Tag Archives: Economy

Greek farmers clash with police in Athens during reforms protest

Riot police stand guard during clashes with Greek farmers from the island of Crete outside the Agriculture Ministry in Athens, Greece March 8, 2017. REUTERS/Alkis Konstantinidis

By Lefteris Papadimas

ATHENS (Reuters) – Greek farmers clashed with police in central Athens on Wednesday when a protest against tax and pension reforms mandated by the country’s multi-billion-euro bailout turned violent.

Waving shepherds crooks, about 1,300 farmers who had arrived in Athens from the island of Crete overnight headed to the agriculture ministry, which was sealed off by police buses.

Tempers flared after reports spread among the assembled crowd that officials had refused to see a delegation from the farmers, witnesses said.

A number of farmers charged the building and smashed windows of two parked police buses, with police responding by using tear gas, dispersing crowds into sidestreets.

At one point some police were cornered by men who pounded their riot shields repeatedly with sticks.

Riot police remained at the scene, with some demonstrators occasionally appearing to hurl stones at them. One demonstrator punched a hole in a police bus window, placing a large blue-and-white Greek flag in it.

Shops in the area, a commercial district in downtown Athens, were shuttered.

Farmers have been engaged in a long-running feud with Greek authorities over social security laws introduced in mid-2016 which force them to pay on imputed earnings upfront, and higher pension contributions.

While most Greeks bore the impact of the adjustment, it hit farmers particularly hard since many previously did not make pension contributions.

“The state is taking 75 percent of my income … we all need meds to endure this,” said Manolis Bobodakis, 42.

Greece is now engaged in discussions with creditors on additional economic reforms required to meet bailout obligations.

The crisis-hit country signed up to a new credit lifeline worth 86 billion euros in mid-2015, its third since 2010.

Farmers have also been hit by high production costs triggered by the removal of tax breaks on items such as fuel and fertilizer, coupled with low prices.

“It’s killing us,” said Panagiotis Koutsomikos, 47, a beekeeper.

(Writing By Michele Kambas; Editing by Toby Chopra)

Carnival party over, Brazil returns to reality of political crisis

A reveller from Mangueira samba school performs during the second night of the carnival parade at the Sambadrome in Rio de Janeiro, Brazil February 28, 2017. REUTERS/Pilar Olivares

By Anthony Boadle and Lisandra Paraguassu

BRASILIA (Reuters) – Carnival revelers were still dancing in the streets of Brazilian cities on Wednesday but for President Michel Temer’s government it was back to the reality of mounting corruption allegations that threaten its survival.

“Out with Temer” was a frequent chant against the unpopular president during the annual celebrations across a country hit by record unemployment and fed up with its political leaders.

On Wednesday afternoon the jailed former CEO of Brazil’s biggest engineering group, Marcelo Odebrecht, was questioned by a judge investigating donations made to Temer’s 2014 campaign, when he was the running mate for leftist leader Dilma Rousseff, who was impeached last year.

A source with access to Odebrecht’s deposition said he confirmed an illegal payment to Rousseff’s campaign manager Joao Santana, but added that he could not say if the then-president or her running mate knew about it.

Odebrecht said former finance minister Guido Mantega negotiated under-the-table donations for the 2014 campaign that totaled 300 million reais, but he denied they were bribes to obtain government contracts, the source said.

Odebrecht, who is seeking leniency to lower a 19-year sentence for corruption and money-laundering, said Temer did not directly request a donation at a dinner in 2014, though the matter was discussed in a general way.

The massive investigation into bribery and political kickbacks, dubbed Operation Car Wash, threatens to bring down members of Temer’s inner circle and has generated political uncertainty that is undermining business confidence and prolonging Brazil’s two-year recession.

Electoral court judge Herman Benjamin is seeking to determine if a 10 million reais ($3.2 million) contribution allegedly sought by Temer was paid from graft money, as claimed by another Odebrecht executive in plea bargain testimony.

Temer has said the donation was legal and duly registered, but Benjamin could recommend annulling the Rousseff-Temer ticket, which would lead to the president’s removal and election of a new leader by Congress if it is upheld by the full court.

The graft scandal endangers Temer’s efforts to push unpopular austerity reforms through Congress aimed at curbing a growing budget deficit that cost Brazil its investment grade credit rating in 2015.

“The President’s biggest challenge now is to prevent the Car Wash investigation paralyzing his reform agenda in Congress,” a Temer aide told Reuters, requesting anonymity because he was not authorized to speak about the government’s worries.

The crisis will deepen in the next few weeks when Brazil’s top prosecutor Rodrigo Janot will ask the Supreme Court to make public plea bargain statements of 77 Odebrecht executives who are expected to name up to one-third of Brazil’s federal lawmakers for taking kickbacks.

Among the politicians at risk is Temer’s chief of staff, Eliseu Padilha, who is on medical leave after prostate surgery but will have to face questions about a package of 1 million reais he allegedly requested as part an undeclared contribution from Odebrecht.

A lawyer and longtime friend of Temer’s, José Yunes, has approached prosecutors to confirm the package was handed over at his office for Padilha but that he had no idea that it contained cash, leaving the chief of staff in a difficult position.

(Reporting by Anthony Boadle; Editing by Andrew Hay)

U.S. jobless claims near 44-year-low as labor market tightens

Legal firm Hogan Lovells representative Nina LeClair (2nd R) talks to U.S. military veteran applicants (L) at a hiring fair for veteran job seekers and military spouses at the Verizon Center in Washington April 9, 2014. REUTERS/Gary Cameron

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing for unemployment benefits fell to near a 44-year-low last week, pointing to further tightening of the labor market even as economic growth appears to have remained moderate in the first quarter.

The stronger labor market combined with rising inflation could push the Federal Reserve to raise interest rates this month.

Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 223,000 for the week ended Feb. 25, the lowest level since March 1973, the Labor Department said on Thursday. Data for the prior week was revised to show 2,000 fewer applications received than previously reported.

It was the 104th straight week that claims remained below 300,000, a threshold associated with a healthy labor market. That is the longest stretch since 1970, when the labor market was much smaller. It is now at or close to full employment, with an unemployment rate of 4.8 percent.

Economists polled by Reuters had forecast new claims for unemployment benefits dipping to 243,000 in the latest week. Financial markets are already pricing in a rate hike at the Fed’s March 14-15 policy meeting.

U.S. stock index futures rose after the data on Thursday. The U.S. dollar <.DXY> also firmed against a basket of currencies, while prices for U.S. government debt fell.

A survey from the U.S. central bank on Wednesday showed the labor market remained tight in early 2017, with some of the Fed’s districts reporting “widening” labor shortages.

The government reported on Wednesday that the personal consumption expenditures (PCE) price index jumped 1.9 percent in the 12 months through January, the biggest gain since October 2012. The PCE price index increased 1.6 percent in December.

The core PCE, the Fed’s preferred inflation measure, increased 1.7 percent, still below its 2 percent target.

TEPID GROWTH

A Labor Department analyst said there were no special factors influencing last week’s claims data. Only claims for Oklahoma were estimated.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 6,250 to 234,250 last week, the lowest reading since April 1973.

Data this week showed tepid growth in consumer spending in January, weak equipment and construction spending, and a wider goods trade deficit, suggesting the economy struggled to gain momentum early in the first quarter after slowing in the final three months of 2016.

The Atlanta Fed is forecasting first-quarter gross domestic product rising at a 1.8 percent annualized rate. The economy grew at a 1.9 percent pace in the fourth quarter.

Thursday’s claims report also showed the number of people still receiving benefits after an initial week of aid increased 3,000 to 2.07 million in the week ended Feb. 18. The four-week average of the so-called continuing claims edged up 750 to 2.07 million.

The continuing claims data covered the survey week for February’s unemployment rate. The four-week moving average of claims fell 21,500 between the January and February survey periods, suggesting an improvement in the jobless rate.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Dow tops 21,000 on Trump speech, rate hike talk

A screen shows the Dow Jones Industrial Average soon after the market opened on the floor of the New York Stock Exchange . REUTERS/Brendan McDermid

By Yashaswini Swamynathan

(Reuters) – The Dow crossed the 21,000 mark for the first time ever on Wednesday, as President Donald Trump’s measured tone in his first speech to Congress lifted investor optimism and bank stocks surged on hopes of an interest rate hike this month.

Trump on Tuesday said he wanted to boost the U.S. economy with a “massive” tax relief and make a $1 trillion effort on infrastructure, bets that have helped Wall Street scale new records since the November election.

“Trump came off very Presidential and investors are drawing optimism from the way he delivered the message in his speech,” said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.

“Today is just another vote of confidence in Donald Trump being able to do what he says he wants to do.”

If the Dow closes above 21,000, it would have taken 24 trading sessions since the blue-chip index first closed above 20,000, matching the fastest move between thousand-point milestones, which happened between March and May 1999 and took the index above 11,000.

Banks and industrial stocks, which have benefited the most in the post-election rally, were the biggest gainers on Wednesday. The spike also helped the S&P to break out from the tight trading range the index has been stuck in since Dec. 7.

The three main indexes were on track for their best one-day gain since Nov. 7, a day before the U.S. presidential election.

The S&P financial index <.SPSY> soared 2.7 percent, outperforming the other 10 major sectors, also helped by key Federal Reserve officials who hinted at an interest rate hike this month.

The KBW Nasdaq Bank index <.BKX> was up 3.3 percent, while the dollar gained 0.6 percent.

The odds of March rate hike also rose after the Commerce Department reported that January inflation ticked up by the most in four years.

Traders have now priced in a nearly 70 percent chance of rate hike when the Fed’s policy-setting body meets on March 14-15, according to Thomson Reuters data.

Gold prices, the CBOE Volatility index <.VIX> and bond proxy sectors of the S&P 500 dropped.

“The specter of higher rates means the economy is doing better,” Bakhos said.

At 12:18 p.m. ET the Dow Jones Industrial Average <.DJI> was up 290.2 points, or 1.39 percent, at 21,102.44, the S&P 500 <.SPX> was up 33.11 points, or 1.40 percent, at 2,396.75 and the Nasdaq Composite <.IXIC> was up 76.88 points, or 1.32 percent, at 5,902.31.

Seven of the 11 major S&P sectors, including industrials <.SPLRCI> and materials <.SPLRCM>, gained between 1.4 and 2.7 percent.

Lowe’s <LOW.N> stock jumped 9.3 percent to $81.22 and was the biggest percentage gainer on the S&P, after the home improvement chain issued an upbeat sales forecast.

One laggard on all the three indexes was Intel <INTC.O>, which fell 1.2 percent after Bernstein downgraded the stock to “underperform” and cut its price target.

Advancing issues outnumbered decliners on the NYSE by 2,044 to 891. On the Nasdaq, 2,192 issues rose and 620 fell.

The S&P 500 index showed 127 new 52-week highs and four new lows, while the Nasdaq recorded 189 new highs and 32 new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Sriraj Kalluvila)

U.S. consumer spending slows; inflation pushes higher

A shoppers carries bags with purchases through Quincy Market in downtown in Boston, Massachusetts, U.S. January 11, 2017. REUTERS/Brian Snyder

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer spending rose less than expected in January as the largest monthly increase in inflation in four years eroded households’ purchasing power, pointing to moderate economic growth in the first quarter.

The surge in inflation raises the possibility of an interest rate increase from the Federal Reserve this month. While still below the U.S. central bank’s 2 percent target, inflation is now in the upper end of the range that Fed officials in December felt would be reached this year.

The Commerce Department said on Wednesday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.2 percent after rising 0.5 percent in December. Economists polled by Reuters had forecast consumer spending gaining 0.3 percent in January.

Consumer spending is likely to remain supported amid promises by the Trump administration of sweeping tax cuts and increased infrastructure spending.

In a speech to Congress on Tuesday night, President Donald Trump said his economic team was working on a “historic tax reform that will reduce the tax rate on our companies” and promised a “massive” tax relief for the middle class. Trump offered no further details.

Consumer confidence has surged following Trump’s election victory, hitting a 15-1/2-year high in February.

In January the personal consumption expenditures (PCE) price index increased 0.4 percent – the largest gain since February 2013 – after rising 0.2 percent in December.

In the 12 months through January, the PCE price index jumped 1.9 percent. That was the biggest year-on-year gain since October 2012 and followed a 1.6 percent increase in December.

Excluding food and energy, the so-called core PCE price index rose 0.3 percent in January. That was the biggest increase since January 2012 and followed a 0.1 percent gain in December.

The core PCE price index increased 1.7 percent year-on-year after a similar gain in December. The core PCE is the Fed’s preferred inflation measure.

Prices for U.S. Treasuries fell, with the yield on the interest-rate sensitive 2-year note <US2YT=RR> rising to its highest level since August 2009. Fed funds futures were pricing in a 65 percent chance of an interest rate hike at the Fed’s March 14-15 policy meeting.

The U.S. central bank has forecast three rate increases this year. The Fed hiked its overnight interest rate last December by 25 basis points to a range of 0.50 percent to 0.75 percent.

The dollar rose against a basket of currencies, while U.S. stock index futures pared gains slightly.

REAL SPENDING FALLS

Rising price pressures, however, suggest that consumer spending will probably not provide a big boost to gross domestic product in the first quarter. When adjusted for inflation, consumer spending fell 0.3 percent in January, the first drop since August and the biggest in three years. Real consumer spending increased 0.3 percent in December.

Consumer spending increased at a 3.0 percent annualized rate in the fourth quarter, helping to blunt some of the impact on the economy from a wider trade deficit. The economy grew at a 1.9 percent rate in the fourth quarter.

Consumer spending in January was held back by a 0.3 percent drop in purchases of long-lasting manufactured goods such as automobiles. Spending on services was unchanged.

Personal income rose 0.4 percent in January after gaining 0.3 percent in December. Wages and salaries rose 0.4 percent.

Income at the disposal of households after accounting for inflation and taxes, fell 0.2 percent, the first decline since October 2013. Savings increased to $795.7 billion in January from $779.5 billion in December

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Dow breaches 21,000 as banks gain on rate talk

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., February 28, 2017. REUTERS/Brendan McDermid

(Reuters) – U.S. stocks opened at record intraday highs on Wednesday, with the Dow breaching the 21,000 mark for the first time ever as a more measured tone in President Donald Trump’s speech reassured investors and bank stocks gained on higher chances of an interest rate hike this month.

The Dow Jones Industrial Average &lt;.DJI&gt; was up 184.17 points, or 0.88 percent, at 20,996.41, the S&amp;P 500 &lt;.SPX&gt; was up 18.65 points, or 0.789037 percent, at 2,382.29 and the Nasdaq composite &lt;.IXIC&gt; was up 49.66 points, or 0.85 percent, at 5,875.10.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Sriraj Kalluvila)

U.S. economy slows in the fourth-quarter; consumer spending remains bright spot

A man pushes his shopping cart down an aisle at a Home Depot store in New York, July 29, 2010. REUTERS/Shannon Stapleton

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. economic growth slowed in the fourth quarter as previously reported, with robust consumer spending offset by downward revisions to business and government investment.

Gross domestic product rose at a 1.9 percent annual rate in the final three months of 2016, the Commerce Department said on Tuesday in its second estimate for the period. That matched the estimate published last month.

Output increased at a 3.5 percent rate in the third quarter.

The economy grew 1.6 percent for all of 2016, its worst performance since 2011, after expanding 2.6 percent in 2015.

Economic data early in the first quarter has been mixed, with retail sales rising in January but homebuilding and business spending on capital goods easing.

The economy may get a boost from President Donald Trump’s proposed stimulus package of sweeping tax cuts and infrastructure spending as well as less regulations.

Trump, who pledged during last year’s election campaign to deliver 4 percent annual GDP growth, has promised a “phenomenal” tax plan that the White House said would include tax cuts for businesses and individuals.

Details on the proposal remain vague, though Treasury Secretary Steven Mnuchin said on Sunday that Trump would use a policy speech to Congress on Tuesday night to preview some aspects of his tax reform plans.

Economists polled by Reuters had expected fourth-quarter GDP would be revised up to a 2.1 percent rate.

U.S. Treasury prices rose after the data, while the dollar <.DXY> dipped against a basket of currencies. U.S. stock index futures were largely unchanged.

CONSUMER SPENDING JUMPS

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was revised sharply higher to a 3.0 percent rate of growth in the fourth quarter. It was previously reported to have risen at a 2.5 percent rate.

That meant private domestic demand increased at a 3.0 percent rate, faster than the 2.8 percent pace reported last month.

Some of the rise in demand was met with imports, which increased at a 8.5 percent rate rather than the 8.3 percent pace reported last month. Exports declined, leaving a trade deficit that subtracted 1.70 percentage point from GDP growth as previously reported.

There was a small downward revision to inventory investment. Businesses accumulated inventories at a rate of $46.2 billion in the last quarter, instead of the previously reported $48.7 billion. Inventory investment added 0.94 percentage points to GDP growth, down from the 1.0 percentage point estimated last month.

Business investment was revised lower to reflect a more modest pace of spending on equipment, which increased at a 1.9 percent rate instead of the previously estimated 3.1 percent pace. That was still the first increase in over a year and reflected a surge in gas and oil well drilling in line with rising crude oil prices.

Spending on mining exploration, wells and shafts increased at a 23.6 percent rate instead of the previously reported 24.3 percent pace. It declined at a 30.0 percent pace in the third quarter.

Investment in nonresidential structures was revised to show it falling at a less steep 4.5 percent pace in the fourth quarter. It was previously reported to have declined at a 5.0 percent rate. Overall, business investment contributed 0.17 percentage point to GDP growth, less than the 0.30 percentage reported last month.

Spending on residential construction increased at a 9.6 percent rate, which was downwardly revised from the 10.2 percent pace reported last month. The rebound followed two straight quarterly declines.

Government spending increased at a 0.4 percent rate in the fourth quarter, rather than the previously reported 1.2 percent pace of growth. As a result, government investment made no contribution to growth. It was previously reported to have contributed 0.21 percentage point.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Dow hits 12th record high close; Trump talks up infrastructure spending

Leaf Group CEO Sean Moriarty (4th L) stands amongst Leaf Group management and board members for the opening bell at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S.

By Caroline Valetkevitch

NEW YORK (Reuters) – U.S. stocks ended slightly higher on Monday and the Dow closed at a record high for a 12th straight session, as President Donald Trump said he would make a “big” infrastructure statement on Tuesday.

The Dow’s streak of record-high closes matches a 12-day run in 1987, with Boeing and UnitedHealth among the biggest boosts for the Dow on Monday. The S&P 500 also closed at a record high. Energy gave the biggest boost to the S&P 500, with the energy index up 0.9 percent.

Trump, who met with state governors at the White House, also said he is seeking what he called a “historic” increase in military spending of more than 9 percent, while he said his administration would be “moving quickly” on regulatory reforms.

The comments came ahead of Trump’s first address to a joint session of Congress Tuesday evening. Investors are looking for more specifics on Trump’s plans, given the hefty gains in the market since the Nov. 8 election.

“Things are moving along in terms of the Trump agenda, but we’ll get a clearer picture after tomorrow night so that might precipitate some buying or selling,” said Bucky Hellwig, senior vice president at BB&amp;T Wealth Management in Birmingham, Alabama.

Hellwig and others said there’s potentially more upside than downside from the address, given how the market has reacted in recent weeks.

Shares of U.S. defense companies – Boeing, Raytheon, General Dynamics and Lockheed Martin – rose after Trump said he would seek to boost Pentagon spending by $54 billion in his first budget proposal.

Boeing was up 1.1 percent while UnitedHealth was up 1.4 percent.

The Dow Jones Industrial Average was up 15.68 points, or 0.08 percent, to close at 20,837.44, the S&P 500 gained 2.39 points, or 0.10 percent, to 2,369.73 and the Nasdaq Composite added 16.59 points, or 0.28 percent, to 5,861.90.

In its 1987 12-day streak of record-high closes, the Dow rose 9.2 percent compared with just a 3.9 percent gain in the recent record run.

While the S&amp;P 500 is up 10.8 percent since the Nov. 8 election, the pace of the rally has slowed this year.

Trump’s promise a few weeks ago of a “phenomenal” tax announcement helped rekindle the post-election rally, driving the main U.S. markets to record highs.

Time Warner ended up 0.9 percent after news that the head of the U.S. Federal Communications Commission does not expect to review AT&T Inc’s planned $85.4 billion acquisition of Time Warner.

AT&T slipped 1.3 percent.

Advancing issues outnumbered declining ones on the NYSE by a 1.55-to-1 ratio; on Nasdaq, a 1.87-to-1 ratio favored advancers.

The S&P 500 posted 63 new 52-week highs and one new low; the Nasdaq Composite recorded 143 new highs and 45 new lows.

(Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by Sriraj Kalluvila and James Dalgleish)

Mexico warns it will end NAFTA talks if U.S. proposes tariffs

Mexico's Economy Minister Ildefonso Guajardo delivers a speech during a "Made in Mexico" event in Mexico City, Mexico,

(Reuters) – Mexico’s economy minister Ildefonso Guajardo warned that his country will break off negotiations on the North American Free Trade Agreement (NAFTA) if the United States were to propose tariffs on products from Mexico, Bloomberg reported on Monday.

“The moment that they say, ‘We’re going to put a 20 percent tariff on cars,’ I get up from the table,” Guajardo told Bloomberg in an interview.

U.S. President Donald Trump has vowed to scuttle NAFTA, the 1994 trade accord which also includes Canada, if he cannot recast it to benefit U.S. interests, raising the risk of a major economic shock for Mexico.

Mexico, which is preparing to discuss changes to some trade rules under the NAFTA, has however expressed confidence that Trump will not be able to impose harsh barriers on imports anytime soon.

Mexican officials expect talks to start in June, Bloomberg reported.

Trump spoke positively about a border adjustment tax being pushed by Republicans in Congress as a way to boost exports in an interview with Reuters last week.

Trump has sent conflicting signals about his position on the border adjustment tax in separate media interviews last month, saying in one interview that it was “too complicated” and in another that it was still on the table.

The White House and the Mexican government were not immediately available for comment.

(Reporting by Kanishka Singh in Bengaluru; Editing by Sai Sachin Ravikumar)

U.S. new home sales rebound; consumer sentiment dips

A carpenter works on a new home at a residential construction site in the west side of the Las Vegas Valley in Las Vegas, Nevada April 5, 2013. REUTER/Steve Marcus

By Lucia Mutikani

WASHINGTON (Reuters) – New U.S. single-family home sales rose less than expected in January, likely held back by heavy rains and flooding in California, but continued to point to a strengthening housing market despite higher prices and mortgage rates.

Other data on Friday showed a dip in consumer sentiment this month, though it remained at a level consistent with a healthy pace of consumer spending. The economy has gained momentum, supported by a labor market that is near full employment.

“It is clear that the economy is moving forward solidly. Consumers are confident and are buying homes, but builders are not getting their share of that demand,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

The Commerce Department said new home sales increased 3.7 percent to a seasonally adjusted annual rate of 555,000 units last month. Economists had forecast single-family home sales, which account for about 9 percent of overall home sales, surging 6.3 percent to a 570,000-unit rate.

New home sales, which are derived from building permits, are volatile on a month-to-month basis and subject to large revisions. Sales were up 5.5 percent compared to January 2016.

Last month, homes sales soared 15.8 percent in the Northeast to their highest level since January 2008. They rose 14.8 percent in the Midwest and advanced 4.3 percent in the South. Sales in the West, which has been hit by extremely rainy weather, fell 4.4 percent.

“The unusually wet winter may have held back sales in January, but sales are still trending higher on a three-month moving average basis,” said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

Data this week showed sales of previously owned homes jumped 3.3 percent to a 10-year high in January. House prices increased 6.2 percent in December from a year ago.

‘SUPPLY-SIDE CHALLENGES’

In a separate report on Friday, the University of Michigan said its consumer sentiment index fell to a reading of 96.3 this month from 98.5 in January. The index had surged in the prior three months after Donald Trump’s presidential election victory.

“With the focus shifting from campaign promises and philosophical goals, consumers may be acknowledging the difficult task ahead for the Trump administration to actually advance his agenda,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.

The University of Michigan said February’s consumer sentiment reading suggested a 2.7 percent annualized growth pace in consumer spending this year.

U.S. stocks were trading lower on Friday, with the Dow Jones Industrial Average <.DJI> on track to snap a 10-day record-setting winning streak. The PHLX housing index <.HGX> fell marginally. U.S. government bond prices rose, while the dollar <.DXY> dipped against a basket of currencies.

The housing market has firmed even as the 30-year fixed mortgage rate rose above 4.0 percent, outpacing annual wage growth that has been stuck below 3 percent. The tightening job market is driving the gains in housing.

While the healthy labor market has not unleashed a stronger pace of wage growth, it has improved employment opportunities for young Americans, encouraging them to form their own households. But a shortage of properties available for sale remains an obstacle to a robust housing market.

“Mortgage rates aren’t to blame. A big part of the problem is the supply-side challenges builders are facing, like regulatory burdens, labor shortages and a lack of capital and financing options,” said Jonathan Smoke, an economist at realtor.com in Atlanta.

The inventory of new homes on the market increased 3.5 percent to 265,000 units last month, the highest level since July 2009. New housing stock remains less than half of what it was at its peak during the housing boom in 2006.

At January’s sales pace it would take 5.7 months to clear the supply of houses on the market, which was unchanged from December. A six-month supply is viewed as a healthy balance between supply and demand. The median price for a new home increased 7.5 percent to $312,900 in January from a year ago.

(Reporting by Lucia Mutikani; Editing by Paul Simao)