, the central bank has raised its benchmark borrowing rate by 3 percentage points, taking it to its highest level since just before the worst of the financial crisis.

Those increases are aimed at slowing the flow of money through the economy and taming a jobs market where openings outnumber available workers by nearly 2 to 1, a situation that has driven up wages and contributed to a wage-price spiral that economists fear will tip the U.S. into recession.

“Our concerns about going into recession would not necessarily be from any of this data. It comes more from how much the Fed cranks up rates and what happens when firms and consumers respond to this,” said Luke Tilley, chief economist at Wilmington Trust.

“The most encouraging thing is you still have consumer spending, you still have job growth and wage growth and that should help on the consumer spending side,” he added. “What we would be most concerned about would be a sharp pullback by businesses in their hiring.”

The Fed is widely accepted to approve a fourth consecutive 0.75 percentage point interest rate hike at its meeting next week, but then might slow the pace of increases afterward as officials take time to assess the impact of policy on economic conditions.

“The Fed will continue to err on the side of overtightening, which is reasonable given the desire to mitigate the risk of inflation becoming entrenched at high levels,” said Preston Caldwell, head of U.S. economics for Morningstar. “After December, we’re likely to see the pace of tightening slow quite dramatically.”

Policymakers will get another, more current look at inflation data when the BEA releases a report Friday that will include personal consumption expenditures prices for September. That measure is expected to show that core prices excluding food and energy rose 5.2% from a year ago and 0.5% on a monthly basis.

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Jerome Powell, chairman of the US Federal Reserve, speaks during a Fed Listens event in Washington, D.C., US, on Friday, Sept. 23, 2022.
Al Drago | Bloomberg | Getty Images

Political questioning of Federal Reserve Chair Jerome Powell about the central bank’s policy moves is intensifying, this time from the other side of the aisle.

No stranger to political pressure, the Fed chief this week found himself the focus of concern in a letter from Sen. Sherrod Brown. The Ohio Democrat warned in the letter about potential job losses from the Fed’s rate hikes that it is using to combat inflation.

“It is your job to combat inflation, but at the same time you must not lose sight of your responsibility to ensure that we have full employment,” Brown wrote. He added that “potential job losses brought about by monetary over-tightening will only worsen these matters for the working class.”

The letter comes with the Fed less than a week away from its two-day policy meeting that is widely expected to conclude Nov. 2 with a fourth consecutive 0.75 percentage point interest rate increase. That would take the central bank’s benchmark funds rate to a range of 3.75% to 4%, its highest level since early 2008 and represents the fastest pace of policy tightening since the early 1980s.

Without recommending a specific course of action, Brown asked Powell to remember the Fed has a two-pronged mandate — low inflation as well as full employment — and requested that “the decisions you make at the next FOMC meeting reflect your commitment to the dual mandate.”

The last time the Fed raised interest rates, from 2016 to December 2018, Powell faced withering criticism from former President Donald Trump, who on one occasion called the central bankers “boneheads” and seemed to compare Powell unfavorably with Chinese President Xi Jinping when he asked in a tweet, “Who is our bigger enemy?”

Democrats, including then-presidential hopeful Joe Biden, criticized Trump for his Fed comments, insisting the central bank be free of political pressure when formulating monetary policy.

Standing firm

Brown’s stance was considerably more nuanced than Trump’s — though equally unlikely to move the dial on monetary policy.

“Chair Powell has made it pretty clear that the necessary conditions for the Fed to achieve its full employment objective is low and stable inflation. Without low and stable inflation, there’s no way to achieve full employment,” said Mark Zandi, chief economist for Moody’s Analytics. “He’ll stick to his guns on this. I don’t see this as having any material impact on decision making at the Fed.”

To be sure, while it’s most likely a reaction to a changing tone from some Fed officials and a slight shift in the economic data, market expectations for monetary policy have altered a bit.

Traders have made peace with the three-quarter point hike next week. But they now see just a 36% chance for another such move at December’s Federal Open Market Committee meeting, after earlier rating it a near 80% probability, according to CME Group data.

That change in sentiment has come following cautionary remarks about overly aggressive policies from several Fed officials, including Vice Chairman Lael Brainard and San Francisco regional President Mary Daly. In remarks late last week, Daly said she’s looking for a “step-down” point where the Fed can slow the pace of its rate moves.

“The democratization of the Fed is the issue for the market, how much power the other members have versus the chairman. It’s difficult to know,” said Quincy Krosby, chief equity strategist at LPL Financial. Regarding Brown’s letter, Krosby said, “I don’t think it’s going to affect him. … It’s not the pressure coming from the politicians, which is to be expected.”

A Fed spokesman acknowledged that Powell received the Brown letter and said normal policy is to respond to such communication directly. In the past, Powell has been generally dismissive when asked if political pressure can factor into decision making.

Employment data will be key

Along with the nudging from Brown, Powell also has faced criticism from others on Capitol Hill.

Sen. Elizabeth Warren, the ultra-progressive Massachusetts Democrat and former presidential contender, has called Powell dangerous and recently also warned about the impact rate hikes could have on employment. Also, Sen. Joe Manchin, D-W. Va., last year criticized Powell for what was seen as the Fed’s flat-footed response to the early rise of inflation.

“I don’t necessarily think that Powell will buckle to the political pressure, but I’m wondering whether some of his colleagues start to, some of the doves who have become hawkish,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “Employment’s fine now, but as months go on and growth continues to slow and layoffs begin to increase at a more notable pace, I have to believe that the level of pressure is going to grow.”

Payroll gains have been strong all years, but a number of companies have said they are either putting a freeze on hiring or cutting back as economic conditions soften. A slowing economy and stubbornly high inflation is making the backdrop difficult for the November elections, where Democrats are expected to lose control of the House and possibly the Senate.

With the high stakes in mind, both markets and lawmakers will be listening closely to Powell’s post-meeting news conference next Wednesday, which will come six days before the election.

“He knows the pressure. He knows that the politicians are increasingly nervous about losing their seats,” Krosby said. “There’s very little he could do at this point, by the way, to help either party.”

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David Solomon, CEO, Goldman Sachs, speaking at the World Economic Forum in Davos, Switzerland, Jan. 23, 2020.
Adam Galacia | CNBC

Goldman Sachs CEO David Solomon and JPMorgan CEO Jamie Dimon both expect a U.S. recession as a tight labor market keeps the Federal Reserve on an aggressive monetary policy tightening trajectory.

Speaking on a panel at the Future Initiative Investment conference in Riyadh, Saudi Arabia on Tuesday, Solomon said he expects economic conditions to “tighten meaningfully from here,” and predicted that the Fed would continue raising interest rates until they reached 4.5%-4.75% before pausing.

“But if they don’t see real changes — labor is still very, very tight, they are obviously just playing with the demand side by tightening — but if they don’t see real changes in behavior, my guess is they will go further,” he said.

“And I think generally when you find yourself in an economic scenario like this where inflation is embedded, it is very hard to get out of it without a real economic slowdown.”

The Fed funds rate is currently targeted between 3%-3.25%, but Federal Open Market Committee policymakers have signaled that further hikes will be needed, with U.S. inflation still running at an annual 8.2% in September.

Philadelphia Fed President Patrick Harker said last week that the central bank’s policy tightening to date had resulted in a “frankly disappointing lack of progress on curtailing inflation,” projecting that rates would need to rise “well above 4%” by the end of the year.

Meanwhile, the U.S. Department of Labor reported 10.1 million job openings in August, signaling that employers’ demand for workers, though falling sharply, remains historically high.

Central bank policymakers hope that a cooling labor market will translate to lower wage growth, which has been running at its highest rate in decades and signals that inflation has become embedded in the economy.

“So I too am in the camp that we likely have a recession in the U.S. … I think most likely we might be in a recession in Europe, and so until you get to that point where you see a change — whether it’s in labor, the demand side — you are going to see central banks continue to move on that trajectory,” Solomon added.

Jamie Dimon, CEO of JPMorgan Chase, testifies during the Senate Banking, Housing, and Urban Affairs Committee hearing titled Annual Oversight of the Nations Largest Banks, in Hart Building on Thursday, September 22, 2022.
Tom Williams | CQ-Roll Call, Inc. | Getty Images

U.S. GDP contracted by 0.9% in the second quarter of 2022, its second consecutive quarterly decline and a strong signal that the economy is in recession.

Fellow Wall Street titan Dimon agreed that the Fed would likely continue hiking rates aggressively before pausing to allow the data to begin reflecting its efforts to rein in inflation, but struck a similarly pessimistic tone on the outlook for economic growth.

“But American consumers, eventually the excess money they have is running out. That will probably happen sometime mid-year next year, and then we will know more about what is going on with oil and gas prices and that kind of thing, so we will find out,” Dimon said.

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Pepsi products are displayed for sale in a Target store on March 8, 2022 in Los Angeles, California.
Mario Tama | Getty Images

One thing is clear at the start of the corporate earnings season: Inflation remains a hot topic for companies.

About two-thirds of companies in the S&P 500 that reported earnings in the first two weeks of the season (Oct. 10-21) had representatives mention inflation, according to a search of conference call transcripts by FactSet. Included among those companies are PepsiCo, Citigroup and Abbott Laboratories.

“The environment clearly is still very inflationary with a lot of supply chain challenges across the industry,” said PepsiCo CEO Ramon Laguarta. The snack and beverage company beat analyst expectations for both revenue and earnings per share as its price hikes buoyed its bottom line, even as some units saw volume declines.

Recent economic data shows little sign of inflation letting up.

The consumer price index increased 0.4% in September, which was a hotter reading than the 0.3% expected by Dow Jones, according to the Bureau of Labor Statistics. It was at 0.6% without food and energy factored in, which was also above Dow Jones’ estimate of 0.4%.

The producer price index, which gauges wholesale prices, also rose 0.4% in September. That was similarly above the Dow Jones expectation of 0.2%.

Lingering inflation has led consumers to rethink expensive purchases as their spending power is squeezed and has also created higher costs for companies like Procter & Gamble. Last week the household goods maker of brands like Tide and Charmin posted quarterly results that narrowly outperformed analyst expectations.

“Raw- and packaging-material costs inclusive of commodities and supply inflation have remained high since we gave our initial outlook for the year in late July,” Chief Financial Officer Andre Schulten said during Wednesday’s conference call. “Based on current spot prices and latest contracts, we now estimate a $2.4 billion after-tax headwind in fiscal 2023.”

The company was among a handful of multinationals that said inflation abroad was chomping at international bottom lines as well as in the U.S. Citigroup and Pool, which distributes pool supplies, both said inflation in Europe hurt their businesses in the previous quarter.

Pool said total construction volume would likely be down in 2022 compared to 2021, though it beat expectations for the quarter.

Inflation is also making it harder for some companies to fill positions. Human resources company Robert Half said the workforce remains tight, while Snap-On said wages had to continue growing to get skilled workers. To be sure, Union Pacific said crew availability continued to improve and HCA Healthcare said it could lean less on contract workers to fill voids.

This year’s inflationary pressure have led to multiple rate increases from the Federal Reserve. It is expected to keep hiking until the end of 2022, at least.

On the fiscal side, the government passed the Inflation Reduction Act earlier this year.

Multiple companies said the Inflation Reduction Act would likely help their outlook, with those who emphasize green energy poised to benefit from the legislation’s tax credits for alternative energy forms.

Electric vehicle maker Tesla said it was too early to predict specific impacts on demand, but they did expect to benefit from the legislation’s benefits for consumers who migrate away from gas-powered cars. The company beat earnings per share expectations for the third quarter but revenue came in lower than analysts anticipated.

How long will pressures last?

Predictions about how long these pressures will last varies with the executives being asked for their opinion.

“Inflation continues to be a stubborn force globally, though we’ve started to see some moderating impacts in certain areas of our businesses compared to earlier in the year,” Abbott CEO Robert Ford said Oct. 19. The science company beat expectations for the quarter with per-share earnings nearly 23% higher than expected.

Manufacturing company Dover also said inflation has come down compared to the past year and a half, specifically pointing to the company’s decreasing costs related to logistics and raw material. That view is in line with that of some economics experts, who said “soft” inflation gauges are falling faster than the main indicators the Fed favors like the consumer price index which can lag.

“Clearly, we have some caution in terms of what’s going to develop in the marketplace,” said Dover CEO Richard Tobin on Oct. 20. “I fundamentally disagree with what the Fed is doing now.”

Others weren’t as upbeat, though. Whirlpool and Tractor Supply Company both said inflation should persist at the current level for the first half of 2023 before cooling. Tractor Supply beat per-share earnings but missed on sales, while Whirlpool came in below expectations for per-share earnings by about 16%.

“Inflation remains persistent and elevated, and we anticipate this to continue well into 2023 with some moderation in the back half of 2023,” Tractor Supply CEO Harry Lawton said.

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The U.S. budget deficit was sliced in half for fiscal 2022, the biggest drop in history following two years of huge Covid-related spending.

Though still large in historical terms, the budget shortfall declined to $1.375 trillion, compared to the 2021 deficit of $2.776 trillion.

The decline would have been steeper had it not been for the Biden administration’s student loan forgiveness program. Education spending totaled $639.4 billion for the fiscal year, $408 billion higher than estimated.

The 2022 fiscal year saw $4.896 trillion in revenue against $6.272 trillion in outlays. The outlays number represented about a $550 billion decline in spending but an $850 billion increase in revenue. The revenue total is by far the highest ever for the U.S. government.

Deficits in the previous two years soared as Congress shelled out massive sums to combat the pandemic.

U.S. Treasury Secretary Janet Yellen listens to a reporter’s question at a news conference during the Annual Meetings of the International Monetary Fund and World Bank in Washington, U.S., October 14, 2022. 
Elizabeth Frantz | Reuters

The shortfall hit a record $3.13 trillion in 2020 due to more than $5 trillion in CARES Act spending and other outlays. In 2019, the deficit was $983.6 billion. Prior to 2020, the highest deficit ever was $1.41 trillion in 2009 as the financial crisis came to a close. The U.S. briefly ran a surplus from 1998 to 2001.

In fiscal 2021, legislators passed the American Rescue Plan, a $1.9 trillion spending package that the White House said helped get the nation through a severe health and economic crisis, but which critics say was unnecessary and helped fuel the highest inflation rate in more than 40 years.

President Joe Biden, however, placed the deficit blame on Republicans for approving the 2017 tax cut bill.

“The federal deficit went up every single year in the Trump administration — every single year he was president,” he said. “It went up before the pandemic. It went up during the pandemic. It went up every single year on his watch, Republican’s watch.”

Biden called the GOP fiscal approach “mega-MAGA trickle down” that he defined as “the kind of policies that have failed the country before and it’ll fail it again.”

Treasury Secretary Janet Yellen said the budget statement released Friday “provides further evidence of our historic economic recovery, driven by our vaccination effort and the American Rescue Plan.”

Yellen added that the results also showed Biden’s “commitment to strengthening our nation’s fiscal health.”

Earlier this year, the White House pushed through the Inflation Reduction Act aimed at a variety of areas including reducing medical costs, boosting clean energy and reforming the tax code. However, inflation has continued to climb, and administration officials have stressed that the Federal Reserve’s primary role in fighting price increases is through interest rate hikes.

—CNBC’s Emma Kinery contributed reporting.

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Tesla Inc CEO Elon Musk attends the World Artificial Intelligence Conference (WAIC) in Shanghai, China August 29, 2019.
Aly Song | Reuters

Tesla founder and CEO Elon Musk thinks the global economic decline could last for another year and a half.

In a Twitter exchange early Friday morning Eastern time, the mercurial electric car executive and world’s richest man said a recession could continue “until spring of ’24.”

The remarks came in response to a tweet from Shibetoshi Nakamoto, the online name for Dogecoin co-creator Billy Markus, who noted that current coronavirus numbers “are actually pretty low. i [sic] guess all we have to worry about now is the impending global recession and nuclear apocalypse.”

“It sure would be nice to have one year without a horrible global event,” Musk replied.

Tesla Owners Silicon Valley, a Twitter account with nearly 600,000 followers, then asked Musk how long he thought the recession would last, to which he replied, “Just guessing, but probably until spring of ’24.”

Global GDP grew 6% in 2021 but is expected to decelerate to 3.2% this year and 2.7% in 2023, according to the International Monetary Fund. That would mark the weakest pace of growth since 2001 outside of the financial crisis in 2008 and the brief plunge in the early days of the Covid pandemic. The Federal Reserve projects GDP in the U.S. to grow just 0.2% this year and 1.2% in 2023.

Musk becomes the latest corporate titan to express reservations about the economy.

In a tweet Wednesday, Amazon founder Jeff Bezos said it’s time to “batten down the hatches” in preparation for rough economic waters ahead. That tweet accompanied a video of Goldman Sachs CEO David Solomon, who said in a CNBC interview that he thinks there’s a “good chance” of a recession in the U.S.

JPMorgan Chase CEO Jamie Dimon also has been warning of economic turmoil ahead.

Musk’s comment also came amid a rough week for Tesla stock as the automaker missed revenue estimates and cautioned about a potential delivery shortfall this year.

During the analyst call, Musk expressed more confidence in the U.S. economy than other parts of the world. He also noted the impact that interest rate increases are having on the economy.

“The U.S. actually is in — North America’s in pretty good health,” he said. “A little bit of that is raising interest rates more than they should, but I think they’ll eventually realize that and bring back down, I think.”

However, he said China is in “quite a burst of a recession of sorts” driven by the real estate market, while Europe “has a recession of sorts, driven by energy.”

Correction: A previous version of this article misstated past GDP growth.

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U.S Treasury yields rose further on Friday as investors digested the need for further interest rate hikes to curb inflation.
Photo by Michael M. Santiago | Getty Images News | Getty Images

Even though Latinos are the second-largest ethnic group in the U.S., they’re underrepresented across many industries, including finance, which can have long-term effects on the ability to grow wealth.

A group of Latino-led and focused venture capital firms is looking to change that.

There are more than 62 million Hispanic or Latino people in the U.S., according to the 2020 Census. That’s nearly 19% of the total population, second only to non-Hispanic whites. They also represent one of the largest and fastest-growing sectors: In 2019, the total economic output of the group was $2.7 trillion, up from $1.7 trillion in 2010, according to a report from the Latino Donor Collaborative.

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But in 2021, Latinos made up only 4% of large U.S. companies’ most senior executives, per a survey from the Hispanic Association on Corporate Responsibility. And a separate study in 2019 by the CFA Institute found that only 8% of workers in investment management firms were Latino compared to 9% Asian, 5% Black and 84% white.

Similarly, only 2% of venture capital professionals and partner-level professionals at institutional firms are Latino, a study from LatinxVC discovered.

“We’re trying to increase [Latino] venture capitalists within established venture organizations,” said Mariela Salas, the executive director of LatinxVC. “We’re also trying to retain those Latinos that are in institutional and smaller firms.”

The investing gap

Latinos also are less likely to have access to investing. Latino household wealth lags that of white counterparts, and only 26% of Hispanic households have access to an employer-sponsored 401(k) plan, compared to 37% of Black households and half of white ones, the Economic Policy Institute found.  

Lack of access to capital markets makes it harder for Latinos to build meaningful wealth. It also means they’re underrepresented as shareholders of companies if they aren’t holding stocks and that they’re not lending a proportional voice to investing decisions.

“We should be mindful of the connection of finance and the capital markets to the broader economy,” said Rodrigo Garcia, global chief financial officer of Talipot Holdings, an investment management group. “It’s always been a critical piece that we have representation in asset management, in the people who are making decisions on the purchases of stocks, bonds, venture capital private equity and more.”

Latino-focused venture capital

There are several Latino-focused venture capital firms that are working on at least one piece of the puzzle: investing in their communities.

One of those firms is the Boston Impact Initiative, which just launched a $20 million fund focused on investing in entrepreneurs of color.

“We take the earliest risk, we’re funding the teeny-tiny startups that hopefully one day will grow into those companies that become publicly traded and become available in the retail finance sector,” said Betty Francisco, CEO of the Boston Impact Initiative. Those businesses include Synergy Contracting, a women-owned construction company, and Roundhead Brewing, the first Latino-owned craft brewery in Massachusetts.

Another group, Mendoza Ventures, was started in 2016 to address the lack of both women and Latinos writing checks to fund new companies. The Boston-based firm run by Adrian Mendoza has raised $10 million across two funds.

“We give the opportunity to first-time accredited investors, people of color and women to get access to venture capital,” Mendoza said. Accredited investors are individuals or entities that meet specific earned income, net worth or asset thresholds in order to invest in sophisticated or complex securities.

“The majority of wealth in America comes from [mergers and acquisitions] and that comes through venture capital and private equity, so why not be able to diversify on the other end?” Mendoza added.

What investors can do

To be sure, there has been some progress in the financial industry. In 2021, the number of Latino certified financial planners rose by 15% from the prior year. Still, of the overall class of professionals who passed the exam that year, only 2.7% identified as Latino.

Those in the industry see that there’s a benefit to having more people with diverse experiences in all areas of finance.

“You cannot replicate anyone’s lived experience,” said Marcela Pinilla, director of sustainable investing at Zevin Asset Management. She added that as a Latina in finance, she wants to bring more people of color into the industry.

From the perspective of the retail investors themselves, one of the most powerful things they can do is look at what they’re investing in and ask how many of those dollars are going to Latino fund managers, Latino-led funds or even companies with Hispanic leadership.

“I think just the simple question of ‘who is managing my money?'” is important, said Mendoza.

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Juan Espinoza, far left, with his family.

A combination of rising interest rates, high home values and limited inventory has been squeezing prospective homebuyers — and perhaps few know that as well as Juan Espinoza does.

The 23-year-old resident of Santa Ana, California, has been on a three-year search for a dwelling that’s within the family budget that includes the four in his own family — and his parents.

“We live in an apartment right now, just waiting for the market to come down a little bit,” Espinoza said. “We’ve been outbid so many times I’ve lost track of how many houses we saw.”

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The family is facing two trends that have made the search especially difficult. The first is that home prices, even as they are beginning to cool, have jumped sharply in the past year. And the Espinozas have been searching in Orange County where the median home price was $987,950 during the third quarter, up 11% from the year-earlier period, according to ATTOM Data.

The second is that the Espinozas are among the millions of people with multiple generations residing under one roof. In March 2021, there were 59.7 million U.S. residents in that living arrangement, up from 14.5 million in 1971, according to Pew Research.

Mortgage rates have also surged as the Federal Reserve tightens monetary policy to curb inflationary pressures not seen in about 40 years. The rate on a 30-year fixed mortgage reached 6.66% on Oct. 6 according to Freddie Mac. It was 2.99% on Oct. 7, 2021.

“We’re going to make them homeowners, but the interest rates have gone up, and their purchasing power has gone down,” said Imelda Manzo, a Murrieta, California-based realtor who has been working on finding new housing for the Espinozas.

Multigenerational households

Families of color are more likely to share a home with multiple generations, Pew found. Roughly a quarter of Asian, Black and Hispanic Americans each lived in multigenerational households in 2021, compared to 13% of those who are white.

Residing with relatives can offer advantages: More family members residing under one roof means you can pool multiple streams of income, for instance. And in households with young children, grandparents can pitch in with child care.

“Latinos are more likely to live in multigenerational households,” said Gary Acosta, co-founder and CEO of the National Association of Hispanic Real Estate Professionals.

“But being a larger multigenerational family comes with complications if you’re trying to be a homeowner,” he said.

For instance, it can be harder for them to qualify for a mortgage, even if they bring multiple streams of income to the table. “The perception is that those aren’t permanent scenarios, so the instinct of the underwriter is to look at everything else more aggressively,” Acosta said.

Larger families also have needs to meet as they search for their dwellings, which make it hard to find the ideal home when inventory is tight. “It’s not just square footage, but do you have a yard, more bedrooms,” Acosta said. “You want more utility.”

“Work-at-home growth pushed homebuyers to the suburbs and toward homes with more utility, such as extra bedrooms that can be used as a home office,” Acosta said. Institutional buyers have also rushed into affordable neighborhoods to snap up homes, he added. Indeed, a May report from the National Association of Realtors found that in 2021 the institutional buyer market share rose in 84% of states, as well as in the District of Columbia.

For the Espinoza family, the ideal home would have at least three bedrooms, a backyard and proximity to employment and schools in Santa Ana.

These issues are also compounded by the fact that first-time homebuyers like the Espinozas have been facing fierce competition from all-cash buyers.

“We would get counteroffers,” said Manzo. “[Sellers] would ask for highest and best within a deadline.”

Aggressive bidders are also willing to up the ante to buy a home, including waiving inspections and appraisal contingencies, she said. And others just bring more cash to the table.

In one situation, the family lost their bid on a home to another buyer who was willing to pay $125,000 over asking, Manzo added.

Seeking balance between higher rates and falling prices

As homeownership becomes increasingly unaffordable, different states are crafting legislation to address the problem.

Last year, Democratic California Gov. Gavin Newsom signed the California Housing Opportunity and More Efficiency Act into law. The measure streamlines the process for homeowners to split their residential lot or build a duplex onto their property.

The law also makes it easier for homeowners to build accessory dwelling units onto their property, said Acosta, which can also help accommodate multigenerational households.

Freddie Mac

“These additional units are typically called granny flats and can be used as an extra bedroom or it can be a small apartment inside of another property, so it increases density,” he said.

Another piece of proposed legislation in New Jersey would permit buyers bidding on foreclosed homes to make a down payment of 3.5%, provided they make that property their primary residence for at least seven years. Normally, buyers of these foreclosed properties would have to put down a deposit of 20%.

For the Espinoza family, the next steps are to wait for the market to cool sufficiently — and to keep an eye on interest rates, even as the Fed continues its policy-tightening regime.

“We’ve started to see some sellers are doing price reductions on their listing; they’re not selling the way they were six months ago,” Manzo said. “We’re in a waiting period right now, but we’ll continue to look and see what happens toward the end of the year.”

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Container freight rates, which soared to record prices at the height of the pandemic, have been falling rapidly and container shipments on routes between Asia and the U.S. have also plunged, logistics data shows.
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After two years of port congestions and container shortages, disruptions are now easing as Chinese exports slow in light of waning demand from Western economies and softer global economic conditions, logistics data shows.

Container freight rates, which soared to record prices at the height of the pandemic, have been falling rapidly and container shipments on routes between Asia and the U.S. have also plunged, data shows. 

“The retailers and the bigger buyers or shippers are more cautious about the outlook on demand and are ordering less,” logistics platform Container xChange CEO Christian Roeloffs said in an update on Wednesday.  

“On the other hand, the congestion is easing with vessel waiting times reducing, ports operating at less capacity, and the container turnaround times decreasing which ultimately, frees up the capacity in the market.”

The latest Drewry composite World Container Index — a key benchmark for container prices — is $3,689 per 40-foot container. That’s 64% lower than the same time last September after falling 32 weeks in a row, Drewry said in a recent update.  

The current index is much lower than record-high prices of over $10,000 during the height of the pandemic but still remains 160% higher than pre-pandemic rates of $1,420. 

According to Drewry, freight rates on major routes have also fallen. Costs for routes like Shanghai-Rotterdam and Shanghai-New York have fallen by up to 13%. 

The falling freight rates tie in with a “sharp drop” in container shipments that Nomura Bank has observed. 

Nomura, quoting data from U.S.-based Descartes Datamyne, said container shipments from Asia to the U.S. for all products except rubber products in September are down year on year.

“We assume that the sharp drop in container shipments largely reflects US retailers stopping orders and reducing inventories due to the risk of an economic slowdown,” Nomura analyst Masaharu Hirokane said in a note on Wednesday, adding that the bank has yet to see signs of a sharp fall in U.S. retail sales.

Port throughput around the world has also dropped. When Shanghai reopened after its recent lockdowns, port traffic volumes lifted but weren’t enough to offset the “wider downturn in port handling levels,” Drewry said. 

What’s different now

In Europe, sliding container prices and rates reflect declining consumer confidence, Container xChange said. 

“The European market is finding itself flooded with 40-foot high-cube containers. As a result, the region is experiencing a fall in the prices of these boxes,” Container xChange said. 

The trends in logistics and supply chains from the past two years have reversed, logistics companies said. During that period, container shortages were constant as a result of delays at ports affected by lockdowns and soaring demand.

In Europe, sliding container prices and rates reflect declining consumer confidence, Container xChange said.
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But now, demand for containers is falling and so are their rates, Seacube Containers chief sales director Danny den Boer said at the Digital Container Summit held earlier this month. 

Idle time for containers is also on the rise, Sogese CEO Andrea Monti said at the same conference.   

“Containers are stacking up at a lot of import-led ports. Shippers are giving containers away just because containers are being stuck there,” said Container xChange account manager Gregoire van Strydonck at the conference. 

India’s Arcon Containers CEO Supal Shah said factories in China have stopped production for the foreseeable future. 

“We heard four months,” he said at the Digital Container Summit conference.

“The container depot space is full in China, Europe, India, Singapore and most parts of the world.”

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Customers shop at the GU Co. store in the SoHo neighborhood of New York, US, on Friday, Oct. 7, 2022.
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Consumer spending was flat in September as prices moved sharply higher and the Federal Reserve implemented higher interest rates to slow the economy, according to government figures released Thursday.

Retail and food services sales were little changed for the month after rising 0.4% in August, according to the advance estimate from the Commerce Department. That was below the Dow Jones estimate for a 0.3% gain. Excluding autos, sales rose 0.1%, against an estimate for no change.

Considering that the retail sales numbers are not adjusted for inflation, the report shows that real spending across the range of sectors the report covers retreated for the month.

A Bureau of Labor Statistics report Thursday indicated that consumer prices rose 0.4% including all goods and services, and 0.6% when excluding food and energy.

Miscellaneous store retailers saw a decline of 2.5% for the month, while gasoline stations were off 1.4% as energy prices declined.

A slew of other sectors also posted drops, including sporting goods, hobby, books and music stores as well as furniture and home furnishing stores, both of which posted a -0.7% drop, while electronics and appliances were off 0.8% and motor vehicle and parts dealers fell 0.4%.

General merchandise store sales rose 0.7%. Gainers also included online stores, bars and restaurants, clothing retailers and health and personal care stores, all of which saw 0.5% increases.

While the gains for the month were muted, retail sales rose 8.2% from a year ago, matching the rise in the consumer price index. Shoppers remain generally flush with cash though there are indications of late that they are dipping into savings to make ends meet.

The Fed has enacted multiple interest rate hikes aimed at reducing inflation and bringing the economy back into balance. Markets expect the central bank to raise rates up to 1.5 percentage points more through the end of the year.

A separate report Thursday showed that import prices fell 1.2% in September, slightly more than the 1.1% estimate. Exports declined 0.8%.

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