- Post Office controversy drives some staff-level talks on pandemic rescue bill
- President Trump and administration officials voice support for phase-one trade deal
- U.S. housing starts expected to rise for a third month
Post Office controversy drives some staff-level talks on pandemic rescue bill — House Democrats are driving hard for money to support the U.S. Post Office, which needs money to cover pandemic losses and to improve infrastructure in order to make sure it can handle the expected crush of mail-in ballots. Speaker Pelosi has called House members back to Washington on Saturday to vote on $25 billion of funding for the Post Office and protections against any attempts by Post Office officials to curb mail-delivery capabilities.
House Democrats currently plan to vote only on the Post Office legislation on Saturday. However, it is conceivable that efforts to find common ground with Republicans on the Post Office could lead to some additional negotiations on the pandemic stimulus bill, which was tabled when talks broke down on August 7 and President Trump issued four executive orders on August 8.
White House Chief of Staff Meadows on Monday told reporters that there have been continued pandemic-bill talks among lower-level staffers but not among the principals of Meadows, Mnuchin, Pelosi, and Schumer. McConnell and Mnuchin on Monday briefed Senate Republicans on a conference call about the status of the larger pandemic stimulus bill.
Meadows and Mnuchin said that Republicans are willing to provide the $10 billion of Post Office funding that was included in their last $1 trillion pandemic stimulus bill offer. However, it appears that the Post Office aid would only be given as part of a larger pandemic stimulus bill that conforms with the Republican’s stimulus-bill offer. Bloomberg reports that Republicans are now putting together a scaled-down pandemic relief bill that would include Post Office funding, $300 per week in bonus unemployment benefits, a second round of PPP money for small businesses, and pandemic liability protection for employers.
There seems to be little chance of an agreement on the Post Office aid since the House wants $25 billion and the Senate appears to be offering only $10 billion as part of an overall pandemic stimulus offer. House Speaker Pelosi wants a $2 trillion stimulus bill and seems willing to peel off only the Post Office as an individual issue. Senate Republicans seem to have little interest in just a Post Office deal. While the current discussions about Post Office funding are encouraging, the odds of a near-term pandemic stimulus bill still seem very unlikely.
President Trump and administration officials voice support for phase-one trade deal — President Trump and his top officials have voiced support for the U.S./China phase-one trade deal in recent days.
White House advisor Kudlow last week said on several occasions that the trade deal is “fine.” President Trump seemed to indicate support for the trade deal when he said on Saturday that, “China has been buying a lot of — a lot of things, and they’re doing that to keep me happy.” White House trade advisor Navarro said Monday on CNBC that the phase-one trade deal is on track. Commerce Secretary Ross on Monday said that China has been buying large amounts of U.S. ag products.
There still has been no real explanation of why Saturday’s 6-month review of the phase-one trade deal was postponed indefinitely other than “scheduling conflicts.” However, the rush of President Trump and his aides to voice support for the phase-one deal suggests that the administration wants to prevent any panic from developing in the stock market because the deal might be close to falling apart.
The stock market could decline sharply if the phase-one trade deal falls apart since President Trump would presumably then go ahead and slap a new round of tariffs on Chinese goods and China would retaliate with higher tariffs on U.S. goods. That would deal an additional blow to the U.S. and global economies, which are still reeling from the pandemic.
U.S. housing starts expected to rise for a third month — The consensus is for today’s July housing starts report to show a +5.0% increase to 1.245 million units, adding to June’s surge of +17.3% to 1.186 million. July building permits are expected to rise by +5.3% to 1.325 million, adding to June’s +3.5% increase to 1.258 million and providing a positive signal for housing starts moving into late summer.
Confidence among U.S. homebuilders plunged during the worst of the pandemic crisis in spring, but has since more than recovered its losses. The NAHB housing market index plunged by -42 points in April to an 8-year low of 30, but then rose in the following four months (May-Aug) by a total of +48 points to 78, thus matching the 35-year record high for the series that was originally posted in 1998.
Confidence among U.S. homebuilders has rebounded sharply because of low mortgage rates and strong demand for new homes by people who need larger houses to work from home or who want to escape apartment living in the city. Indeed, new home sales surged by +19.4% in May and +13.8% in June to a 13-year high of 776,000, exceeding the pre-pandemic level of 774,000 seen in January.
Home sales and builder confidence have also been boosted by extremely low mortgage rates. The 30-year mortgage rate last week was extremely low at 2.96%, which was just 12 bp above the early-August record low of 2.88%.
Meanwhile, U.S. homebuilder stocks have been on a roll thanks to the surge in demand for new homes. The SPDR S&P Homebuilder ETF (XHB) on Monday posted a record high (data since 2006) and is up +17.3% year-to-date.
