December 6, 2023

Housing Starts Fall to 10-Month Low

The Commerce Department said on Wednesday housing starts dropped 9.9 percent to a seasonally adjusted annual rate of 836,000 units. That was the lowest level since August last year.

Economists, who had expected groundbreaking to rise to a 959,000-unit rate, shrugged off the decline and said wet weather in many parts of the country had dampened activity. They noted that much of the drop was in the volatile multifamily segment.

“It looks like it’s weather-related,” said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. “On the surface it doesn’t look good, but we are confident that starts activity is still going to climb higher in the months to come.”

Permits to build homes fell 7.5 percent last month to a 911,000-unit pace. Economist had expected permits to rise to a 1-million unit pace.

Though it was the second straight month of declines in permits, they remained ahead of starts. Economists said this, together with upbeat homebuilder confidence, suggested groundbreaking activity will bounce back in July and through the remainder of this year.

Sentiment among single-family home builders hit a 7-1/2 year high in July, a report showed on Monday, amid optimism over current and future home sales.


There was little to suggest that a recent spike in mortgage rates was restraining home building activity, economists said, pointing to the improving builder confidence.

“New home supply and housing completions remain low, home prices are rising and, despite the recent rise, mortgage rates remain low,” said John Ryding, chief economist at RDQ Economics in New York. “To us, this all points to housing activity adding to growth in the second half of the year.”

Housing’s recovery is being aided by still-low mortgage rates engineered by the Federal Reserve’s accommodative monetary policy and steady employment gains.

Mortgage rates increased in recent weeks after the Fed expressed its desire to start cutting back on its bond purchases later this year. The monthly $85 billion in bond purchases have been holding down interest rates.

Fed Chairman Ben Bernanke said on Wednesday the central bank still expected to start scaling back its massive asset purchase program later this year, but left open the option of changing that plan in either direction if the economic outlook shifted.

The U.S. stock market rose as Bernanke’s comments led markets to believe the central bank’s plans to pull its monetary stimulus were not set in stone. The U.S. dollar gained ground while Treasury securities prices slipped.

Bernanke offered an upbeat assessment of the housing market’s prospects.

“Housing activity and prices seem likely to continue to recover, notwithstanding the recent increases in mortgage rates, but it will be important to monitor developments in this sector carefully,” Bernanke told lawmakers.

Last month, groundbreaking for single-family homes, the largest segment of the market, slipped 0.8 percent to its lowest level since last November 2012. Starts for multi-family homes declined 26.2 percent to a 245,000-unit rate.

Starts were down in all four regions in June, with big declines in the Northeast, South and the Midwest.

Weak groundbreaking suggested a smaller boost to both second and third quarter gross domestic product from residential construction. Second-quarter GDP estimates are ranging between 0.5 percent and 1 percent.

The economy grew at a 1.8 percent annual pace in the first three months of the year.

Permits for multi-family homes fell 21.4 percent last month. But permits for single-family homes rose 0.6 percent to a their highest since May 2008.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Chizu Nomiyama)

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China Manufacturing Contracts to Lowest Level in 9 Months

HONG KONG — Manufacturing output in China has been contracting worse than economists expected in June, a closely watched survey showed on Thursday, challenging Beijing’s stated goal of driving growth through economic overhauls rather than resorting to more more lending to stimulate the economy.

A preliminary survey of purchasing managers for the month of June showed that output in China has fallen to its lowest levels in nine months, as manufacturers cut back production at a faster pace in response to slack demand both at home and overseas.

The preliminary Purchasing Managers’ Index, or P.M.I., published by HSBC and compiled by Markit, dropped to 48.3 points as of the first three weeks of June, its lowest level since last September and down markedly from 49.2 in May. A reading above 50 indicates growth, and anything below that level signals contraction.

“Manufacturing sectors are weighed down by deteriorating external demand, moderating domestic demand and rising destocking pressures,” Qu Hongbin, HSBC’s chief economist for China, said in a statement accompanying the survey results.

“Beijing prefers to use reforms rather than stimulus to sustain growth,” Mr. Qu said. “While reforms can boost long-term growth prospects, they will have a limited impact in the short term.”

Markets fell Thursday on news of the survey data. In Hong Kong, a subindex of shares in mainland Chinese companies was down more than 3 percent at noon — outpacing declines on the broader Hang Seng index, which had fallen 2.5 percent and was one of the worst performers in the Asia-Pacific region.

China’s slowing economy is posing a challenge for Prime Minister Li Keqiang, who took office in March and has said he plans overhauls targeting sustainable growth — as opposed to relying on loose credit from statecontrolled banks, which helped the country rebound strongly in the years since the 2008 financial crisis.

Data released earlier this month showed that China’s economic performance had worsened in May, with industrial production dropping to its lowest growth rate since last September, imports and fixed-asset investment having their weakest growth since last August, and producer prices continuing to accelerate downward, having declined every month for 15 months in a row.

On Wednesday, economists at HSBC joined counterparts at several other banks in slashing their growth forecasts for the Chinese economy this year. HSBC said it now expected gross domestic product to expand 7.4 percent in 2013, down from a previous forecast of 8.2 percent.

Such downgrades raise the risk that China’s growth could fall short of the government’s official target of 7.5 percent growth this year.

Louis Kuijs, an economist at Royal Bank of Scotland and former China economist at the World Bank, wrote Thursday in a research note that Beijing’s response to the new preliminary P.M.I. survey was unlikely to be dramatic.

“Policy makers would want to see this weakness confirmed by the official P.M.I. and hard activity data before making bold decisions,” Mr. Kuijs said. “Nonetheless, this kind of data will test the resolve of the government to maintain its current relatively firm macro policy stance.”

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Layoffs and Cutbacks at ‘PBS NewsHour’

Because of declines in support from corporate sponsors, the show’s producer, MacNeil/Lehrer Productions, will close the two offices it has outside of the Washington area — in Denver and San Francisco — and lay off most of the employees there. The company, which is based in Arlington, Va., will also eliminate several of what it calls “noncritical production positions” at its main office.

The cuts were described in an internal memorandum on Monday from Linda Winslow, the executive producer of the “NewsHour,” and Boisfeuillet Jones Jr., the chief executive of MacNeil/Lehrer Productions. They said the reorganization, coming at a time of tightened purse strings for public media, would “improve the long-term sustainability of the ‘NewsHour.’ ”

Some other savings will be achieved by leaving positions unfilled and by streamlining technical operations.

Reaction to the plan was mixed, both among “NewsHour” staff members and viewers on social media Web sites. Many expressed sadness about the layoffs and concern about the quality of news coverage, while others suggested the “NewsHour” producers were right to trim excess spending.

Earlier this year, public television employees who were not authorized to speak publicly told The New York Times that the production company was facing a shortfall of up to $7 million, a quarter of its $28 million overall budget, in the fiscal year that ends this month. The company’s budget outlook for the next fiscal year is unknown.  But a spokeswoman for the “NewsHour” acknowledged that the reorganization, which will take place over several months starting in July, would help balance the budget.

The spokeswoman said that about 10 employees, of 100 in all, would be affected.

Ms. Winslow and Mr. Jones said in their memo that the cuts were a result of, among other things, “a steady drop in corporate revenue.”

The shuttering of the offices in Denver and San Francisco will end an era for the “NewsHour,” which long ago also had offices in New York, Chicago, Los Angeles and elsewhere. To make up for the loss of reporting staff outside the Washington area, “along with sending our own teams in the field, we anticipate building new relationships with a variety of locally based freelance video journalists around the country,” Ms. Winslow and Mr. Jones wrote. “Under no circumstances do we intend to abandon the minidocumentary reports that have become so critical to our broadcast. The ‘NewsHour’ remains committed to delivering the same kind of in-depth reporting our viewers and supporters expect from us.”

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Reuters Names New Head of News Operation

Thomson Reuters has hired Andrew Rashbass, chief executive of The Economist Group, to take on a newly created role overseeing the sprawling Reuters news operation.

In his time as head of the group that publishes The Economist magazine, Mr. Rashbass oversaw a period of growth, especially in the type of deep-pocketed global readers Reuters covets. Even as other magazines suffered declines in advertising and newsstand sales, The Economist had attracted new digital subscribers and sold nearly 1.5 million copies each week, according to the Alliance for Audited Media.

Reuters employs more than 2,800 journalists in nearly 200 bureaus worldwide. Much of the news they produce is distributed via Thomson Reuters financial terminals as well as in newspapers and Web sites that pick up Reuters articles. Mr. Rashbass’s hiring signals Thomson Reuters’s continued desire to turn its news organization into a dominant — and profitable — force.

“Andrew’s track record as C.E.O. of The Economist Group speaks for itself,” James C. Smith, chief executive of Thomson Reuters, said in a statement. “He brings to us a rare blend of commercial acumen, sensitivity to the best traditions of quality journalism and editorial integrity.”

Mr. Rashbass, 49,, will be based in London, where for the last 15 years he has held various positions at The Economist. He served as managing editor of and publisher of the weekly economic and world events magazine. He has been chief executive of The Economist Group, half owned by Pearson, since 2008.

In his new capacity, Mr. Rashbass will hold the title of chief executive of Reuters. Stephen J. Adler, Reuters’s president and editor in chief, will report to Mr. Rashbass.

Thomson Reuters, with revenues of $12.9 billion in fiscal 2012, no longer owns a print publication and makes the vast majority of its revenues from its financial and legal data services. But unlike its main competitor, Bloomberg, Thomson Reuters has deep roots in regional newspapers, feeding speculation about whether the company eventually wants to expand its news organization with a print publication like The Financial Times, which is also owned by Pearson.

The company publishes an occasional Reuters magazine at events like the World Economic Forum in Davos, Switzerland, and recently redesigned its consumer Web site. (Pearson has said The Financial Times is not for sale.)

“Our family’s commitment to news stretches back three generations,” said David Thomson, chairman of Thomson Reuters. “We are determined that Reuters news should not only fulfill its critical journalistic mission but also its potential in creating long-term value for our customers and shareholders.”

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Off the Charts: Stimulus Lets Developing Economies Recover More Quickly

THIS has not been a good recovery for the wealthy countries. Growth has lagged, in part, because government spending has been far more restrained than in past recoveries from major recessions.

But developing economies have been free to increase government spending, and their economies are generally growing more rapidly than they did after past recessions.

The accompanying charts, based on data released this week by the International Monetary Fund in the semiannual World Economic Outlook, show the stark differences in performance.

At the top are charts comparing changes in real gross domestic product per capita in developing countries and advanced economies since 2008, including the fund’s forecasts for 2013 and 2014. In every year, the developed countries have lower growth. The monetary fund forecasts that this year the increase in the United States will be a paltry 1 percent, which at least is better than the forecast for the euro zone and Britain, where declines are expected.

A major reason for the slow recoveries is the absence of fiscal stimulus in much of the developed world. The middle charts show trends in government spending in advanced economies and in developing ones, comparing the trend during the current recovery to an average of the recoveries after three previous world downturns — in 1975, 1982 and 1991. In each case, the figures treat the year before the downturn as zero, and show how earlier and later years differed from that year.

In emerging markets, spending this time has been much stronger than in previous recoveries. But the opposite is true for developed countries, both as a group and for each of the four major regions — the United States, the euro zone, Britain and Japan — that are shown in separate charts.

Those changes reflect the determination to follow a path of austerity in much of the developed world. Many developing countries, having built up foreign exchange reserves in the years before the recession, do not need to follow that course.

The Great Recession brought a drop in world trade volumes that exceeded any decline since the Depression. But as the charts show, the percentage declines were a little less in developing countries than they were in developed countries. And since then, the recoveries have been far more impressive in the less developed countries.

In the euro zone, the total level of imports has still not recovered to 2007 levels, although the International Monetary Fund says it thinks that will happen in 2014. The same is true of exports from Japan, a country whose export prowess once seemed unmatched but lately has been running trade deficits.

Among the four developed regions shown, only the United States has experienced an export revival that is comparable to that of the average emerging market.

Floyd Norris comments on finance and the economy at

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European Auto Market Slump Continues

PARIS — European new car sales contracted in March for an 18th consecutive month, industry data showed Wednesday, led by declines in Germany and France.

New vehicle registrations in the European Union fell 10.2 percent in March from a year earlier, the European Automobile Manufacturers’ Association reported from Brussels, to 1.3 million vehicles from about 1.5 million in March 2012.

Economic stagnation continues to demand in the 27-nation bloc long after a rebound in auto sales in the United States and continuing growth in emerging markets. Across Europe, more than 26 million men and women are unemployed, according to official data, and the overall economy is expected to contract in 2013 for a second straight year.

This month, the International Monetary Fund revised downward its forecast for 2013, saying it now expects the 17-nation euro zone, which makes up the bulk of the European Union economy, to shrink by 0.3 percent, worse than the 0.2 percent decline it had previously forecast.

The data Wednesday showed sales in Germany, which has the largest economy in the European Union, fell 17.1 percent; economic sentiment among Germans has fallen sharply in the last month, according to a report Tuesday from the ZEW research institute. In France, hobbled by economic stagnation and 10.8 percent unemployment, sales fell 16.2 percent. The only expansion among major markets was a 4.9 rise in Britain, which is outside the euro zone.

Sales of Volkswagen, Europe’s biggest automaker, slid 9.0 percent, with the biggest decline from its Volkswagen brand. Sales at PSA Peugeot Citroën, No.2 in Europe, plunged 16 percent. Ford Motor’s sales slid 15.8 percent, while General Motors’ tumbled 12.6 percent.

In recent months, the high-end market, which had held up even as the mass-market segment withered, has also begun to lose steam. Sales at Daimler, which warned last week that its 2013 profit forecast was beginning to look shaky, fell 1.2 percent, while its rival BMW posted a 4.7 percent sales drop.

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I.S.M. Services Sector Index Shows Slower Growth

WASHINGTON (AP) — Two reports showed Wednesday that American service companies grew more slowly in March and private employers pulled back on hiring. The declines suggest businesses may have grown more cautious last month after federal spending cuts took effect.

The Institute for Supply Management said that its index of nonmanufacturing activity fell to 54.4 last month. That is down from 56 in February and the lowest in seven months. Any reading above 50 signals expansion.

Slower hiring and a steep drop in new orders drove the index down. A gauge of hiring fell 3.9 points to 53.3, the lowest since November. That means companies kept hiring, just at a slower pace.

The group’s report covers companies that employ roughly 90 percent of the work force. It measures growth in industries that include retailing, construction, health care and financial services.

A separate report from the payroll processor ADP also pointed to slightly weaker hiring in March. ADP said private employers added 158,000 jobs in March, down from 237,000 the previous month. Construction companies did not add any jobs after three months of solid gains.

Economists were not overly concerned with the weaker reports. Several noted that ADP’s figures were less reliable than the government’s more comprehensive employment report, which comes out on Friday.

Still, many say the pace of hiring has probably dropped off from the previous four months, when employers added an average of 200,000 net jobs a month. And a few reduced their forecasts for March job growth after seeing the two reports.

Jim O’Sullivan, chief United States economist at High Frequency Economics, now expects just 160,000 net jobs in the March employment report, instead of 215,000. Jennifer Lee, an economist at BMO Capital Markets, said her group had lowered its forecast to 155,000, from 220,000.

Ms. Lee said businesses might have temporarily suspended hiring because they wanted to see the impact of $85 billion in government spending cuts, which began on March 1.

Still, most economists say any slowdown is likely to be temporary. Most say growth accelerated in the January-to-March quarter to a 3 percent annual rate, buoyed by a resilient consumer and a steady rebound in housing.

And even if growth slows in the April-to-June period to roughly 2 percent, as some predict, that would still leave the economy expanding at a solid pace in the first half of the year.

“For now, there is still a lot of good news on the economy,” said Paul Edelstein, an economist at IHS Global Insight. “Home construction and demand are growing, and jobs are being added.”

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Sears Reduces Losses, and Gap Has Banner Quarter

But investors were not pleased, sending shares down $2.47 a share, or 5.2 percent, to close at $45.

The results came after the company, which operates Sears and Kmart stores, announced last month that its chairman, the hedge fund billionaire Edward Lampert, would become chief executive as well. Investors had been queasy about the move as they worried whether Mr. Lampert would continue the investment that his predecessor, Louis D’Ambrosio, made to improve the shopping experience.

In his annual letter to investors, Mr. Lampert sought to ease worries on Wall Street by promising that the company would continue to invest in technology, bolster its online operations and make other changes. But he also blamed Sears’s difficulties on the seismic changes in buying behavior in the digital era.

“We are living in a hyper-connected world,” he wrote. Customers “want to get what they want when they want it and where they want it — on their own terms,”‘ he said. “To win the game, we have to change the game.”

Mr. Lampert engineered the combination of Sears and Kmart in 2005, about two years after he helped bring Kmart out of bankruptcy.

Sears Holdings has posted six straight years of declines in revenue at stores opened at least a year.

The company reported it lost $489 million, or $4.61 a share, for the quarter ended Feb. 2. That compares with a loss of $2.4 billion, or $22.47 a share, a year earlier.

Excluding onetime items, earnings from continuing operations were $1.12 a share. That was below the company’s forecast made last month for a profit of $1.25 to $2 a share.

Revenue fell 2 percent to $12.26 billion from $12.48 billion. Sears said this was mostly a result of the separation of its Sears Hometown and Outlet businesses, the impact of having fewer Kmart and Sears stores in operation and lower revenue from stores open at least a year. This was somewhat offset by having an extra week in the period.

Revenue at stores open at least a year dropped 1.6 percent in the quarter.

Separately, Gap Inc., which operates stores under its namesake, Banana Republic and Old Navy brands, reported a 61 percent increase in fourth-quarter profits, capping a strong year in which the company’s turnaround took hold.

Gap said late Thursday that it earned $351 million, or 73 cents a share, in the quarter ended Feb. 2. That compares with $218 million, or 44 cents a share, a year earlier. Revenue rose 11 percent to $4.73 billion in the period.

Analysts had expected 71 cents a share on revenue of $4.69 billion, on average.

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U.S. Economy Expanded Slightly in 4th Quarter

Output expanded at an annual rate of 0.1 percent, which is basically indistinguishable from no growth at all and which is far below the growth needed to get unemployment back to normal. But at least the economy did not shrink, as the Commerce Department estimated in January, when the first report suggested that output had contracted at an annual rate of 0.1 percent.

The department’s latest estimate for economic output, released on Thursday, showed that growth was depressed by declines in military spending (possibly in anticipation of the across-the-board spending cuts that are to begin on Friday) and in how much companies restocked shelves.

“The good news with business inventories is that what they take away in one quarter they tend to add to the next,” said Paul Ashworth, chief North American economist at Capital Economics, referring to the measure of this restocking process. “So there’s a good chance that first-quarter numbers will be better than originally thought.”

The growth in output was revised upward from the original estimate partly thanks to updated, and improved, data on business investment and net trade. Imports were lower than previously reported and exports were higher.

Economists expect government spending to continue to drag on the economy this year, especially if Congress does not avert the spending cuts, which would shave around 0.6 percentage point off growth. Many hope that even if the cuts go through, Congress will quickly reverse them.

“They can always change their minds when they have to renew the continuing budget resolution at the end of this month or in April or May,” said Mr. Ashworth. “My expectation is that at most the cuts stay a month or two, and in most departments, with a wink or a nod, they won’t do anything crazy.”

Even if government does lop off $85 billion in the so-called sequester, as current law states, the private sector will offset most of this drag, thanks to the housing recovery and other sources of strength. Forecasts for the first quarter call for annual growth of 2.4 to 3 percent.

Monetary stimulus from the Federal Reserve, while under fire from some Republicans, is also helping offset the fiscal contraction.

“With monetary policy working with a lag and still being eased, the boost to the economy is probably still growing,” said Jim O’Sullivan, chief United States economist at High Frequency Economics.

The combination of monetary expansion and fiscal tightening has helped lead to a painfully slow decline in the unemployment rate. The jobless rate stood at 7.9 percent in January. The recent end of the payroll tax holiday is also expected to hold back consumer spending and with it job growth.

The Labor Department reported on Thursday that first-time claims for unemployment benefits decreased by 22,000, to 344,000, last week. The less-volatile four-week moving average fell to 355,000 from 361,750.

“I think it’s largely steady as she goes for employment,” said Jay Feldman, an economist at Credit Suisse, of the indications from the latest growth report. “I still think we’re in kind of a 175,000-jobs-a-month clip for a while, but with some downside risks later in the year from the sequester.”

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Bucks Blog: Home Values Rise Quickly but Unevenly

A home for sale in California.Associated PressA home for sale in California.

Home values rose nearly 6 percent in 2012, according to year-end data from the real estate Web site Zillow. But such increases aren’t likely to continue.

The increase is the largest annual gain since 2006, near the peak of the housing bubble, and is greater than the typical appreciation seen in healthy markets. Zillow forecasts an increase next year of about 3.3 percent, more in line with typical housing market appreciation. (Historically, annual appreciation averages about 3 percent, according to Zillow’s research.)

Stan Humphries, Zillow’s chief economist, said he expected the housing recovery to continue this year, but at a “more sustainable” pace. Tight inventory in some markets, combined with strong demand and a slowing pace of foreclosures, contributed to the rise in values, he said. As values rise, fewer homeowners are underwater, or owe more than their home is worth, and may be more willing to put their homes on the market. The increase in inventory, in turn, should moderate future price increases.

As home values rose in the fourth quarter, foreclosures slowed, to 5.22 of every 10,000 homes nationwide in December. That was the lowest pace since November 2007, when the rate was 5.18 per 10,000 homes, Zillow said. Sales of foreclosed houses stood at 12 percent of the market, down 4 percent from the end of 2011.

The housing recovery, however, is uneven. Phoenix, for instance, which has had strong investor interest, showed an increase of more than 22 percent year-over-year, a pace reminiscent of the real estate bubble. Cincinnati and Chicago, meanwhile, showed slight declines. Seven of the top 30 metropolitan areas in the study, however, showed an increase in home values of 10 percent or more.

While it’s encouraging to see housing values rise rather than fall, there’s a risk that consumers may get used to such large increases and expect them to continue, Mr. Humphries said. And that’s probably not a good thing. The recent volatility in the housing market makes it easier to think of housing as a shorter-term, speculative investment, he said, rather than as a place to live. “Housing should be thought of as a long-term investment.”

Has the recent rise in home values changed your perspective on housing as an investment?

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