Tag Archives: Economy

Retail U.S. gasoline prices surge as refineries warn of shortages after Harvey

A note is left on a gas pump in the aftermath of Hurricane Harvey in Cedar Park, Texas, U.S., September 1, 2017. REUTERS/Mohammad Khursheed

By Julia Simon

NEW YORK (Reuters) – Retail U.S. gasoline prices rose 2.8 percent from Friday to Saturday as refineries warned customers about fuel-supply shortages caused by Hurricane Harvey.

They were at $2.59 a gallon, according to motorists advocacy group AAA. It represents a 16.7 percent rise in the average price from a year ago.

Prices have risen more than 17.5 cents since Aug. 23, before the storm began.

Average prices in Texas, the epicenter of the storm, rose more than 3 percent from Friday to Saturday, and are up 12 percent from a week ago.

Refiner Motiva has warned customers along the route of the largest U.S. fuel pipeline to prepare for shortages after Harvey shut refineries and cut supply to the line, said a source at a fuel distributor supplied by Motiva.

Harvey shut refineries that can process up to 4.4 million barrels per day (bpd) of crude. The plants shut down include Motiva’s 603,000 bpd facility in Port Arthur, Texas, the largest refinery in the country.

Nearly half of the U.S. refining capacity is in the Gulf Coast, a region with proximity to plentiful crude supplies including Texan oil fields and also Mexican and Venezuelan oil imports.

“The refineries were built on the Gulf Coast with the idea that we’re going to import,” said Sandy Fielden, director of oil and products research at Morningstar in Austin, Texas, “That’s why we’re having problems today because that’s where they were all built.”

The reduction in fuel supplies has forced the Colonial Pipeline, which supplies fuel from refineries near the Gulf of Mexico to the U.S. Northeast, to reduce supplies.

Convenience store and gas station chain Circle K, a big buyer from Motiva, said the company was working with a limited supply.

Some crude oil pipelines have restarted operations. Magellan Midstream Partners <MMP.N> announced late Friday that it resumed operations on its BridgeTex and Longhorn crude oil pipelines. The two pipelines transport around 675,000 barrels per day (bpd) of West Texas crude oil into East Houston.

The company says it expects to resume service on its Houston crude oil distribution system over the weekend.

U.S. crude production continues to stall following the storm. As of Friday, volume of crude production still shut-in had declined to about 153,000 bpd, down from 324,000 bpd just two days ago.

(Reporting by Julia Simon Editing by Jeremy Gaunt)

Retail U.S. gasoline prices surge as Harvey keeps refiners shut

A gas station submerged under flood waters from Tropical Storm Harvey is seen in Rose City, Texas, U.S., on August 31, 2017.

By Erwin Seba and Devika Krishna Kumar

HOUSTON/NEW YORK (Reuters) – Retail U.S. gasoline prices hit two-year highs and global shipping routes were scrambled as the nation’s largest refiners remained shut on Friday, even as Storm Harvey lost strength.

Major fuel pipelines feeding the U.S. Northeast and Midwest were either closed or severely curtailed, prompting shortages in some areas and dramatic spikes in wholesale prices.

The storm, which began as a hurricane a week ago, has roiled global fuel markets, and tankers carrying millions of barrels of fuel have been rerouted to the Americas to avert shortages. European refining margins hit a two-year high amid the surge in exports.

Indeed, the effects of the storm will continue for several weeks, if not months, after Harvey hammered the Gulf Coast for days and brought floods that buried Houston and the surrounding area in several feet of water. It knocked out about 4.4 million barrels of daily refining capacity, slightly more than Japan uses daily, and the signs of restarts were tentative.

The nation’s largest refiner, Motiva’s Port Arthur facility, which can handle 600,000 barrels of crude daily, will be shut for at least two weeks, according to sources familiar with plant operations.

Other plants in the Beaumont/Port Arthur area are expected to face similar challenges restarting as waters continued to rise, even as flooding receded in Houston, some 85 miles (137 km) west.

In Corpus Christi, where Harvey first made landfall, refiners Citgo Petroleum Corp, Flint Hills Resources and Valero Energy Corp were moving to restart their plants, along with the nearby Valero Three Rivers refinery, according to sources.

Benchmark U.S. gasoline prices  have surged more than 15 percent since the storm began, but in trading Friday, the contract for October delivery lost 1 percent, the first decline in five days. September’s contract had risen by 25 percent, but stopped trading Thursday.

U.S. crude prices continued to slump along with demand, with the futures contract falling 0.4 percent to $47.02 a barrel.

The national average for a regular gallon of gasoline rose to $2.519 as of Friday morning, according to motorists advocacy group AAA, with even gaudier increases in the U.S. Southeast, which relies heavily on Gulf supplies. South Carolina, for instance, has seen prices rise nearly 30 cents, and prices were up nearly 20 cents in Texas, where fuel shortages were already evident.

 

SHORTAGE WORRIES

Suppliers in the Chicago area were taking steps to prevent shortages, and banking on hope.

Dave Luchtman, owner and president of Lucky’s Energy Service Inc., a small distributor in Chicago, has rented two storage trailers that hold 8,000 gallons each, expected to be delivered Friday.

“So I have a little lifeline,” Luchtman said.

Refineries so far have not given any indication that there are fuel shortages, said Mario Orlandi, an operations manager at Olson Service Co, which supplies diesel and gasoline to the Chicago area.

“Cross our fingers, keep our tanks full,” Orlandi said.

The global impact of the storm was being felt in Venezuela, where financially strapped state-run PDVSA is facing the possibility that scheduled deliveries – tankers floating offshore for weeks due to non-payment – will make their way to other Latin American destinations.

At least two cargoes scheduled to deliver to Venezuela currently in the port of Curacao are now expected to be delivered to Ecuador.

Mexico, Brazil, Colombia and other countries want to tap some of the 7 million barrels of fuel sitting in the Caribbean sea, according to three traders and shippers.

European and Asian traders have diverted millions of barrels of fuel to the Americas. That included a rare opportunity for exports of jet fuel from Europe to the United States, reversing the usual flow of shipments.

Supplies from distant markets may not arrive soon enough to avert a crunch after the Colonial Pipeline, the biggest U.S. fuel system, said it would shut part of its main lines to the Northeast.

“We are going to have outages from Texas to Boston,” said one East Coast market source. The market is “way under-appreciating the magnitude of this.”

Several East Coast refineries have run out of gasoline for immediate delivery as they sent fuel elsewhere, and concerns over shortages ahead of the U.S. Labor Day extended weekend were mounting.

 

(Reporting by Erwin Seba and Devika Krishna Kumar; Additional reporting by Jarrett Renshaw, Susannah Gonzales, Marianna Parraga, Karolin Schaps, Ron Bousso, Libby George and Seng Li Peng; Writing by David Gaffen; Editing by Susan Fenton and Bernadette Baum)

 

Exclusive: At least $23 billion of property affected by Hurricane Harvey – Reuters analysis

A house is seen submerged by flood waters from Tropical Storm Harvey in Orange, Texas, U.S., August 30, 2017. REUTERS/Jonathan Bachman

By Ryan McNeill and Duff Wilson

(Reuters) – At least $23 billion worth of property has been affected by flooding from Hurricane Harvey just in parts of Texas’ Harris and Galveston counties, a Reuters analysis of satellite imagery and property data shows.

The number represents market value, not storm damage, and is but a small fraction of the storm’s reach, as satellite images of the flooding are incomplete. Satellite imagery compiled by researchers at the University of Colorado shows flooding across 234 square miles (600 sq km)of Harris County and 51 square miles (132 sq km) of Galveston County, about one-eighth of each county’s land area.

It is impossible to discern damage amounts from the data, as the satellite imagery does not reveal the depth of the floodwaters; nor does it reveal the impact of wind. But even this partial tally signals that the storm will rank among the most damaging in U.S. history.

Reuters overlaid the flood imagery on property parcel maps and found floodwaters had encroached on at least 30,000 properties in the two counties, with a total market value of $23.4 billion.

Of that, 26 percent is land value; the rest is buildings and other improvements. In Harris County, where Reuters was able to determine the property’s use, about 18 percent of the affected property is residential.

The tally omits much of Houston’s dense urban center because a satellite specializing in urban imagery has not yet taken enough images there. Floodwaters have inundated the area, like surrounding regions, and thousands of homes are damaged. Many roads, including vital highways and parkways, were submerged and businesses flooded and shuttered.

Ultimately, storm damage totals will come from estimates of insured and uninsured losses and disaster assistance payments, not from tallying property assessment values.

And real estate is only part of the equation in the rapidly rising toll as Harvey moves from Texas to Louisiana. Federal damage estimates will also include the vast cost of business interruptions, ruined vehicles and other personal possessions, repairs to roadways and other public infrastructure, and disaster aid like the money used to feed and house tens of thousands of displaced people.

Adam Smith, a lead scientist for the federal agency that compiles storm damage costs, said it is “very possible” Harvey’s costs may surpass the record $160 billion from Hurricane Katrina.

“But it will take some time to understand the magnitude of Harvey’s devastation, which is still unfolding,” Smith said in an email Wednesday to Reuters. “It is very unclear if Harvey’s costs will ultimately surpass Katrina. However, since this is an unprecedented extreme precipitation event over a major city, in addition to the damage to other cities (and) regions from wind, storm surge and flooding, it’s very possible.”

Hurricane Katrina in 2005 caused about $160 billion in damage, Hurricane Sandy in 2012 caused $70 billion, and Hurricane Ike in 2008 caused $34 billion, according to research by the National Oceanic and Atmospheric Administration. The damage figures are adjusted for inflation to 2017 dollars.

Harvey, a category 4 storm with 130 mph winds, came ashore Friday in Rockport, Texas. It churned slowly over the next five days, dropping about 50 inches of rain on Harris County, more than any tropical storm recorded in the continental U.S. since 1950.

Rob Moore, a senior policy analyst for water issues at the nonprofit Natural Resources Defense Council, said it’s “anybody’s guess” how much damage Harvey has wreaked.

“Because of the extent of flooding, a lot of insurance companies are expecting to see very high numbers of complete losses of residential properties,” said Moore, who monitors government and insurance industry reports. “And large proportions of those properties are going to be uninsured. A lot of people have dropped flood insurance policies the last few years.”

Homeowners who live outside the 100-year-flood hazard zone or don’t have mortgages are not required to buy flood insurance. Because there hasn’t been major flooding in Houston in 16 years, many homeowners have dropped coverage to save money.

Asked what would happen to them, Moore said, “They’re left in a situation nobody wants to be in. They’re not going to have very many options for repairing their homes. And a lot of forms of federal disaster assistance aren’t available if you don’t have flood insurance.”

Many of the neighbors who returned Wednesday to Oak Knoll Lane in Northeast Houston find themselves in that predicament. One of them, Valerie Stephens, 32, abandoned her house on Saturday, when about nine inches of water rushed into the house over half an hour. She has no flood insurance, and she said her house, valued at $79,000 on Zillow just before the storm, is worth “much less than that” now.

Up and down the street, water had topped mailboxes and left behind puddles of dirty water, a festering stink and a faint line of grime inside each house where the water had stagnated, usually a couple of feet off the floor.

That’s much less water than some areas have reported, but it was enough that residents began piling furniture on the curb and ripping open walls and floors to stop mold from creeping in and making the situation even worse.

Many did the same thing in 2001 after Tropical Storm Allison swamped the street.

“We’ve already pulled out the doors, the door frames. Then we’ll start with the sheetrock and the floors,” Stephens said. She expects to live with concrete floors and bare sheetrock while she finds the money to pay for all the damage.

(Reporting by Ryan McNeill and Duff Wilson in New York; Additional reporting by Peter Henderson and Ernest Scheyder in Houston; Editing by Janet Roberts and Marla Dickerson)

U.S. consumer confidence hits five-month high; house prices rise

A 'for sale' is seen outside a single family house in Garden City, New York, U.S., May 23, 2016. REUTERS/Shannon Stapleton/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S consumer confidence surged to a five-month high in August as households grew increasingly upbeat about the labor market while house prices rose further in June, suggesting a recent acceleration in consumer spending was likely to be sustained.

The data on Tuesday also supported views that economic growth would accelerate in the second half of the year after a sluggish performance earlier.

“Despite a daily dose of worrying headlines, consumers still have plenty to be confident about right now. Home prices are rising, stocks are just off record highs and the labor market is churning out jobs,” said Robert Kavcic, a senior economist at BMO Capital Markets in Toronto. “That should continue to support solid consumer spending growth through the rest of the year.”

The Conference Board said its consumer confidence index increased to a reading of 122.9 this month from 120.0 in July. That was the strongest reading since March when the index hit a 16-year high of 124.9. August was also the second highest reading since 2000.

The survey’s so-called labor market differential, derived from data about respondents who think jobs are hard to get and those who think jobs are plentiful, was the best in 16 years.

This measure closely correlates to the unemployment rate in the Labor Department’s employment report and is consistent with further absorption of labor market slack. The labor market is near full employment, with the unemployment rate at 4.3 percent.

Strong consumer confidence bodes well for consumer spending, which accelerated in the second quarter after slowing at the start of the year. It also provides a boost to the economy after it grew 1.9 percent in the first half of the year.

The dollar pared losses against a basket of currencies on the data. Prices for U.S. Treasuries were little changed after earlier rising on safe-haven buying after North Korea fired a ballistic missile over Japan’s northern Hokkaido island into the sea. Stocks on Wall Street were marginally lower.

BULLISH CONSUMERS

Economists said bullish consumer optimism, together with the tightening labor market, were compelling reasons for the Federal Reserve to increase interest rates again this year despite worries about persistently low inflation.

“Consumers seem very confident in their ability to find a new job. They also are becoming more bullish on the outlook for stock prices even as the market holds near record highs,” said John Ryding, chief economist at RDQ Economics in New York.

“The Fed has put significant weight on consumer confidence in forming its views on the economy and, from that perspective, this report supports further rate increases.”

The U.S. central bank has raised rates twice this year. Economists expect the Fed will announce a plan to start reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities in September and hike rates in December.

The Conference Board survey showed consumers mildly upbeat about their short-term income prospects. The percentage of consumers expecting an improvement in their income rose slightly to 20.9 percent this month from 20.0 percent in July. The share expecting a drop fell to 7.8 percent from 9.5 percent in July.

Despite being near full employment, the labor market has struggled to generate strong wage growth, a frustration for both consumers and policymakers.

A second report on Tuesday showed the S&P CoreLogic Case-Shiller composite index of house prices in 20 metropolitan areas rose 5.7 percent in June on a year-over-year basis after a similar increase in May.

An acute shortage of homes on the market and strong demand are pushing up house prices. While rising house prices are boosting equity for homeowners, the dearth of properties is hurting home sales.

“Tight market conditions will drive house prices higher over the remainder of the year, although cautious appraisals and tougher mortgage lending regulations will act to prevent a dangerous house price boom,” said Matthew Pointon, an economist at Capital Economics in New York.

(Reporting by Lucia Mutikani; Additional reporting by Richard Leong in New York; Editing by Andrea Ricci)

U.S. current account imbalance unlikely to diminish: researcher

FILE PHOTO - A police officer keeps watch in front of the U.S. Federal Reserve in Washington, DC, U.S. on October 12, 2016. REUTERS/Kevin Lamarque/File Photo

(Reuters) – The United States will likely continue to run a large current account deficit against other countries because of its status as a global safe asset haven among other reasons, a U.S. economist told an annual symposium of some of the world’s most influential central bankers in Jackson Hole, Wyoming, on Saturday.

University of Wisconsin, Madison, professor Menzie Chinn’s research also suggests lawmakers in the United States should look to domestic fiscal policy if they want to reduce external imbalances.

A glut of savings in other countries historically has fueled capital flows into the United States, and while global imbalances have shrunk back to pre-crisis levels such flows will continue to weigh on the nation’s current account balance, especially as the quantity of safe assets has diminished in recent years.

The current account measures the flow of goods, services and investments into and out of a country.

Data shows that the savings glut effect on the current account has faded somewhat but the budget balance has retained its importance since the financial crisis, Chinn said in a paper delivered on the final day of the flagship three-day economic conference.

“Policymakers are clearly not going to seek to diminish America’s ability to generate safe assets. On the other hand, fiscal policy can (and has) had a noticeable influence on current account imbalances,” Chinn told the conference, whose theme this year is how to foster a dynamic global economy.

Global imbalances worry policymakers because they are seen as a risk to financial stability, though views differ on how much of a threat they pose.

The U.S. Congress faces a looming budget battle when it reconvenes in early September. On Tuesday, President Donald Trump promised to shut down the U.S. government if necessary to secure funding for a wall along the border with Mexico.

“For the United States, although the budget balance is not the largest single contributor to the current account imbalances, it is a substantial factor,” Chinn said.

That said, other factors will continue to keep the deficit in place, including the flow of excess savings to the United States.

A large proportion of capital flowing to the United States takes place in the form of purchases of U.S. government securities, particularly by foreign central banks. China and Japan are the largest foreign holders of U.S. government debt.

“While the particular creditor economies might change over time, the U.S. will tend to continue to run deficits larger than is explicable by other factors,” he said.

With monetary policy tightening in the United States and the euro area and similar action in Japan unlikely in the near future “that particular combination will likely lead to an exacerbation, rather than amelioration, of the U.S. current account deficit,” Chinn said.

(Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci)

Trump says U.S. debt ceiling ‘mess’ could have been avoided

U.S. President Donald Trump waves as he steps out from Air Force One in Reno, Nevada, U.S., August 23, 2017. REUTERS/Joshua Roberts

WASHINGTON (Reuters) – President Donald Trump said on Thursday congressional leaders could have avoided a legislative “mess” if they had heeded his advice on raising the U.S. debt ceiling, renewing criticism of fellow Republicans whose support he needs to advance his policy agenda.

Trump said he had advised Senate Majority Leader Mitch McConnell and House of Representatives Speaker Paul Ryan to link passage of legislation raising the debt ceiling to a measure on veterans affairs that he signed on Aug. 12.

“I requested that Mitch M & Paul R tie the Debt Ceiling legislation into the popular V.A. Bill (which just passed) for easy approval,” Trump said a in Twitter post.

“They … didn’t do it so now we have a big deal with Dems holding them up (as usual) on Debt Ceiling approval. Could have been so easy-now a mess!” he added, referring to Democrats.

The Treasury Department, already using “extraordinary measures” to remain current on its obligations, has said the limit on the amount the federal government may borrow must be raised by Sept. 29.

The issue is one of the must-pass measures Congress will take up when it returns on Sept. 5 from its August recess. Another is a spending bill: Congress will have about 12 working days from when it returns from the break to approve spending measures to keep the government open.

Trump threatened on Tuesday to shut down the government if Congress failed to secure funding for his long-promised wall along the U.S. border with Mexico. His threat, which added a new complication to Republicans’ months-long struggle to reach a budget deal, rattled markets and drew rebukes from some Republicans.

Democrats have slammed Trump over his comments.

On the debt ceiling issue, House Democratic leader Nancy Pelosi said on Thursday that with Republicans controlling the White House and both chambers in Congress, “the American people expect and deserve a plan from Republicans to avert a catastrophic default and ensure the full faith and credit of the United States.”

On Thursday, investors were more broadly waiting for speeches on Friday by central bank governors at a conference in Jackson Hole, Wyoming, for any new indications on monetary policy. U.S. stocks opened higher but then turned negative, and U.S. Treasury yields edged higher.

Yields on Treasury bills due in early October rose on concerns that payments on the debt could be delayed if lawmakers fail to raise the debt ceiling before the government runs out of funds.

“There’s disjointedness because of the debt ceiling,” said Lou Brien, a market strategist at DRW Trading in Chicago.

RELATIONS WITH MCCONNELL

Trump’s renewed criticism of the Republican leaders came just a day after the White House and McConnell issued separate statements saying they were continuing to work together on shared priorities, seeking to counter news reports that their relationship is disintegrating.

Trump and McConnell “remain united on many shared priorities, including middle class tax relief, strengthening the military, constructing a southern border wall, and other important issues,” the White House said in its statement.

Trump also reiterated his criticism of McConnell on Thursday over the Senate’s failure in July to pass a bill to replace Democratic former President Barack Obama’s healthcare law, legislation opposed by Republicans since it was enacted in 2010.

“The only problem I have with Mitch McConnell is that, after hearing Repeal & Replace for 7 years, he failed!That should NEVER have happened!,” Trump said in a tweet.

McConnell offered muted criticism of Trump on Thursday, saying he was “a little concerned about some of the trade rhetoric” by the president and others.

Trump has repeatedly condemned trade deals he believes are bad for American workers and for the U.S. economy. On Tuesday he cast doubt on any deal emerging to improve the North America Free Trade Agreement with Mexico and Canada. “We’ll end up probably terminating NAFTA at some point,” he said.

“Trade is a winner for America,” McConnell told a gathering of Kentucky farmers and lawmakers. “You may or may not know this, but of all the current free trade agreements that we have with the various countries all around the world, if you add them all up, we actually have a trade surplus.”

“The assumption that every free trade agreement is a loser for America is largely untrue,” McConnell said.

The New York Times reported on Tuesday that McConnell and Trump were locked in a political “cold war,” especially after an Aug. 9 phone call it said devolved into a shouting match. On that day and the next, Trump assailed McConnell via Twitter, angered by a speech McConnell had given saying Trump had “excessive expectations” of Congress.

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(Reporting by David Alexander, Makini Brice and Ayesha Rascoe in Washington; Karen Brettell and Megan Davies in New York; Writing by David Alexander; Editing by Frances Kerry)

U.S. weighs ban on trade in Venezuela debt: U.S. official

President Donald Trump waves to Marines as he departs Marine Corps Air Station Yuma in Yuma, Arizona. REUTERS/Joshua Roberts

WASHINGTON (Reuters) – The Trump administration is considering additional sanctions against Venezuela’s government, including a ban on trading the country’s debt, a U.S. administration official with knowledge of discussions said on Wednesday.

“It is just one option that is being talked about,” the official told Reuters, speaking on condition of anonymity.

The Wall Street Journal, which first reported on Tuesday the possibility that the United States could prohibit trading of some Venezuelan bonds, said one option would be a ban on trading of new debt issued by Venezuela or its state-owned entities, with an exemption for debt issued under the authority of the National Assembly that Maduro has stripped of power.

Venezuela bonds fell on Wednesday.

The Trump administration has imposed sanctions against Maduro and senior officials in his administration to punish them for what the United States sees as their role in undermining democracy in the oil-producing country.

On Aug. 9, Washington imposed sanctions against eight more individuals, including the brother of late socialist leader Hugo Chavez.

U.S. Vice President Mike Pence, speaking in Miami on Wednesday, said the Trump administration was ready to do more.

“You may be assured that under the leadership of President Donald Trump, the United States will continue to bring the full measure of American economic and diplomatic power to bear until democracy is restored in Venezuela,” Pence said, urging Latin America to also do more to pressure Maduro’s government.

“The United States has already issued three rounds of targeted sanctions against Maduro and his inner circle, and there is more to come,” Pence said.

Venezuela’s government has around $2 billion in available cash to make $1.3 billion in bond payments by the end of the year and to cover imports of food and medicine, Reuters reported in August.

The funds that could be used for debt payment include $1.3 billion in cash and IMF Special Drawing Rights held in central bank reserves, and $700 million in separate accounts that the central bank lists as “other financial assets,” according to a report by local firm Financial Synthesis.

(Reporting by Tim Ahmann and Lesley Wroughton; editing by Mohammad Zargham)

Drowning in debt, Connecticut faces budget crunch

FILE PHOTO: The Connecticut State Capitol pictured here in Bushnell Park, Hartford, Connecticut, U.S., August 17, 2017. REUTERS/Hilary Russ

By Hilary Russ

HARTFORD (Reuters) – Connecticut, home to hedge fund billionaires alongside cities mired in poverty, is racing against the clock to pass a budget or face further spending cuts to education and municipal aid across the state.

Nearly two months without a budget, Connecticut is getting crushed by a burdensome debt load that has squeezed spending and amplified legislative discord.

State lawmakers must agree on a biennial budget soon or else Governor Dannel Malloy’s executive order to slash state aid to municipalities and eliminate school funding for some districts will go into effect in October. The state faces a $3.5 billion deficit over the next two years.

Among the wealthiest in the United States, Connecticut has been strained by already high taxes, outmigration, falling revenues and $50 billion of unfunded pension liabilities.

Some $23 billion of outstanding municipal debt has also constrained spending. Bondholders must be paid ahead of most other expenses like non-essential services and payments to vendors.

The $2.85 billion of principal and interest the state paid on its bonds in fiscal 2017 was the highest in six years, according to preliminary unaudited information from State Treasurer Denise Nappier’s office that has not yet been published.

“The state invested in the wrong things for a period of time. It allowed its higher educational institutions to suffer while it sought to placate communities with respect to other forms of local reimbursement,” Malloy told Reuters during an interview in his office on Thursday.

“We built too many prisons, which we’re still paying off even while we’re closing them,” he said. The Democrat took office in 2011 and is not seeking a third term.

Further, the state’s budget crunch is threatening its cities including the state capital of Hartford, which is considering bankruptcy due, in part, to its dependence on state aid.

Connecticut has borrowed for decades to fund school construction, whereas nearly all other states typically borrow at the local level for those projects.

Lack of county governments means some other local costs are picked up by the state, including for all of its detention facilities.

Connecticut has piled on debt to bolster its public pensions, selling $2.3 billion of bonds in April 2008.

And again in December 2009, the state sold $916 million of economic recovery notes to close a budget deficit after depleting its rainy day fund during the Great Recession.

By many measures, Connecticut’s debt levels are the worst of the 50 U.S. states.

It has the most net tax-supported state debt per capita in the nation at $6,505, versus a median of $1,006, according to Moody’s Investors Service.

It has the highest debt service costs as a portion of state revenues, as well as debt relative to gross domestic product, Moody’s said.

Connecticut was downgraded by all three major Wall Street credit rating agencies in May.

Both Republicans and Democrats in the state legislature have proposed solutions, including a hard cap on annual bond sales.

Democratic legislators met with Millstein & Co., the same restructuring firm that advised Puerto Rico over its suffocating debt burden, according to The Connecticut Mirror newspaper.

Nappier proposed a new tax-secured revenue bond program in lieu of general obligation debt, which she says will lower borrowing costs and boost reserves.

But until lawmakers craft a budget, the state’s fiscal uncertainty is causing havoc among municipalities. Some are considering whether to delay the start of school or dip into reserves.

And for Hartford, the longer the state goes without a budget, the closer the city comes to a possible bankruptcy filing, said Hartford Mayor Luke Bronin, a 38-year-old former U.S. Treasury official.

“The lack of a state budget… makes a liquidity challenge come that much faster,” he said.

(Reporting by Hilary Russ in Hartford; Editing by Daniel Bases and Diane Craft)

U.S. consumer sentiment rises to seven-month high: University of Michigan

A shopper walks down an aisle in a newly opened Walmart Neighborhood Market in Chicago in this September 21, 2011 file photo. REUTERS/Jim Young/Files

(Reuters) – U.S. consumer sentiment improved to its strongest level in seven months in early August, reflecting confidence in the outlook for the economy and in personal finances as the U.S. stock market holds near record highs, a key survey showed on Friday.

The University of Michigan’s consumer sentiment index rose to 97.6 in the first half of August from 93.4 the month before, which was an eight-month low. The result exceeded expectations for a reading of 94, according to a Reuters poll.

Whether that optimism holds in the weeks ahead, however, is a major question following recent events stemming from a white nationalist rally in Charlottesville, Virginia, said Richard Curtin, chief economist for the University of Michigan’s Surveys of Consumers. There were not enough survey interviews conducted following the protests, in which one woman died as white nationalists clashed with counter-protesters, to assess how much the events might weaken sentiment.

Curtin said the backlash over Charlottesville and U.S. President Donald Trump’s response could weigh on subsequent survey readings.

Trump has blamed the Charlottesville violence on not just the white nationalist rally organizers but also the counter-protesters, and said there were “very fine people” among both groups. His remarks drew rebukes from Republican and Democrat lawmakers as well as business leaders and U.S. allies.

“The fallout is likely to reverse the improvement in economic expectations recorded across all political affiliations in early August,” Curtin said. “Moreover, the Charlottesville aftermath is more likely to weaken the economic expectations of Republicans, since prospects for Trump’s economic policy agenda have diminished.”

FALLOUT FROM CHARLOTTESVILLE

The private sector has reacted to Trump’s remarks as well. Earlier this week, several chief executives quit Trump’s two business advisory groups in protest, resulting in the president disbanding the groups altogether.

Moreover, speculation emerged that key officials, notably director of National Economic Council Gary Cohn, could resign due to Trump’s controversial comments.

Cohn is seen leading the White House’s effort on tax reform and is a front-runner to possibly succeed Janet Yellen as head of the U.S. Federal Reserve.

On Thursday, rumors on social media of Cohn resigning spurred a sell-off on Wall Street and buying of U.S. Treasury bonds — a safe-haven market instrument in times of uncertainty — as traders feared Trump’s economic agenda would stall.

CURRENT, FUTURE DIVERGE

The rebound in University of Michigan’s overall consumer reading in early August was due to a jump in the survey’s expectations component. It rose to 89.0 from 80.5 in July.

On the other hand, the survey’s current conditions measure fell to 111.0 from 113.4 in late July.

“I would say that the economy is in good shape and is not especially sensitive to the latest political buzz, but how much of a hit confidence takes remains to be seen,” Stephen Stanley, Amherst Pierpoint Securities’ chief economist, wrote in a research note.

(Reporting By Dan Burns; Editing by Meredith Mazzilli and Chizu Nomiyama)

UK banks behind schedule in post-Brexit preparations: ECB

Sabine Lautenschlaeger attends at a news conference at the ECB in Frankfurt October 26, 2014. REUTERS/Ralph Orlowski

FRANKFURT (Reuters) – British-based banks seeking to relocate to the European Union before Britain leaves the bloc are behind schedule in their preparations for the move, a European Central Bank supervisor said on Wednesday.

International banks based in London risk losing access to the EU’s single market once Britain leaves it in 2019, forcing many to consider moving parts of their businesses to the bloc and seek a license from the ECB, the sector’s watchdog.

But Sabine Lautenschlaeger, who represents the ECB’s supervisory arm on the central bank’s board, said progress had been slower than hoped.

“Frankly, the banks are not as far advanced as we would like them to be,” Lautenschlaeger said in a newsletter article.

“Of the banks that have indicated an interest in relocating operations to the euro area, a number of the larger banks have made progress in their planning. But we have not seen many final decisions yet.”

She added the ECB would not grant licenses to “empty shells” and would take a tough stance on “back-to-back transactions”, where a bank would conduct trades out of its EU base but process and risk manage them at its London office.

“While we do not rule out this practice per se, ultimately we expect banks to manage relevant parts of their risks locally and independently,” Lautenschlaeger said.

Lautenschlaeger also said she expected banks moving to the EU to update their recovery plans, which kick in if they fail, “shortly” after moving.

(Reporting By Francesco Canepa; Editing by Angus MacSwan)