Housing starts drop underscores economic woes (Reuters)

WASHINGTON (Reuters) – New construction of homes fell more than expected in August, dragging on economic growth and keeping pressure on President Barack Obama to do more to help the sputtering economy.

Housing starts dropped 5 percent, the most since April, to a seasonally adjusted annual rate of 571,000 units, the Commerce Department said on Tuesday.

Economists polled by Reuters had forecast groundbreaking activity would fall to only a 590,000-unit rate in August. Housing starts are at less than a third of their peak during the housing boom.

"The housing market is not only bad, but still missing low expectations," said Sal Catrini, a managing director for equities at Cantor Fitzgerald & Co in New York.

An overhang of previously owned homes on the market has left builders with little appetite to break ground on new projects and is frustrating the economy's recovery from the 2007-09 recession.

The housing market "won't improve until the labor market improves substantially and that doesn't look like that would happen this year," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

Housing has been a persistent headwind to the U.S. recovery, although now it only accounts for about 2.4 percent of gross domestic product, down from about 6.1 percent reached during the housing boom.

U.S. stock prices rose as investors shook off the data and turned their focus to a two-day meeting the Federal Reserve that kicked off on Tuesday. The Fed is expected to end its meeting with a decision to take further steps to aid the economy. U.S. Treasury debt prices were little changed.

The ongoing weakness in housing keeps pressure on the White House to provide more support.

Obama, who is struggling with a 9.1 percent unemployment rate that imperils his re-election bid next year, has proposed a $447 billion stimulus package combining tax cuts with infrastructure spending and extended jobless benefits.

The administration is also working with the Federal Housing Finance Agency, a regulator, to try to expand a program that helps distressed borrowers with government-backed loans.

Some other government props for the sector, however, are set to fall away. At the end of this month, the size of the loans federal housing agencies can purchase will fall, and next year government-controlled mortgage companies Fannie Mae and Freddie Mac will begin to raise fees on the loans they purchase.

RECESSION WATCH

The fall in new residential construction in August may have been fueled in part by tropical storms, including Hurricane Irene, which pummeled the East Coast at the end of the month. Starts in the Northeast fell 29.1 percent.

Most of the weakness in new construction nationwide was concentrated in the multi-family housing sector, where starts dropped 13.5 percent.

Single-family home construction -- which accounts for a larger share of the market -- slipped 1.4 percent.

With overall economic growth looking less steady, the International Monetary Fund warned on Tuesday the United States could slip back into recession.

However, the consensus view among economists is that the country will dodge that bullet.

Heavy manufacturer Caterpillar Inc on Tuesday reported a slight acceleration in machinery sales to North American dealers in the three months through August, a sign demand remains steady.

In another upbeat sign, General Motors reached a tentative deal to create more than 6,000 U.S. factory jobs, union officials said.

The housing sector also saw a glimmer of hope in Tuesday's data, with permits for future construction up 3.2 percent in August. A day earlier, home-builder Lennar Corp had forecast a strong fourth quarter.

Still, the sector does not look ready to provide much support to economic growth anytime soon.

"Housing isn't going anywhere fast," said Sean Incremona, an economist at 4Cast in New York. "The permits side is a little bit more positive looking, but it doesn't look like things are really finding their way off the ground."

(Additional reporting by Caroline Valetkevitch and Richard Leong in New York, Editing by Andrea Ricci and Neil Stempleman)

View the original article here

Excessive heat starts dogged eastward trek (AP)

CINCINNATI – Hot weather that has plagued the Plains for days spread eastward Thursday, blanketing several more states under a sizzling sun that made people sick, shut down summer schools and spurred cities to offer cooling centers and free swimming.

The temperature could soar to 101 in Toledo, Ohio — 2 degrees above a record set in 1930. Combined with the humidity, it could feel as hot as 115 across Ohio.

"It feels very sultry, very uncomfortable, and it's just very dangerous," said Jim Lott, lead forecaster for the National Weather Service office in Wilmington, Ohio.

Government forecasters issued excessive heat warnings for a huge section of the country, from Kansas to Massachusetts, while some southern states were under heat advisories.

Thursday shaped up as the hottest day of a steamy week in Ohio, with temperatures climbing to 97 in the southwestern part of the state. Farther east, the worst of the heat waited for Friday and the weekend.

Scattered deaths have been blamed on the heat nationwide. The Ohio Health Department said emergency room visits have been three or four times higher than usual this week, mainly due to heat exhaustion and heat stroke cases.

Thousands of homes and businesses in southern Michigan lost power Thursday morning as people cranked up air conditioner use. Ferndale Recreation Director Julie Hall said a cooling center in suburban Detroit took in numerous senior citizens after their nearby apartment lost electricity.

Lisa Blumentritt headed to the cooling center after spending Wednesday night without air conditioning in an apartment where it was "difficult to breathe."

Jackson, Mich.-based Consumers Energy asked its 1.8 million customers to try to reduce their electricity use by raising thermostats a few degrees, limiting opening of refrigerator doors and turning off unnecessary lights and appliances.

Baltimore, Annapolis and several other Maryland cities opened public cooling centers for folks to find relief. Allentown, Pa., waived fees at all public pools.

The temperature approached triple digits in Philadelphia and much of central and western New York. Philadelphia school officials sent students home early Thursday and canceled summer school for Friday.

In South Carolina, a heat index expected to spike Friday at 115 sent people to the beach and water parks.

"Traditionally what we see is that once July 4th comes, there's a tapering off as people get back from vacations and get ready to go back to school," said Phil Macchia, director of operations for Charleston County parks. "So far, we haven't seen much of that, and the weather is a big factor."

Some outdoor events also were canceled, but the annual Dayton Air Show said it would go on this weekend.

At the Warren County Fair in Lebanon, Ohio, rides were closed early Thursday afternoon. Fair officials pushed their opening time back to 4 p.m. because of the heat. Attendance is off this year, too, fair officials said.

"It's miserable," said Peggy Vanderpool, 52, working outside to park cars at the fair. "This is the worst year in the 10 years I've been coming here. Even the young kids are not handling it well."

She said workers took regular breaks, drank plenty of water and wrapped wet rags around their necks Thursday to earn their $9 an hour.

At the Ottawa County Fair near Toledo, 14-year-old Austin Schimming hosed down his beef cattle and put on his jeans and button-down shirt for the calf judging.

"It's worth it when the check comes," the youth said of the hot clothing.

In Delaware, Ohio, a Harry Potter costume party fundraiser was moved from Friday to July 29. The party will benefit a group that seeks to preserve and promote downtown Delaware.

The statement from Main Street Delaware reported: "We blame nargles. (And the stifling heat, too)."

___

Contact the reporter at http://www.twitter.com/dansewell.

___

AP writers Corey Williams in Ferndale, Mich., Bruce Smith in Charleston, S.C., John Seewer in Toledo and Kantele Franko in Columbus, Ohio, contributed.

View the original article here

Investors stay cautious as H2 starts: Reuters poll (Reuters)

By Jeremy Gaunt, European Investment Correspondent Jeremy Gaunt, European Investment Correspondent – Thu?Jun?30, 9:10?am?ET

LONDON (Reuters)- Investors have become a little more upbeat heading into the second half of the year, lifting stock allocations from 2011 lows but remaining cautious with plenty of safe-haven cash and bonds.

They also lifted their exposure to euro zone stocks and bonds in the month, despite the ongoing debt crisis.

Reuters asset allocation polls released on Thursday showed leading investors across the world recovering from May's retrenchment, brought on by fears over a stagnant U.S. economy, potential over-heating in China, and the euro zone debt crisis.

On average, 58 fund firms in the United States, Europe excluding the UK, Japan and Britain held 51.5 percent of a balanced portfolio in equities, up from 50.7 percent in May.

Bond holdings were at 35.1 percent, down slightly from 35.5 percent a month earlier. Cash was at 4.9 percent, down from 5.2 percent.

The overall picture suggested that investors have overcome some of their worst fears but are far from bullish.

June's equities allocation, for example, is far closer to what it was last year before the Federal Reserve launched its second asset-buying quantitative easing program (QE2) than it was in the immediate months that followed.

QE2, which ends on Thursday, provided a major sentiment boost for investors.

"The investment environment continues to be highly uncertain," said Yoshinori Nagano, senior strategist at Daiwa Asset Management in Tokyo.

Investors are being battered by the Greek sovereign debt crisis, in which a default could spread into a wide range of other assets through banking losses and contagion into other euro zone countries.

Despite this, the euro zone saw more interest from investors in June, with holdings of both euro zone stocks and bonds rising.

This appeared to be based on a belief that policymakers would do what was necessary to keep the crisis contained.

"Ultimately, (Greece) cannot be allowed to fail because this could cause a contagion effect across peripheral Europe," said Neil Michael, executive director of investment strategies at London & Capital.

REGIONALLY

U.S. fund managers added to equities for the first time in two months and decreased bond exposure.

Fifteen U.S.-based fund management firms held an average of 63.9 percent of assets in equities, up from 61.6 percent a month earlier and 63.3 percent in April.

Bond holdings decreased to 28.5 percent in June from 30 percent in May and 29 percent in April. Cash exposure remained at 3 percent in June.

European investors raised equities and cut cash for the first time this year while they held their bond holdings largely steady.

The survey of 17 Europe-based asset management firms outside Britain showed a typical balanced portfolio holding 47.6 percent of equities in June compared with 45.5 percent in the previous month.

It held 39.0 percent in bonds compared with 39.5 percent in May. Cash holdings fell for the first time since December to 7.1 percent from 8.8 percent.

Japanese fund managers' global bond weighting was near a record high while their stock weighting sunk toward a 12-year low.

The poll of 13 institutions found the average weighting for global bonds was 49.5 percent, close to the 49.6 percent logged in March and May, which was the highest since the survey began in February 1995.

Their average weighting for global equities edged down to 42.6 percent in June after a three-month high of 43.0 percent in May. Cash positions rose to 4.8 percent this month from the three-month low of 4.5 percent in May.

British fund managers trimmed equity holdings and lifted bonds.

The 13 UK-based management companies polled held 52 percent of their portfolios in stocks, down from 52.0 in May. Bond holdings rose to 23.3 percent from 22.9 percent.

Cash weightings rose slightly to 4.5 percent from 4.4 percent.

(Additional reporting by Chris Vellacott and Natsuko Waki in London, Jennifer Ablan in New York, Kaori Kaneko in Tokyo and Bangalore Polling Unit; Reporting by Jeremy Gaunt)

View the original article here