Municipal bond sales for new projects hit 10-year high
U.S. states and cities are turning to the municipal-bond market to raise money for new projects at the fastest pace in at least a decade, a sign of optimism as tax revenue improves with the reviving economy and as federal aid pours in.
Localities issued about $65 billion in long-term municipal debt in the first four months of 2021 solely for new projects, a 31% jump from the same period of last year, according to data compiled by Bloomberg. The tally marks the most bond sales for new endeavors, known as new-money issuance, to begin a year since 2010.
The borrowing burst speaks to localities’ improving confidence as business activity recovers with the vaccination campaign and as localities ponder how to spend the money they’re getting from the $350 billion of aid in President Joe Biden’s American Rescue Plan.
In just two examples of deals for infrastructure projects that are about to hit the market, West Virginia is selling more than $200 million of general-obligation bonds to fund highway, bridge and secondary road construction; and Colorado is set to issue $500 million of certificates of participation for highway and transit projects in rural areas.
“Many issuers delayed projects or scaled them back because of the pandemic,” said Peter Block, head of municipal strategy at Ramirez &Co. “We’re seeing a natural increase in new money as the economy picks up.”
US initial jobless claims
fell by more than forecast
Applications for U.S. state unemployment insurance fell to a fresh pandemic low for the week ended May 8 as business confidence strengthens and employers seek to fill more positions left open by restrictions.
Initial claims in regular state programs declined by 34,000 to 473,000 in the week ended May 8, Labor Department data showed Thursday. The median estimate in a Bloomberg survey of economists called for 490,000 claims. The prior week’s figure was revised up to 507,000.
The labor market continues to improve as more Americans get vaccinated and consumer demand picks up, helping spur economic activity. As more businesses and states lift remaining pandemic restrictions, hiring is expected to continue to accelerate.
Claims data have been volatile during the pandemic amid backlogs, fraud and new programs. Also, several states including South Carolina and Montana have recently said they plan to pull out of federal unemployment benefit programs amid a debate about whether generous aid is playing a role in why businesses are having a hard time hiring workers.
Michigan and New York led among states with the biggest declines last week.
Expert: Chip shortage to cost
auto industry $110 billion
The semiconductor shortage is now expected to cost global automakers $110 billion in revenue this year, according to global consulting firm AlixPartners, up from the $61 billion the firm predicted in January.
Interruptions to chip supply, including a fire at a Japan semiconductor facility, severe weather in Texas and a drought in Taiwan, pushed the firm to increase its original estimates, which also included the production loss of 2.2 million vehicles. The firm now expects a production loss of 3.9 million vehicles globally, representing a little more than 4.5% of the vehicles automakers planned to build this year.
“These (chip) plants are running full out,” said Dan Hearsch, a managing director in AlixPartners’ automotive and industrial practice. “There’s nothing to absorb the shocks, there’s no additional capacity, there’s no additional inventory … all of the cushion has been taken out and you’re running on knees with no cartilage.”
Automakers here and abroad have been battling the semiconductor shortage since the start of the year. They’ve halted production at various plants, even shutting down some of the ones that make high-demand trucks.
Ford Motor Co. expects to lose some 1.1 million vehicles of planned production this year, the Dearborn automaker said on its earnings call. The Dearborn automaker is projecting a $2.5 billion hit to its adjusted earnings for the year due to the chip shortage.
General Motors Co. hasn’t provided specifics on volume impact. The Detroit automaker has said the shortage could lead to a $1.5 billion to $2 billion earnings hit.
Japanese automaker Nissan said it’s planning to produce half a million fewer vehicles in 2021, CNBC reported Thursday.
By wire sources
