Posts Tagged ‘economic recovery’

Home Prices Spike But Is It Real?

Monday, May 6th, 2013

Economists tell us that the reason the US is doing better than Europe is because of two things: our equity markets and our housing sector.  And now comes the news that housing is posting its best numbers since 2006.  The widely followed Case-Shiller indexes showed the price of single-family homes across 20 of the most important U.S. cities grew 9.3% in February, its fastest rate since May of 2006. Single family starts are expected to rise to 700,000 new homes (from 535,000 in 2012) and to 1 million in 2015.

All of this activity is, of course, being driven by all-cash investors looking for high returns (the Blackstone Group is reputedly spending $100 million a week buying homes). And homebuyers eager to lock in at record low interest rates who have very little to choose from. The reasons for short supply aren’t however related to the health of the market but because of the obverse. Home prices are still 29% to 30% off their mid-2006 peaks and monthly foreclosures are more than double what they were before the recession. Clearly, underwater homeowners and people who’ve seen some part of their equity vanish simply don’t want to take a loss so they’re waiting it out. As a result, we’re building more.

As housing price gains 23% per year in Phoenix; 17.6% in Las Vegas, and 16.5% in Atlanta, let us think carefully before we go on a building spree. We still have 1.1 million homes in some state of foreclosure and a shadow inventory that tops 2 million. It is important that we temper the current exuberance with a view to not flooding the market with excess inventory. The housing sector is critical to our recovery for two large reasons – the wealth effect which bolsters consumer spending and the fact that small to medium-sized businesses rely on home equity lines of credit to underwrite their businesses. True recovery can only happen with housing.

Large Firms Driving the Downtown Boom

Wednesday, August 1st, 2012

Here’s a little news to buck up the real estate mavens weathered by the daily diet of recessionary news: Google has signed the largest lease in downtown Chicago in 7 years.

It is a familiar story – a marquee firm relocating downtown because of the hip, cosmopolitan appeal and amenities of a CBD — but it does contradict the usual pattern of a recession. Nationally we’re seeing large firms (more than 500 employees) moving downtown to compete for young workers with the effect that the CBD is doing way better than the burbs. According to National RE Investor (NREI) Magazine, since the advent of the labor market recovery in the first quarter of 2010, large companies have created 1.06 million jobs while small companies have created 823,000 jobs. Talk to an economist or your cycle-tested real estate broker and they will tell you that it’s not how things usually work.

In every recession we’ve tracked, the small to medium-sized businesses (SMBs) have led hiring during the first stages of a recovery only to be surpassed by large firms ramping up during the latter stages of a comeback.  According to NREI, during the economic recovery in 1992 and 1993, hiring by small companies outpaced hiring by large companies—roughly 1.95 million jobs versus 1.52 million jobs. Over the next seven years before the economy entered another recession, the trends reversed. From 1994 through 2000, large firms created 11.23 million jobs while small firms created 7.36 million jobs.

The same thing happened in the economic recovery of the early 2000s: During 2003 and 2004 as the labor market began to recover, hiring by small firms of 1.44 million jobs outpaced hiring by large firms of 592,000 jobs. During this period suburban vacancy fell by 35 basis points while CBD vacancy rose by 130 basis points. But then it reversed. Once again, large companies generated more jobs than small companies —  3.09 million jobs versus 1.89 million jobs.

So, why is it different this time? The answer is credit. Small firms can’t tap the capital markets the way they used to because banks are still cautious. As a result, they need to keep their real estate costs low which means remaining in suburban space. Concurrently, large firms have gone through a huge cost-cutting period which has warranted the restacking, redesign and relocation of their workspaces to utilize space more productively with fewer but more highly skilled workers. And invariably, it means being downtown. Looking at the 10 largest leases of the last 12 years, we see the types of firms that rely on younger, highly educated workers who want to be downtown  — law firms, large financial consulting firms and tech giants.

Tepid 1st Quarter Growth Disappoints

Tuesday, May 15th, 2012

The American economy grew less than expected during the 1st quarter as the biggest gain in consumer spending in more than a year failed to overcome a diminished contribution from business inventories.  Gross domestic product rose at a 2.2 percent annual rate after a three percent increase in the 4th quarter of 2011, according to Department of Commerce Department statistics.  The median forecast called for a 2.5 percent increase.  Household purchases rose 2.9 percent, exceeding the most positive projection.  Home building grew at its fastest pace in almost two years.  The GDP data confirm the view of Federal Reserve officials who expect “moderate” growth as they repeated that borrowing costs are likely to stay low at least through late 2014.

In addition to the improvement in consumer purchases and home building, the economy benefited from a rise in auto production.  The GDP was negatively impacted by a drop in government spending and slower growth in business investment.  The United States is faring better than some other major economies.  The United Kingdom is in the throes of its first double-dip recession since the 1970s.  In Japan and Germany, GDP declined in the final three months of 2011, while China’s economy, the world’s second-largest, is also cooling.

“Consumers are remarkably stable and steady,” said Julia Coronado, chief economist for North America at BNP Paribas in New York.  “We’ll need to see final demand continue to improve.  We’re still in muddling-along territory.”

According to MarketWatch, the devil is in the details. “Growth of 2.2 percent is mediocre, but it’s worse than that once you peel away a few layers — about a fourth of the growth in gross domestic product was accounted for by a build-up in inventories, and half of it came from the building and selling of motor vehicles.  Strip away the inventory growth, and final sales in the economy increased 1.6 percent, the 4th quarter in the past five that was below two percent.  Although all the headlines report on the GDP numbers, the number to watch is final sales, because that gauges demand for our products, not merely how much we made.  Away from King Consumer, the rest of the economy is slowing.  Business investment spending dropped 2.1 percent, the first decline since 2009.  Let’s not get carried away too much by the gloom and doom.  The economy IS growing, even if it’s not as fast as we’d like.  The economy has grown by nearly seven percent since depths of the recession in 2009.”

As disappointing as the 2.2 percent is, the market will have to learn to live with lowered expectations.  From a market perspective, lukewarm growth could force Ben Bernanke’s hand to unfreeze lending, keep interest rates at their current lows, or re-use other monetary policy tools to keep money flowing.  Ironically, even with the Fed’s relaxed monetary policy, most of the extra cash in the economy remains on corporate balance sheets (Apple has billions on hand) or is going into the securities markets.

Official reaction was as expected. “Today’s advance estimate indicates that the economy posted its 11th straight quarter of positive growth, as real GDP (the total amount of goods and services produced in the country) grew at a 2.2 percent annual rate in the first quarter of this year.  While the continued expansion of the economy is encouraging, additional growth is needed to replace the jobs lost in the deep recession that began at the end of 2007,” said Alan Krueger, chairman of the White House’s Council of Economic Advisers.

Fed chairman Ben Bernanke called the slow pace of recovery “frustrating. Here we are almost three years from the beginning of the expansion, and the unemployment rate is still over eight percent.  It’s been a very long slog.  And that, I think, would be the single most concerning thing,” he said.

Rising Gas Prices Send Americans to Mass Transit

Monday, March 19th, 2012

American public transportation ridership rose 2.3 percent last year as gas prices rose to their highest-ever annual average, according to the American Public Transportation Association (APTA).  The 10.4 billion trips recorded last year was the highest since 2008, when gas prices hit more than $4 a gallon nationwide for seven weeks in the summer.

APTA said economic recovery, that sees more Americans commuting to and from work, added to ridership.  Approximately 60 percent of commutes are for work.  Greater use of smart-phone apps, which “demystify” schedules for riders, also boosted ridership, the APTA said.  Increases in public transportation were reported in communities of all sizes and among light rail, subway, commuter train and bus services, the APTA said.  The largest increase — 5.4 percent — occurred in rural communities with populations of less than 100,000, said Michael Melaniphy, APTA’s president and chief executive.

Spending on public transport totals in the region of $50 billion a year, Melaniphy said.  Funding for public transportation is split nearly 50/50 between federal dollars from the gas tax, money from state and local property and sales taxes, and ridership fees.

In Boston, where unemployment has fallen two percent since the beginning of 2010, ridership rose four percent last year to an average of 1.3 million passenger trips a day on weekdays, said Joe Pesaturo, of the Massachusetts Bay Transportation Authority.

Because of the recession, transit agencies were forced to operate more efficiently and better care for existing systems and equipment, said Robert Puentes, senior fellow in the Metropolitan Policy Program at the Brookings Institution.  That has resulted in better service.

In terms of specific modes of transit, light rail (including streetcars and trolleys) led with a 4.9 percent increase.  This was followed by heavy rail (subways and elevated trains) at 3.3 percent; commuter rail at 2.5 percent; and large bus systems at 0.4 percent.

It’s ironic that these increases occurred despite the fact that transit agencies have had to increase fares and decrease service because of budget cuts, according to Melaniphy. “Can you imagine what ridership growth would have been like if they hadn’t had to do those fare increases and service cuts?”

11 Percent Rise In New-Home Sales

Thursday, May 12th, 2011

New home sales rose in March, with the number of properties on the market at its lowest since the 1960s.  Additional gains will be stymied by competition from the market’s glut of previously owned houses.  Single-family home sales rose 11.1 percent to a seasonally adjusted 300,000 unit annual rate, according to the Department of Commerce, during a month when economists had expected a 280,000-unit pace.  Even with the March uptick, new home sales are just bouncing along the bottom.  Despite the good news, the number of houses sold still is 21.88 percent less than the level achieved one year ago.  The news was released by the U.S. Census in its monthly New Residential Home Sales Report for March.

“Investors continue to drive the market and were about 22 percent of the purchasers in March, up from 19 percent a year ago,” said economist Joel Naroff, of Naroff Economic Advisors, in Holland, PA.  Investors typically look for foreclosures or short sales.  “They love those cheap distressed homes, which now make up 40 percent of the market,” Naroff said.  “Given the tight lending standards cash buyers are more than welcome.  To get a Fannie or Freddie loan, which are the only games in town, a borrower has to have a credit score of about 760.  Before anyone gets excited and thinks housing is on the rebound, understand that we need to more than double the March sales pace to reach decent sales levels,” Naroff said.  “Prices remain soft and are down by about five percent over the year.”

According to Dirk van Dijk of the Wall Street Pit, “The March level was substantially better than the expected rate of 280,000.  The 11 lowest months on record (back to 1963) for new home sales have all been in the last 11 months.  We are down sharply from a year ago, and it is not like a year ago was a great time in the homebuilding industry either.  Relative to the peak of the housing bubble (July ’05, 1.389 million) new home sales are down 78.4 percent.  Inventories of new homes were down 1.1 percent on the month and are down 19.7 percent from a year ago.  Supply is at 7.3 months, down from 8.0 months in February, but up from 7.1 months a year ago.  While that is well off the peak of 12.0 months, it is still above normal.  A healthy market has about a six month supply of new houses and during the bubble, four months was the norm.”

The median price of new houses sold in March was $213,800, according to the Census Bureau.  “It’s a decent start to the spring selling season, but we’re coming off all-time lows here, so we’re not going to get too excited,” said Brett Ryan, economist with Deutsche Bank Securities.  “The overhang of foreclosures drags on new home sales.  Builders are waiting for a clearing process to take place.”

The housing market was either “little changed from low levels” or weaker across the country, the Federal Reserve said in its most recent Beige Book report.  The absence of a continued housing rebound is one of the reasons why policymakers will complete their $600 billion asset purchase plan and keep borrowing costs at nearly zero to encourage growth.

Last year was the fifth consecutive year of declining new-home sales. According to economists, it could take years before sales return to a healthy pace.  Slow new-home sales add up to fewer jobs in construction, which normally powers economic recoveries following recessions.  Each new home creates an average of three jobs for a year and adds $90,000 to the local tax base, according to the National Association of Home Builders.

Bernanke Press Conferences Shedding Light on the Fed’s Inner Workings

Monday, May 9th, 2011

Ben Bernanke’s first-ever press conference is important because the unprecedented move gives the world a look at the inner workings of the often arcane Federal Reserve.  As a general rule, the Fed’s chairman avoids press conferences.  Typically they issue statements that are worded with extreme care.  Since the economic meltdown, however, the Fed’s increased role in crafting the nation’s fiscal policy has been under the microscope.  As a result Bernanke decided to start holding press conferences every few months “to further enhance the clarity and timeliness of the Federal Reserve’s monetary policy communication”

Veteran Fed watchers say Bernanke will avoid make any unexpected observations about the economy.  The Fed almost certainly won’t raise interest rates or change the course of the Quantitative Easing 2 (QE2) program to boost economic recovery.  What makes the event important is that it is a new chapter in the history of U.S. central banking, one that brings transparency that allows the Federal Reserve to make its case for monetary policy directly to the American people.  The press conference, “whose ostensible purpose is to add more transparency regarding Fed policy, is really designed to help repair its image with the general public, a process that began when Bernanke first appeared on ’60 Minutes,’” writes Bernie Baumohl, chief economist at The Economic Outlook Group.  “The press conference serves multiple purposes.  It helps explain the Fed’s role in the economy, improves public trust in the central bank, and can be used discreetly as a platform to place more pressure on Congress to reduce the swelling budget deficits.”  During the financial crisis, some criticized the Federal Reserve’s role in the economy, with conservative Tea Party movement members calling for a dissolution of the Fed or a Congressionally-mandated opening up of the once-secretive central bank.  The press conference is intended to silence the critics by providing certain details that were previously denied.

The Fed is notoriously tight lipped Until 1994, the Fed never notified’ the public of policy changes, leaving an army of Wall Street “Fed watchers” to figure them out for themselves. The Federal Open Markets Committee (FOMC) did not release statements on a regular basis until 1999.  The majority of Fed chairmen have shied away from the cameras.  Now, Bernanke is welcoming them.  Although Bernanke excels at not saying anything newsworthy, the timing of the first press conference comes at a particularly sensitive time: shortly before the end of the controversial QE2 monetary policy program, and during an argument over inflation.  Bernanke and other FOMC members, such as Fed Vice Chairwoman Janet Yellen, argue that inflation remains subdued: Demand is slack, and core inflation below-target.  But not everyone shares that view. More hawkish Fed officials, such as Thomas Hoenig of the Kansas City Fed, have pointed to frothiness in oil, food, and commodities markets to make loud calls for tightening.

Writing in the Atlanta Journal Constitution Washington Insider columnist Jamie DuPree says that “Ben Bernanke starts what will be the first of four annual news conferences about the work of the Fed.  The job of Fed Chairman has always been a little mysterious, feeding a variety of conspiracy theories about its work and ties to other groups like the Trilateral Commission and more.  The news conferences will take place four times a year, after the Fed meets for its quarterly policy-making meeting, where announcements are made on interest rates and economic policy.  Bernanke is no stranger to the limelight, as he testifies regularly on Capitol Hill, taking questions from lawmakers.  But Fed Chairs usually don’t do press conferences – and you don’t have to have much of an imagination to wonder if there could be some odd questions thrown his way.  In fact, Fed Chairs often don’t do interviews either, making his twice-per-year testimony before the Congress a big story to cover.  Because the insight of the Fed Chairman is so important to the markets, the Federal Reserve does not want the testimony leaked early, for fear that someone could use it to manipulate trading in some way.”

Economists Say U.S. Economy Is on the Road to Recovery

Wednesday, April 27th, 2011

The American recovery is on the road to recovery, unless the mounting federal deficit slows its momentum.

A recent survey by Smart Brief and the international market research firm Ipsos of 841 financial professionals found that 67 percent think that stock prices will rise this year and that the country’s economic output will increase by 65 percent; another 59 percent said they expect unemployment to decrease slightly in the next 12 months.  The survey found that even such modest optimism is tempered by expectations of rising health care costs (88 percent); higher fuel prices (85 percent); rising prices for durable goods such as appliances, automobiles and consumer electronics (72 percent); and slightly higher interest rates (59 percent).  Additionally, 43 percent expect home prices to continue declining, while only 21 percent expect them to rebound; 34 percent expect no change.  By a margin of 70 percent – 30percent, respondents oppose allowing states to declare bankruptcy; 77 percent expect the nuclear disaster in Japan to drive greater investment and funding into renewable energy.

“Financial professionals are cautiously optimistic about economic prospects in the near term; indeed, they think that the overall scenario will improve, and they’re making business decisions on that basis, such as increased investment and hiring,” said Ipsos Managing Director Cliff Young.  “That being said, there are still concerns in the short to medium term about the increased costs of inputs such as fuel and durable goods.”

Larry Summers, former president of Harvard and architect of the Obama administration’s stimulus plan agrees, noting that “An economy in economic freefall has now recovered for 18 months,” he said.  “Make no mistake, the American economy has a feeling of normalcy that was completely absent in 2009 and that is a substantial achievement.”  Summers warned that the nation faces new challenges, including reducing the 8.9 percent unemployment rate, which he said is “far, far too high.”  He said it will be important for the US — and Massachusetts, in particular — to keep the life sciences industry strong.

To keep the recovery on track, the International Monetary Fund urged the United States to speed up efforts to slash the budget deficit.  “It is important the United States undertakes fiscal adjustment sooner rather than later,” said Carlo Cottarelli, director of the IMF Fiscal Affairs Department, the U.S. is projected to have a fiscal debt balance as a percentage of GDP of 10.8 percent in 2011, the biggest percentage among advanced countries. “Market concerns about sustainability remain subdued in the United States, but a further delay in action could be fiscally costly,” the IMF said.

According to the IMF, although most advanced economies have taken steps to tighten budget gaps, two of world’s largest economies — Japan and the United States — had delayed action to maintain their recoveries.  “Countries delaying adjustment in 2011 will face more significant challenges to meet their medium-term objectives,” the IMF warned in its updated “Fiscal Monitor” report.

Signs of Confidence Sprouting in the Construction Industry

Tuesday, April 12th, 2011

The recent construction industry mantra of “Wait until next year” may be coming to fruition in 2011, according to a recent survey conducted by ENR.  The 1st quarter of 2011 Construction Industry Confidence Index (CICI) survey soared to 51 on a scale of 100, a significant increase from the 43 percent reported in the 4th quarter of 2010.  The rise marks the first time the CICI has risen above 50 since March of 2009 and provides hints of a market that is stabilizing.  The survey of 679 construction and design executives suggests that the market has hit bottom and should improve throughout the year.

The uptick in market confidence is in step with the most recent CONFIN-DEX survey conducted by the Construction Financial Management Association.  This survey of contractors, general contractors and civil contractors spiked to 131 from 117 on a scale of 200, said Mike Verbanic, the organization’s director of marketing.  The most encouraging statistic is the increase that measures current business conditions, which rose to 145 from 129, again on a scale of 200.  “What makes these indices doubly reassuring is that our members are not wild gamblers, so their responses are measured and based on conditions they see,” according to Verbanic.  CFMA’s survey found some bad news in the financial conditions index, which rose to 116 from 105.  “These indices show that CFMA members expect demand to increase, but that credit and project financing may lag,” said Anirban Basu, CEO of Sage Policy Group, Inc., an economic consulting firm.

Although relatively few survey respondents plan to start office construction projects anytime soon, the strongest sectors are hospitals and healthcare facilities; distribution centers and warehouses; multi-family residential; retail; hotels and hospitality; and entertainment.  Fully 27.6 percent of respondents said client access to credit is an ongoing problem, while 51.8 percent said that access to credit is easier now than just a few months ago.  An additional 20.7 percent believe that access to credit is easing.

Construction companies are concerned about the price of materials.  A significant 80.3 percent of respondents said they are experiencing pressure on the cost of materials and equipment.  The cost of steel, copper and gas were mentioned most often.  According to Basu, the Producer Price Index has shown substantial price pressure recently.  “The dollar has been softening recently and there is evidence that commodity speculators have become more active in the metals markets,” he said.

Democrats, Republicans Butt Heads on Fed’s Quantitative Easing 2

Monday, February 21st, 2011

Federal Reserve Chairman Ben Bernanke is knocking heads with Representative Paul Ryan (R-WI), the new chairman of the House Budget Committee, about how to best control inflation while buying billions of dollars worth of Treasury bonds to build up the economy in a process called quantitative easing 2 (QE2). As the nation’s debt climbs to an unprecedented high level, President Obama is in the difficult position of having to forge an agreement with Congress on how high the legal cap on how much money the government can borrow will be.  The Republicans who now control Congress say they will consent to an increase in the cap only if President Obama agrees to make significant budget cuts. Ryan has been an outspoken opponent of the Fed’s stimulus policy, which is pumping $600 billion into the economy through purchases of long-term Treasuries.  He is concerned that the policy will accelerate inflation, create asset bubbles and reduce the dollar’s value.  “My concern is that the cost of the Fed’s current monetary policy…will come to outweigh the perceived benefits,” Ryan said. “We are already witnessing a sharp rise in a variety of key global commodities and basic material prices.”

Bernanke disagreed, saying “The inflation is taking place in emerging markets because that’s where the growth is.”  In the United States, he said, “overall inflation is still quite low and longer-term inflation expectations have remained stable.”  Bernanke pointed to growth in economies like China, India and Brazil as the real cause of rising prices.

Speaking in a different venue, Treasury Secretary Timothy Geithner expressed confidence that Congress ultimately will raise the debt limit.  “I can say this with complete confidence – that the U.S. will meet its obligations, that Congress will act as it always has to make sure we meet those obligations,” Geithner said.  “There’s always a little political theater around this.”

Democrats and Republicans remain sharply divided on the issue.  “It would be reckless from an economic and financial perspective…to essentially default on our debts and question the creditworthiness and full faith and credit of the United States, correct?” asked Representative Chris Van Hollen (D-MD) “Wouldn’t significant reductions or addressing the short-term spending aspect be good for the market and economy?” asked Representative Scott Garrett (R-NJ).

Representative Ron Paul (R-TX) and a Libertarian characterized Bernanke’s testimony as “cocky”. Paul, a 2008 presidential candidate who is a long-term critic of the Federal Reserve, now has a platform to air his views, thanks to the Republicans winning control of the House. As chairman of the House Domestic Monetary Policy and Technology Subcommittee, Paul called the hearing to examine the impact of the Fed’s policies on job creation and the unemployment rate.  Paul has advocated for measures that would review the Federal Reserve or even eliminate it.  Additionally, Paul slammed the Fed’s latest $600 billion bond-buying program, saying it and near-zero interest rates haven’t led to job creation in the United States.

The Times, They Are A-Changin’

Wednesday, June 9th, 2010

As consumer confidence returns, Americans are realizing that the Great Recession has changed our way of life.  The economic upheavals of recent years have changed Americans in ways that we are still coming to terms with because it marks the end of an era.  The Great Recession was anything but an ordinary downturn and the way we live and work has been transformed.  Construction and auto jobs have declined by one-third; retail and banking employment is down eight percent.  Some of those jobs will return as the economy improves, but Americans must face the new reality that the era of cheap credit, cheap oil and runaway consumerism has vanished – and likely will remain that way at least for the foreseeable future.

Writing in The Economist, Greg Ip, a senior writer for The Wall Street Journal, says that “The crisis and then the recession put an abrupt end to the old economic model.  Despite a small rebound recently, house prices have fallen by 29 percent and share prices by a similar amount since their peak.  Households’ wealth has shrunk by $12 trillion, or 18 percent, since 2007.  As a share of disposable income it is back to its level in 1995.  And if consumers feel less rich, they are less inclined to spend.  Banks are also less willing to lend:  they have tightened loan standards, with a push from regulators who now wish they had taken a dimmer view of exotic mortgages and lax lending during the boom.”

Consumer debt was 129 percent of disposable income in 2007, a rise over the 80 percent reported in 1990 – an untenable situation that was destined to come to a bad end.  Over the next six or seven years, Americans will slash their debt to more controllable levels, according to the McKinsey Global Institute.  Ip notes that “The effect on the economy of deflated assets, tighter credit and costlier energy are already apparent.  Fewer people are buying homes, and the ones they buy tend to be smaller and less opulent.  In 2008 the median size of a new home shrank for the first time in 13 years.  The number of credit cards in circulation has declined by almost a fifth.”

The recession was caused by a financial crisis that harmed the financial system and saw consumers and businesses weighted down by surplus buildings, equipment and debt acquired during the boom.  With recovery now in its ninth month, the GDP has grown at approximately four percent and unemployment remains at generational highs.  Innovation is being scaled back, because tight credit makes it impossible for start-ups to get the cash they need.  Despite the glum news, there is reason for optimism.  The Conference Board has reported an increase in consumer confidence, rising to 63.3, an increase over the 57.7 reported in April.

According to Lynn Franco, Director of The Conference Board Consumer Research Center, “Consumer confidence posted its third consecutive monthly gain, and although still weak by historical levels, appears to be gaining some traction.  Consumers’ apprehension about current business conditions and the job market continues to slowly dissipate.  Consumers’ expectations, on the other hand, have increased sharply over the past three months, propelling the Expectations Index to pre-recession levels (August 2007, 89.2).  The improvement has been fueled primarily by growing optimism about business and labor market conditions. Income expectations, however, remain downbeat.”