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Maybe the U.S. economy’s strength this winter wasn’t just weather-related after all.
Home construction is near a three-year high. And factory output has risen in three of the year’s first four months.
The data released Wednesday suggest growth in the April-June quarter is off to a good start, helped by falling gas prices and solid hiring gains. Fears of a spring slump are easing.
“It’s all very encouraging,” said Paul Ashworth, chief U.S. economist at Capital Economics. “Things look good at the moment.”
Builders broke ground in April at a seasonally adjusted annual pace of 717,000 homes, the Commerce Department said. That nearly matches January’s pace, the best since October 2008.
Construction rose for both single-family homes and apartments.
Some economists have noted that a warm winter led companies to move up some hiring and accelerate other activity _ including homebuilding _ that normally wouldn’t occur until spring. That gave the appearance that the economy had strengthened in January and February and weakened in March.
But Ashworth noted that the overall trend in housing starts has been running at roughly the same annual pace _ approximately 700,000 _ over the past six months. That’s 100,000 more on average than the pace for the previous six months.
Ashworth said the higher level suggests demand is increasing and the mild winter had less effect than some economists had thought.
“We expect starts to strengthen further this year,” Ashworth wrote in a note to clients.
Even with the gains, the rate of construction for all homes is only about half the 1.5 million annual pace that most economists consider healthy. But the increase, along with rising builder confidence and stronger job growth, is a sign that the home market may finally be starting to recover nearly five years after the housing bubble burst.
Single-family home construction is now 39 percent higher than its recession low. And developers are also anticipating more sales. Permits for single-family home construction rose 2 percent last month.
The growth in single-family home construction is important because those homes make up roughly 70 percent of the market. Since the recession, homeownership has declined while demand for apartments has surged.
Economists say continued job gains could quickly reverse that trend.
“Homebuilders are reporting stronger demand,” Ian Shepherdson, an economist at High Frequency Economics, said in a note to clients. “And while rental demand means the multi-family sector is much stronger than single family, that will change as the labor market improves further.”
U.S. manufacturing, one of the strongest areas of the economy since the recession ended nearly three years ago, also rebounded in April after a March lull.
Factory output is now 18.3 percent higher than its low hit in June 2009, the month the recession ended. It’s only 6.1 percent below its pre-recession peak.
Factories are busier in part because automakers are selling more cars and trucks. Half of April increase in factory output reflected a 3.9 percent jump in the production of motor vehicles and parts. That was the fifth straight gain at auto plants.
Production also rose at a wide range of companies in April, from makers of computers and electronics to aerospace and furniture factories.
The modest gain shows that U.S. manufacturers aren’t cutting back in the face of Europe’s financial crisis and slower growth in China.
Faster output at U.S. factories has been a key reason employers have added 1 million jobs over the past five months. It’s also helped lower the unemployment rate from 9.1 percent in August to 8.1 percent last month.
Manufacturing companies have added 167,000 jobs in that stretch. That’s roughly 17 percent of the job gains, even though manufacturing represents less than 10 percent of the economy.
More jobs, along with record-low mortgage rates and low home prices, are making home buying more attractive to some Americans.
And gas prices have dropped in the past month after surging earlier this year. So consumers have more money for other purchases. The average price of a gallon of gas was $3.73 on Wednesday, according to AAA. That’s 18 cents less than a month ago.
Some hurdles to a smooth recovery remain: Builders are struggling to compete with deeply discounted foreclosures and short sales. (Short sales occur when a lender accepts less than what’s owed on a mortgage.)
And many would-be buyers are struggling to qualify for home loans or can’t afford larger down payments that banks require.
Though new homes represent just 20 percent of the overall home market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.
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ST. LOUIS • When it comes to deciding how much taxpayers should know about plans to overhaul the Edward Jones Dome, the Rams appear to be calling the shots.
The Rams, who last month rejected a $124 million renovation plan from the St. Louis Convention and Visitors Commission, by Tuesday must present the commission with an alternative plan to upgrade the Dome to “first tier” status.
But the CVC maintains that it will not publicly release the Rams’ plan unless the team gives it permission — even though public money likely would cover much, if not most, of the renovations.
So while key officials at the CVC, city and county will see Tuesday what the team wants to do with the Dome, taxpayers could be left in the dark — depending on the Rams’ whims.
At stake could be the fate of professional football in St. Louis, as the team ultimately could leave if talks break down.
Kevin Demoff, the team’s executive vice president for football operations, declined to say last week whether the team would allow its plan to be released.
The CVC, a public agency that operates the Dome, has taken the same stance since the process to reach a deal began this year: it will release records only if the Rams say it’s OK.
The team gave its blessing on Feb. 1, when the CVC publicly released its own proposal to renovate the Dome. But in March, when the Post-Dispatch submitted a public records request for the letter the Rams sent rejecting the proposal, the CVC said no. Its stated reason: the Rams wouldn’t allow the release of the letter.
At issue is a provision in the Dome lease that states the CVC and the Rams can keep some information confidential, except under certain circumstances — such as when laws or NFL policies require information to be released, or if all parties give permission to making information public.
Kathleen “Kitty” Ratcliffe, president of the CVC, repeatedly has said the commission is legally bound by the clause.
Mike Jones, a senior policy adviser to St. Louis County Executive Charlie A. Dooley, backed that stance.
“You live with the contract you’ve got and those are the terms, so we’ve got to live with them,” Jones said. “Ultimately, at the end of the day, everything will see the light of day.”
Dooley and St. Louis Mayor Francis Slay each appoint five commissioners of the CVC’s 11-member board. Missouri Gov. Jay Nixon appoints the chairman.
Kara Bowlin, spokeswoman for Slay, released a statement, saying only, “We fully expect the CVC to honor all of its legal obligations.” She did not elaborate.
SUNSHINE LAW OFFENSE?
But the CVC’s position may not comply with state law — specifically, the Missouri Sunshine Law, which requires governments and public agencies to keep most records and meetings open to public view.
A representative with the state attorney general’s office said a confidentiality clause can’t supersede the open-records law.
“In my experience, a confidentiality agreement with a third party does not constitute an exception to the sunshine law,” Patricia Churchill, chief of the governmental affairs division, said in statement responding to a question about the law in general Internet Payday loans.
Arnie Robbins, editor of the Post-Dispatch, said he expects the CVC to obey state public-records laws and release the Rams counterproposal, just as it released its own proposal in February.
“We fully anticipate that our public officials will, in fact, make public a proposal that calls for spending millions of dollars in public funds on a public facility. It’s the right thing to do,” Robbins said in a statement. “The public has a right to know how its tax money could be spent. We don’t see how a so-called confidentiality agreement benefits the public, and we certainly cannot imagine how it could trump state laws that protect the public’s right to know.”
There are exceptions in the Sunshine Law that allow public bodies to keep some records closed, like those dealing with ongoing lawsuits or the buying and selling of real estate.
But Kenneth Bunting, executive director of the National Freedom of Information Coalition in Columbia, Mo., doesn’t believe the CVC can argue that any of the exemptions apply. Some exemptions make sense, he said, “but open-government laws start with the presumption of openness.”
“We’re talking about a project involving a public facility and a lot of public money that much of the public are going to view with a lot of skepticism,” Bunting said, adding that it’s a “real outrage” the CVC and Rams “aren’t going out of their way to make this public.”
ARBITRATION IS POSSIBLE
Under the terms of the Rams’ 30-year lease, the CVC is required to come up with a renovation plan to make the Dome “first tier,” or better than three-quarters of all National Football League venues, in 15 categories.
The franchise rejected the CVC’s Feb. 1 plan, and the Rams have until Tuesday to make a counteroffer. If a deal isn’t struck by June 15, the two sides would go into arbitration, which could run through year’s end. Without an agreement, the Rams’ lease would become year-to-year after the 2014 football season, with the team free to move after that.
The Dome, which opened in 1995, was largely financed with $256 million in bonds, and the repayment of that 30-year debt will be $720 million. Every year, Missouri spends $12 million to pay off the debt, and St. Louis and St. Louis County each pay $6 million.
Representatives of Slay and Dooley have said that voters in the city and county would have to approve any deal that involves raising taxes or redirecting existing streams of public money. But some options, such as taxes and fees charged in and around the Dome, might not necessarily trigger a public vote.
Federal regulators are softening a plan to oversee companies that trade financial derivatives, the complex investments that played a central role in the 2008 financial crisis.
The rule defines which companies trading derivatives will be subject to a stricter regime created in the 2010 overhaul of financial laws. Most companies that deal derivatives will be exempt.
The Securities and Exchange Commission and Commodity Futures Trading Commission approved the rule unanimously in separate votes Wednesday. The rule says derivatives used by companies to offset their own risk will not attract scrutiny. The higher oversight standard would apply only to companies that sell $8 billion or more of the investment products annually.
Under an earlier proposal, companies that sold $100 million of certain derivatives would have faced tougher oversight.
India cut its benchmark interest rate more than forecast and highlighted inflation risks that limit the scope for following up on the first reduction in borrowing costs since 2009.
Governor Duvvuri Subbarao lowered the repurchase rate to 8 percent from 8.5 percent, the Reserve Bank of India said in a statement in Mumbai today. The outcome was predicted by three of 25 economists in a Bloomberg News survey. Seventeen expected a 0.25 percentage-point cut and the rest predicted no change.
India joins nations from Brazil to the Philippines in lowering borrowing costs to support domestic demand as political gridlock deters investment and Europe’s debt crisis and easing Chinese expansion dim global prospects. Inflation has slowed to 6.89 percent while remaining the fastest among the biggest emerging economies. The central bank said today price pressures contribute to limiting the room for further rate cuts.
“The RBI is in an unenviable position, but needs to shift focus to supporting growth,” Rohini Malkani, an economist at Citigroup Inc. in Mumbai, said before the decision. Higher oil prices, the fiscal deficit and the rupee’s decline continue to pose the risk of faster price increases, Malkani said.
“The reduction in the repo rate is based on an assessment of growth having slowed below its post-crisis trend rate which, in turn, is contributing to a moderation in core inflation,” the Reserve Bank said. “However, it must be emphasized that the deviation of growth from its trend is modest. At the same time, upside risks to inflation persist. These considerations inherently limit the space for further reduction in policy rates.”
Growth Outlook
Gross domestic product may expand 7.3 percent in the year through March 2013, compared with the baseline projection of 7 percent for the previous 12 months, the central bank estimated today. Inflation will probably be at 6.5 percent by the end of the current financial year, it said.
Uncertainty about global commodity prices, particularly crude oil, India’s fiscal shortfall, a “very high” current- account deficit and food inflation are among risks to the outlook, the Reserve Bank said.
Growth has been hurt by declining investment and moderating consumer spending after the Reserve Bank raised rates by a record 3.75 percentage points from March 2010 to October last year to fight inflation.
Subbarao has already eased monetary conditions by reducing the amount of deposits lenders must set aside as reserves twice this year, by a combined 125 basis points, to 4.75 percent to ease cash shortages in the banking system. He left the cash reserve ratio unchanged today. Liquidity is “steadily moving towards” its comfort zone, the RBI said cheap business cards.
Diminished Trend Rate
Recent patterns of inflation and expansion signal India’s trend rate of economic growth has declined from its peak before the financial crisis, the Reserve Bank said. Significant supply bottlenecks in infrastructure, energy, minerals and labor are among the main reasons why, it said.
March’s climb in the benchmark wholesale-price index exceeded the median 6.65 percent estimate in a Bloomberg News survey of 33 economists, data showed yesterday. While Indian inflation has eased from more than 9 percent in most of 2011, it remains the fastest in the so-called BRIC group of largest emerging economies that also includes Brazil, Russia and China.
Monetary policy will continue to aim to “condition and contain perception of inflation” in the range of 4 percent to 4.5 percent, the monetary authority said.
“The RBI is faced with a very difficult situation as growth is slowing and inflation remains high,” said Rupa Rege Nitsure, an economist at state-owned Bank of Baroda in Mumbai. India needs “efforts from the government’s side to boost the capacity of the economy by accelerating reforms,” Nitsure said.
Petroleum Prices
Higher raw material costs and the rupee’s decline are leading companies including steel makers to raise prices. Steel Authority of India Ltd., the nation’s second-largest producer, increased tariffs in April for the fourth time in three months.
Prime Minister Manmohan Singh’s government, grappling with fiscal and trade gaps and depressed industrial output, faces one of the most challenging periods since taking office in 2004.
In the budget on March 16, the administration announced record borrowing needs to plug a fiscal shortfall estimated at 5.1 percent of gross domestic product in 2012-2013. The current- account deficit reached $19.6 billion in the three months through December, the worst quarterly performance on record.
“From the perspective of vulnerabilities emerging from the fiscal and current account deficits, it is imperative for macroeconomic stability that administered prices of petroleum products are increased to reflect their true cost of production,” the Reserve Bank said.
A current-account gap at 4.3 percent of gross domestic product in the fourth quarter of 2011 is unsustainable, it said.
Policy reversals have further hindered Singh’s economic agenda, including the suspension of plans in December to open India’s retail industry to foreign companies.
U.S. government programs designed to stem the financial crisis starting in 2008 will probably break even in the long term, Treasury Department officials said.
So-called financial stability programs include excess earnings from the Federal Reserve and don
The price of oil slipped to near $103 per barrel following weak economic reports out of China and Europe.
Oil, a globally traded commodity, typically swings with investor expectations for economic growth, world oil supply and demand. On Friday, traders saw signs of trouble from two continents.
China, the second-largest oil consumer after the U.S., said its economy grew by just 8.1 percent from January to March. While that would be strong growth for most countries. it was the weakest in three years for China. A slowdown in China could have major implications for oil prices, since its burgeoning cities and factories have been among the primary drivers of world oil demand.
In Europe massive national debts continued to worry investors. Yields rose on government bonds issued by Italy and Spain, meaning those countries will have to pay more to borrow money from investors personal loans for bad credit.
Benchmark U.S. crude fell by 61 cents to $103.03 per barrel on Friday in New York. Brent crude lost 55 cents to $120.97 per barrel in London.
Retail U.S. gasoline prices fell for the seventh day in a row, to a national average of $3.90 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular has dropped by about 3.5 cents in the past week.
In other energy trading, natural gas stayed near 10-year lows, unchanged at $1.981 per 1,000 cubic feet. Heating oil was up less than a cent at $3.1682 per gallon and gasoline futures lost a penny to $3.3418 per gallon.
The Federal Reserve said the economy grew in all 12 of its regions as manufacturing, hiring and retail sales showed signs of strength in the face of higher fuel prices.
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