— U.S. Productivity Surges Past Expectations; Saudi Budget Deficit Widens; U.S. Office Space Shrinks for First Time; Buffett Buys More Treasuries; 10 Injured in Long Island Rail Derailment; U.S. Mortgage Rates Hit 3-Week High; Apollo Net Profit Jumps 75%
1. U.S. Productivity Surges Past Expectations
The U.S. Bureau of Labor Statistics reported today that labor productivity in Q2 rose at an annualized rate of 3.7%, exceeding economists’ median forecast of 2.2%.
Unit labor costs (the cost of labor per unit of output) rose 1.6%, lower than the previous quarter’s 3.3%.
Improved productivity helps offset wage and other cost inflation, which is why many businesses are upgrading their software and infrastructure.
Wages adjusted for inflation rose 2.7% year-over-year.
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2. Saudi Budget Deficit Widens
In Q2, Saudi Arabia’s budget deficit surged 80% quarter-over-quarter to $1.4 billion, mainly due to significant government spending aimed at diversifying away from oil.
Government revenue rose 12% in Q2, with non-oil revenue up 32%, while oil revenue fell 28% year-over-year.
Despite this, the Saudi government still expects a budget surplus for the year and continues to restrict oil output to support prices.
Total government expenditure rose 13%, driven largely by social security and capital spending.
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3. U.S. Office Space Shrinks for the First Time
According to the latest data from JLL, less than 5 million square feet of new office space has broken ground this year, while 14.7 million square feet has been removed or repurposed.
JLL states this may be the first annual net reduction in U.S. office space since 2000.
The average U.S. office vacancy rate has reached 20%.
RentCafe reports that 45,000 apartments nationwide have been converted from former office buildings.
The weak performance of the office sector is pushing more developers to build residential properties, helping ease the nation’s chronic housing shortage.
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4. Buffett Buys More U.S. Treasuries
In an interview with CNBC, Warren Buffett said Berkshire Hathaway bought $10 billion in U.S. Treasuries last Monday, and another $10 billion this Monday.
Buffett expressed zero concern about the recent U.S. credit rating downgrade and said investors shouldn’t worry either.
While markets haven’t overreacted to the downgrade, long-term Treasuries have had their worst week of the year.
On Wednesday night, Bill Ackman said he plans to short 30-year Treasuries.
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5. Long Island Rail Derailment Injures 10
This morning, a Long Island Rail Road (LIRR) train derailed in eastern Jamaica, Queens, injuring 10 people who were taken to nearby hospitals with minor injuries.
The derailment involved 8 train cars and occurred near the intersection of 175th Street and 93rd Avenue in NYC.
An MTA spokesperson said other trains were quickly rerouted and passengers were able to transfer.
This train was traveling from Grand Central Terminal to Hempstead.
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6. U.S. Mortgage Rates Hit 3-Week High
Freddie Mac reported today that the 30-year fixed mortgage rate rose to 6.9% this week, up from 6.81% last week, marking a 3-week high.
Chief economist Sam Khater said that a series of strong economic reports, combined with the U.S. credit rating downgrade, pushed mortgage rates higher.
With rates nearing 7% and housing inventory still low, many prospective buyers remain sidelined.
Economists believe the downgrade played a major role in the rate increase.
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7. Apollo’s Net Profit Soars 75%
Private equity giant Apollo Global Management reported Q2 adjusted net income of $1 billion, up 75% year-over-year and beating analyst expectations, driven by rising interest rates and strong performance from annuities provider Athene.
CEO Marc Rowan stated that investors and the industry increasingly recognize the power of private credit, and the firm’s efforts are paying off.
Athene’s net interest-related earnings jumped 76% to $799 million due to strong capital inflows and higher rates.
Fee-related earnings rose 30% to $442 million, with Apollo increasingly focused on credit and insurance products.
As of Q2’s end, Apollo managed $617 billion in assets, up 20% year-over-year.
Apollo shares rose as much as 6% today to $86.17 per share.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.