Economy

Single-family housing starts, which account for the bulk of homebuilding, increased 1.1% to a seasonally adjusted annual rate of 830,000 units last month, the Commerce Department said on Thursday. Data for January was revised down to show single-family homebuilding falling to a rate of 821,000 units instead of the previously reported 841,000 unit-pace.Single-family homebuilding increased in the Northeast and West, but tumbled in the densely populated South as well as the Midwest. Single-family housing starts dropped 31.6% on a year-on-year basis in February. The housing market has been choked by the Federal Reserve’s most aggressive interest rate hiking cycle since the 1980s to tame inflation. But the worst of the housing market downturn could be over. A survey on Wednesday showed the National Association of Home Builders/Wells Fargo Housing Market Index increased for a third straight month in March, though homebuilder sentiment remains depressed.Mortgage rates, which had resumed their upward trend, could start falling as U.S. Treasury yields have declined sharply after the recent collapse of two regional banks sparked fears of contagion in the banking sector. Some economists believe financial market instability could make it harder for the Fed to continue raising rates next week.Starts for housing projects with five units or more shot up 24.1% to a rate of 608,000 units, the highest level since last April. Multi-family housing construction remains underpinned by demand for rental accommodation.With both single- and multi-family homebuilding rising, overall housing starts surged 9.8% to a rate of 1.450 million units last month, the highest level since September. Economists polled by Reuters had forecast starts rising to a rate of 1.310 million units in February. Starts dropped 18.4% on a year-on-year basis in February.Single-family building permits increased 7.6% to a rate of 777,000 units. They had declined for 11 straight months.Permits for housing projects with five units or more jumped 24.3% to a rate of 700,000 units. Overall, building permits vaulted 13.8% to a rate of 1.524 million units.The number of houses approved for construction that are yet to be started was unchanged at 294,000 units. The single-family homebuilding backlog fell 3.0% to 130,000 units, but the completions rate for this segment increased 1.0% to a rate of 1.037 million units. The inventory of single-family housing under construction fell 1.7% to a rate of 734,000 units. More

(Reuters) – Traders no longer expect a rate hike of 50 basis points by the U.S. Federal Reserve next week as the surprise collapse of startup-focused Silicon Valley Bank has rattled the financial system.A 25 bps hike seems most likely, although traders see a 30% chance that the Fed will keep the policy rate unchanged in March.That is a quick reversal in expectations after hawkish commentary from Fed Chair Jerome Powell had prompted traders to give a 70% chance of a 50 bps rate hike just a week earlier. Following are rate expectations from major Wall Street banks: Bank Expectation post SVB Expectation before SVB crisis and U.S. Feb CPI crisis March hike Terminal March Terminal rate (in bps) rate hike (in bps) Goldman No hike 5.25% – 5.5% 25 5.5% – 5.75% JPM 25 5% – 5.25% 25 5% – 5.25% Citi 25 5.5% – 5.75% 50 5.5% – 5.75% BofA 25 5.25% – 5.5% 25 5.25% – 5.5% Morgan 25 5.125% 25 5.125% Stanley Barclays (LON:BARC) No hike 5.1% 50 5.5% – 5.75% NatWest No hike N/A 50 N/A Nomura 25 bp cut N/A 50 N/A (This factbox has been refiled to fix a typographical error in the second column header in the table) More

The writer is the US nominee for president of the World BankExtreme poverty leaves people in hunger, without housing or medical care, robbing them of dignity. Deprivation of opportunity has no place in a world with the resources and technology that so many enjoy in abundance. Since its inception nearly eight decades ago, the World Bank has played a transformational role in lifting living standards in every corner of the globe. But as we confront rising poverty and crisis after crisis — from pandemic to conflict to the ravages of a changing climate — the need for a high-performing bank is more urgent than ever.The institution must now evolve to tackle challenges that its founders couldn’t imagine — in the keen understanding of how these priorities intersect. Climate change, pandemics and forced migration are eroding progress for the very people whom development efforts benefit. The tasks ahead of us are intertwined. Their scale means that no institution can do it alone. We should seize this moment to convert these challenges into greater opportunities for the most vulnerable. Meeting ambitious climate goals doesn’t mean sacrificing development or inclusive economic growth. New technologies can help bypass the emissions-heavy pathways of the past — something I recently saw in Kenya, which generates the overwhelming majority of its energy from renewable sources.Public-private partnerships and investments have enabled renewable energy to become cost efficient. We now need to invest in developing infrastructure, agricultural productivity, food security, and expanding shipping and trucking in a resilient and sustainable manner. We must particularly focus on unlocking the potential of young people, especially in the global south. They deserve economic opportunities and the resulting optimism to better their lives and their countries. The World Bank can, and must, play a critical role as a force multiplier in coordinating global action. Its talented staff do vital, and often unsung, work every day. The scale of investments required for fighting inequality and climate change, and boosting productivity and growth, is in the many trillions of dollars each year. The bank should build on the recommendations of the G20 Capital Adequacy Framework to stretch every dollar it has. But working alone, it will fall short of what’s required. All multilateral development banks must work in tandem to maximise impact.Still more will be required. The private sector, with its capital and innovation, will be key, as will the partnerships that need strengthening between governments, civil society and private enterprise. The bank can deploy technical knowledge, policy support and financing to serve as a catalyst for mobilising the private sector to help address these challenges. Managing this will require skills that I believe my background has given me. In the private sector, I’ve led organisations spanning the globe with tens of thousands of employees and close engagement with the public sector. I’ve delivered on ambitious goals that required me to transform teams to meet the demands of a constantly-changing world. I’ve brought together government and business to secure over $4bn in commitments to invest in economic opportunities in Central America and advised an investment fund that channelled over $800mn into emerging green technologies, including in developing countries. I believe that is exactly what the World Bank needs at this critical moment in time.Effectively leading the bank also requires a deep understanding of the challenges that countries and people face. Right now, I’m on a tour to meet with government officials, development experts, civil society organisations and entrepreneurs to hear their vision for the institution’s future. In Ivory Coast and Kenya, I had the privilege of hearing from those who have benefited from the World Bank’s work. Residents of Abidjan told me their lives have been transformed by an investment in expanding access to electricity. Young entrepreneurs in Nairobi showed me how they’re benefiting from expertise and financing to launch clean tech start-ups. The opportunity to lead the World Bank would be the culmination of my life’s work. I grew up in India in a middle-class family. I received a good education and learnt the value of hard work. But too many people don’t get the opportunities I did. All of the world’s citizens deserve a chance to better their lives. We must offer people — and indeed countries — the opportunities they need to succeed, so that everyone can feel the hand of good fortune pushing them forward. More

Initial claims for state unemployment benefits dropped 20,000 to a seasonally adjusted 192,000 for the week ended March 11, the Labor Department said on Thursday. Economists polled by Reuters had forecast 205,000 claims for the latest week.Despite major technology companies slashing jobs, the labor market has remained resilient, with employers generally reluctant to lay off workers after struggling to find labor during the COVID-19 pandemic. Labor market tightness, marked by 1.9 job openings for every unemployed person in January, together with stubbornly high inflation argue for the Federal Reserve to continue raising interest rates next week.But the recent collapse of two regional banks has sparked fears of contagion in the banking sector, bruising the stock market and casting a pall over the economy’s outlook.Financial markets have wavered between the Fed hiking rates by a quarter-point and pausing its monetary policy tightening campaign when policymakers meet next Tuesday and Wednesday, according to CME Group’s (NASDAQ:CME) FedWatch tool.As recently as last week, they were betting on a 50 basis points rate hike. Those expectations were dialed back to a quarter point after the government reported the economy added 311,000 jobs in February, but with wage gains slowing and the unemployment rate rising to 3.6% from 3.4% in January.The U.S. central bank has raised its benchmark overnight interest rate by 450 basis points since last March from near-zero to the current 4.50%-4.75% range. The claims report also showed the number of people receiving benefits after an initial week of aid, a proxy for hiring, decreased 29,000 to 1.684 million during the week ending March 4. The so-called continuing claims remain low, suggesting some laid off workers could be easily finding new work. More

LONDON (Reuters) – The euro and Swiss franc regained some lost ground on Thursday, as markets reacted positively to the Swiss central bank extending support to Credit Suisse, ahead of a difficult meeting for European Central Bank rate setters.The euro was up 0.28% at $1.0608. On Wednesday it had lost 1.4% – its biggest percentage fall in six months – as the focus of fears about the banking sector spread from the collapsed U.S.-based Silicon Valley Bank to the much larger Credit Suisse. Some calm was restored to markets after the Swiss lender said it would borrow up to $54 billion from the Swiss National Bank to shore up liquidity and investor confidence after the bank’s shares plunged as much as 30% on Wednesday.That helped the Swiss franc to strengthen, and the dollar at one point fell more than 1% against the franc, to 0.9232, reversing some of its 2.15% surge on Wednesday – the largest daily gain since 2015.Paul Jackson, global head of asset allocation research at Invesco, said the nature of the banking system, such as its interconnectedness, meant that any troubles in the sector made investors particularly nervous.”It’s like walking through a forest at night, and if you’re nervous and you hear a sound, which could be a squirrel or it could be a bear, you react as if it’s a bear.”But news of the Swiss National Bank’s support for Credit Suisse calmed the mood, and some said they expected to hear reassuring comments from the European Central Bank later on Thursday.”We already saw a recovery since the SNB stepped in to offer its reassurances. I presume that we’ll continue to hear more reassurances about the safety of the banking system and I would expect that would come through with the ECB,” said Joel Kruger, Market Strategist, LMAX Group. ECB IN FOCUS In what would have been the day’s main event before the banking sector ructions, the ECB meets to set interest rates on Thursday, with its decision due out at 2.15 p.m. CET (1315 GMT).The central bank had all but committed to a 50 basis-point hike at this meeting after its previous meeting. The latest market turmoil has led to some doubt over those expectations.”If recent inflation data clearly underpinned the ECB’s pledge to hike rates by 50bp in March, the ongoing turmoil in the financial sector is casting doubts on whether policymakers will raise rates at all,” said Francesco Pesole FX strategist at ING. Pricing in derivatives markets currently indicates a little more than a 50% chance of a 50 basis-point hike, an increase from earlier in the week. Pesole said it was also unclear how the euro would react to the ECB’s decision.”If the ECB 50bp hike comes in an environment where markets are scaling back concerns on the banking sector thanks to the support from the SNB, then this may actually be read as a signal of confidence by Frankfurt on the health of the euro zone banking system, and can ultimately lift the euro,” Pesole said.”Should the ECB force a hike in a still fragile environment for the European banking sector, the impact on EUR/USD may actually be negative, as investors see this as another major risk for the financial stability in the area.”Elsewhere, the safe-haven Japanese yen remained in favour even as markets calmed a little. The dollar was last down 0.69% against the yen at 132.5, a near 4% slide from the U.S. currency’s near three-month high hit on March 8 before markets entered their tailspin. Sterling was steady at $1.20415, and the dollar index, which tracks the unit against six main peers, was down 0.2% at 104.45. More

CAIRO (Reuters) – Egypt has promised the International Monetary Fund it will roll back the state’s involvement in the economy and allow private companies a much greater role, yet several recent moves show it continuing to expand its holdings and tighten its control. As part of a $3 billion, 46-month financial support package announced with the IMF in October, Egypt pledged to level the playing field between the public and private sectors, strengthen the business climate and reduce the role of the state and military in non-strategic areas. Egypt desperately needs the proceeds from privatisation after a series of economic shocks. Its progress on economic reform could determine whether it can ride out the financial crisis exposed by the war in Ukraine and lay the ground for sustainable growth.But previous reform promises and privatisation plans have often failed to materialise, and analysts say a state ownership policy that is meant to signal where the state will step back and is viewed as a key commitment by the IMF, leaves the government plenty of room for manoeuvre.”A lot of it is actually a justification for a massive state intervention in sectors that are supposedly strategic,” said Yezid Sayigh, a senior fellow at the Carnegie Middle East Center in Beirut. On Dec. 7, six weeks after the IMF deal was announced, a regulation was published in the official gazette stating that people seeking to set up any of 83 economic activities would need written permission from security directorates. The activities included operating grocery stores, kiosks, wedding decor services, hair salons and shoe shine stands. The number was reduced to 35, according to the government-owned Ahram Gate website, following criticism on social media.Licence applications under the measure could take up to three months and would impose new fees on applicants. In a January decree, President Abdel Fattah al-Sisi allocated the military 2km of land on either side of nearly 3,700 km (2,299 miles) of planned highways, much of it with high development potential.Egyptian authorities did not respond to a request for comment.STAKE SALE DRIVEEgypt set a target in 2022 of raising $10 billion annually over four years through private investment in state assets. Last month, it said its would sell stakes in 32 companies over the coming year. On Sunday, the government said it would begin procedures this week to list two army-owned companies – petrol stations operator Wataniya and bottled water firm Safi – on the stock exchange. But many of the firms named by the government had already been earmarked for years. Sales of stakes in almost all of the 23 companies slated for privatisation in 2018 were put off, with officials blaming market turbulence for the delays.Though sovereign funds in hydrocarbon-rich Gulf states bought some assets as they came to Egypt’s help last year, momentum has stalled. Egypt has established its own sovereign fund to bring in private investors to develop state assets, but the move appears designed to attract capital without relinquishing control, said Sayigh.”They want others to help the state with its financial burden, but it’s still the state that determines priorities and investments,” he said.MILITARY TAX BREAKS Future asset sales will be complicated by an expansion under Sisi of the military’s often opaque economic role, analysts say.The military, as well as other security institutions, are exempt from value-added taxes for goods and services needed for armament, defence and national security under a 2016 law, from real estate taxes under a 2015 decree, from income taxes under a 2005 law and from import tariffs under a 1986 law. The Ministry of Defence can decide which goods and services qualify. Businessmen have long complained privately of other disadvantages, including in dealing with an oppressive bureaucracy.Military generals are frequently present at meetings where economic policy is discussed, according to statements from the presidency. In return for new finance, Gulf states have been attaching more conditions than in the past, including a demand for economic reforms in line with IMF recommendations. But even if it materialises, investment from such political allies may not galvanise the private sector, in the absence of clear signs the state is withdrawing, analysts say. So far, the government has leaned towards selling minority stakes and keeping control in its own hands, making them less attractive to prospective buyers.In parliament, nationalist deputies have railed against a fund designed to leverage Suez Canal assets and against the prospect of an indebted state selling discounted resources to Gulf investors.Rather than rolling back its holdings, the military-owned Tolip chain of nearly two dozen hotels last month bought a luxury hotel in the resort town of Sharm el-Sheikh from the publicly traded Remco Tourism Villages Construction Co. for 700 million Egyptian pounds ($22.7 million), according to a stock exchange disclosure. More

The creation of the Central Financial Commission will see the dissolution of the state-run Financial Stability and Development Committee (FSDC), a powerful body set up in 2017 and headed by former Vice Premier Liu He to curb risks in China’s complex and often opaque financial system.The new watchdog will be responsible for the top-level design, development and supervision of the financial sector, strengthening “unified leadership on financial work”, according to a plan published by state media. To strengthen the ideological and political role of the party in China’s overall financial system, a separate Central Financial Work Commission will also be established.The reorganisation of party and state-run financial bodies comes after Xi Jinping secured a precedent-breaking third term as party leader in October and also a new term as president earlier this month, making him China’s most powerful leader since Mao Zedong. “The line between the party and the government has become decisively blurred, so there is no way that the new financial watchdogs will contradict with what the party wants,” said Yan Wang, chief China strategist at Alpine Macro, a global investment firm based in Montreal. Reuters previously reported that Beijing was planning to resurrect an elite party financial watchdog that operated between 1998 and 2003 to increase political control over the financial sector. It would be headed by a member of the seven-member Politburo Standing Committee, the party’s top decision-making body helmed by Xi, sources previously said.The revival of the high-level oversight body comes as Chinese leaders race to inject new momentum in the world’s second-largest economy battered by three years of heavy COVID-19 curbs, a protracted property slump and weak external demand for the country’s exports.”From investors’ point of view, the near-term impact of the regulatory overhaul is unlikely to be significant. Promoting growth is clearly Beijing’s top priority, so it is unlikely to upset the market and hurt the economy with drastic policy changes,” Wang said. More

Addressing Russia’s business elite in person for the first time since the day he sent his troops into Ukraine on Feb. 24 last year, Putin told them their role was not just to make money but to support society.Companies should not hide their assets offshore but should invest more at home, he said.He hailed the “high mission” of entrepreneurs who looked after their workers and directed their talents not just towards extracting profit but also for the public good.Billionaires Oleg Deripaska, Vladimir Potanin, Alexei Mordashov, German Khan, Viktor Vekselberg, Viktor Rashnikov, Andrei Melnichenko and Dmitry Mazepin – whose interests range from metals and banking to fertilisers – were among those in attendance.”I look forward to hearing your opinion on how to make the development of the domestic economy at a new stage more dynamic, more successful, so that it leads to a noticeable improvement in the quality of life of people across the country,” Putin told them.Though welcomed with a standing ovation, he was delivering a tough message to Russia’s richest people: that they need to think more about the needs of the country and less about their own bottom line. When he met with them at the start of the war, Putin told them he had been left with no choice but to launch his “special military operation” – in effect forcing them into a public display of consent.ECONOMY RESISTS SANCTIONSMany of the tycoons, known as oligarchs, were subsequently placed under sanctions by the West, but Putin said the attempt to destroy Russia’s economy had failed.He said those Western firms that had decided to stay in Russia rather than flee in a corporate exodus last year had made a smart decision.In the clearest sign of rising demands on big business, the government – faced with a widening budget deficit – plans to raise around 300 billion roubles ($3.9 billion) in a windfall tax, though this will not affect oil, gas and coal firms. Finance Minister Anton Siluanov said the tax would be set at around 5% of excess profits, TASS news agency reported. The levy will come into force legally from 2024, but the finance ministry expects companies to make payments this year as well, he said.Russia is hoping to bring about economic growth this year, after a 2.1% slide in 2022. Economy Minister Maxim Reshetnikov told the congress that GDP and investment would grow this year, but stopped short of giving estimates.The economy proved unexpectedly resilient in the face of sanctions last year, but a return to pre-conflict levels of prosperity may be far off as more government spending is directed towards the military.Putin has effectively placed large parts of the economy on a war footing, with defence factories working round the clock to churn out weapons, ammunition and equipment.The president last month urged business elites to invest in Russia rather than “begging” for money in the West, telling them that ordinary Russians had no sympathy for the yachts and palaces they had lost due to sanctions. More