Israel fast-tracks wall, escape route for new U.S. embassy in Jerusalem

FILE PHOTO: View of the U.S. consulate in Jerusalem February 24, 2018. REUTERS/Ammar Awad/File Photo

JERUSALEM (Reuters) – Israel has expedited construction permits to enable temporary quarters for the U.S. Embassy to open in Jerusalem as planned in May, the Finance Ministry said on Tuesday.

U.S. President Donald Trump in December broke with other world powers by recognising Jerusalem as Israel’s capital and announcing the U.S. Embassy would be moved there from Tel Aviv.

Trump’s reversal of decades of U.S. and broad international policy was welcomed by Israeli Prime Minister Benjamin Netanyahu as a “historic decision”. But it drew criticism from around the world and outraged Palestinians, who want a capital for their own future state in eastern parts of the city.

FILE PHOTO: Israeli Prime Minister Benjamin Netanyahu (R) and Israeli Finance Minister Moshe Kahlon attend the weekly cabinet meeting at the Prime Minister's office in Jerusalem December 24, 2017. REUTERS/Amir Cohen/File Photo

FILE PHOTO: Israeli Prime Minister Benjamin Netanyahu (R) and Israeli Finance Minister Moshe Kahlon attend the weekly cabinet meeting at the Prime Minister’s office in Jerusalem December 24, 2017. REUTERS/Amir Cohen/File Photo

Israel has said the Embassy will be opened on May 14, the 70th anniversary of its founding. A U.S. official said it would be located at a provisional site in Jerusalem that now houses a U.S. consular section.

Building a permanent embassy could take several years.

Finance Minister Moshe Kahlon said in a statement that he would empower the Jerusalem municipality to waive the permits that would have been required for a wall and an escape route at the interim site.

“We will not allow needless bureaucracy to hold up the transfer of the American embassy to Jerusalem, Israel’s eternal capital,” Kahlon said.

“This is a strategic diplomatic move for the State of Israel and the planning agencies under me will do whatever is necessary to accommodate the schedule being demanded.”

Jerusalem Mayor Nir Barkat had voiced concern about the timeline, telling Israel Radio on March 9: “I hope their (Americans’) schedule will be kept.”

The Israeli planning permit waiver for the Embassy will be good for three years, the Finance Ministry statement said.

“Initially, the interim Embassy in (the Jerusalem neighbourhood of) Arnona will contain office space for the Ambassador and a small staff,” said a U.S. Embassy official in Tel Aviv.

“By the end of next year, we intend to open a new Embassy Jerusalem annex on the Arnona compound that will provide the Ambassador and his team with expanded interim office space,” he said, adding that a search for site for the construction of a permanent embassy had begun.

Most countries do not recognise either side’s sovereignty in Jerusalem and have embassies to Israel in the Tel Aviv area.

Netanyahu has described Jerusalem as “the capital of the Jewish people for 3,000 years”, and Trump said the embassy move was “a long overdue step to advance the peace process”.

Palestinian leaders said Washington’s decision meant it was no longer an honest broker in efforts to revive peace talks, which collapsed in 2014.

(Writing by Dan Williams; Editing by Jeffrey Heller and Raissa Kasolowsky)

More than 200 companies have Israeli settlement ties: U.N

A construction site is seen in the Israeli settlement of Givat Zeev, in the occupied West Bank December 22, 2016.

By Stephanie Nebehay

GENEVA (Reuters) – The United Nations human rights office said on Wednesday it had identified 206 companies so far doing business linked to illegal Israeli settlements in the West Bank and it urged them to avoid any complicity in “pervasive” violations against Palestinians.

Israel fears that companies in the U.N. “blacklist” could be targeted for boycotts or divestment aimed at stepping up pressure over its settlements, which most countries and the world body view as illegal.

“Businesses play a central role in furthering the establishment, maintenance and expansion of Israeli settlements,” the U.N. report said.

The settlements alter the demographic composition of the occupied Palestinian territory, seized by Israel in 1967, and threaten the Palestinians’ right to determination, it said.

The majority of the companies, or 143, are domiciled in Israel or the settlements, followed by 22 in the United States, it said. The remainder are based in 19 other countries, including Germany, the Netherlands, France and Britain.

The report, which did not name the companies but said that 64 of them had been contacted to date, said that the work in producing the U.N. database “does not purport to constitute a judicial process of any kind”.

But businesses operating in the occupied area have a responsibility to carry out due diligence and consider “whether it is possible to engage in such an environment in a manner that respects human rights”, it said.

The office’s mandate was to identify businesses involved in the construction of settlements, surveillance, services including transport, and banking and financial operations such as loans for housing that may raise human rights concerns.

Human rights violations associated with the settlements are “pervasive and devastating, reaching every facet of Palestinian life,” the report said. It cited restrictions on freedom of religion, movement and education and lack of access to land, water and jobs.

Israel assailed the Human Rights Council in March 2016 for launching the initiative at the request of countries led by Pakistan, calling the database a “blacklist” and accusing the 47-member state forum of behaving “obsessively” against it.

Israel’s mission in Geneva said on Wednesday that it was preparing a statement responding to the U.N. report. There was no immediate reaction by its main ally, the Untied States.

“We hope that our work in consolidating and communicating the information in the database will assist States and businesses in complying with their obligations and responsibilities under international law,” said U.N. High Commissioner for Human Rights Zeid Ra’ad al-Hussein.

Zeid’s office deferred the report last February saying it needed more time to establish the database. It is to be debated at the U.N. Human Rights Council session of Feb 26 – March 23.

(Reporting by Stephanie Nebehay; Editing by Richard Balmforth)

Special Report: Unfettered construction raises U.S. hurricane costs

Special Report: Unfettered construction raises U.S. hurricane costs

By Benjamin Lesser and Ryan McNeill

PATTON VILLAGE, Texas (Reuters) – When Hurricane Harvey sent two feet of water rolling into this small community about 35 miles north of Houston, Alfredo Becerra had to flee his modest 1,500-square-foot house.

Muddy floodwater submerged the furniture and ruined carpet inside the construction worker’s longtime home. He has been living in temporary housing since the storm struck in August. He said the Federal Emergency Management Agency gave him $15,000 in aid.

One month later, across the Gulf of Mexico in Big Pine Key, Florida, moving company driver Byron Keeble lost about $10,000 worth of belongings, including a new sofa and his television, when Hurricane Irma sent a surge of seawater through his rented ground-floor apartment. Keeble said FEMA paid for him to stay in a hotel for a few weeks while he tried to figure out where he would go next.

Floodwaters aren’t the only common thread in the two men’s stories. Also linking them is this: Neither should have been living in harm’s way.

Becerra’s and Keeble’s homes were built or rented out in violation of National Flood Insurance Program rules. Like thousands of others in the hurricane-ravaged Florida Keys and on the Texas Gulf Coast, such houses are undermining efforts to limit flood damage, lower the cost of disaster assistance and reduce claims on the taxpayer-backed federal flood insurance program, a Reuters investigation found.

Similar rule-busting construction has happened in scores of communities across the United States, where local, state and federal officials have failed to enforce regulations intended to restrict building in areas at high risk of flooding.

Across the country, newer construction in flood-prone areas generated more than $9 billion in claims for structural damage on the cash-strapped flood insurance program between 2000 and 2015. Flood-management authorities say that some of those claims probably never would have been filed had proper building controls and accurate flood maps been in place.

“You look at the media images and you see new subdivisions, new strip malls and new buildings with water up to the rooftop. Those are red flags in my mind. Those shouldn’t be happening,” said Paul Osman, floodplain program manager for the Illinois Office of Water Resources.

Controlling construction inside flood-prone areas is critical to keeping flood insurance affordable and reducing post-disaster costs, federal officials say. The primary tool used to ensure communities are doing so effectively is a system of audits of how localities adhere to their own floodplain-management rules. But that system is crippled by a lack of funding and political will, Reuters found in a review of thousands of federal and state documents and dozens of interviews with flood-management authorities.

Many communities go years without these audits, which are conducted by FEMA or state officials and known as community assistance visits. And when serious problems are uncovered, Reuters found, FEMA has been ineffective in forcing communities to fix them.

Hurricanes Irma, which devastated Florida, and Harvey, which inundated vast sections of Texas, have already generated almost $7 billion in flood insurance claims paid. Houston, where $1.3 billion of those claims originated, has not had an audit in at least eight years.

FEMA has leverage: It oversees the National Flood Insurance Program, and can use it to punish a community that fails for years to address problems. The first sanction is probation, which imposes on all policyholders in the community a $50-a-year surcharge on flood insurance premiums until violations are resolved. If the issues aren’t fixed, FEMA can impose a tougher measure: The entire community can be suspended altogether, and all property owners lose access to flood insurance.

Residents and floodplain-management officials told Reuters they think FEMA is reluctant to use these sanctions, however. Of the 22,000 communities participating in the flood insurance program, four are now suspended for failing to enforce floodplain-management rules. Thirty have been suspended for that reason since 1978.

FEMA’s desire is to keep a community in the program “as long as there is any hope of compliance” to avoid stopping regulation altogether, said Rachel Sears, director of FEMA’s floodplain-management division. “We want to keep that relationship intact,” she said. “We only move toward probation or suspension when there is no further hope.”

UNCHECKED RISKS

When Irma made landfall in the Florida Keys, the region was filled with thousands of homes that federal or state officials suspected of having illegal ground-floor enclosures. Those code-breaking homes were unaddressed despite decades of prodding from FEMA.

It is difficult to quantify the costs to taxpayers from the failure to control development in high-risk areas. FEMA doesn’t ask insurance agents and adjusters to identify illegal structures when reviewing claims. And homeowners are allowed to claim losses for a prescribed list of items, including washers and dryers, even if they had been kept in an illegal basement or low-lying enclosure.

All of this stresses an insurance program that the Government Accountability Office, a congressional watchdog, considers to be at high risk of fraud, waste and mismanagement. Until recently, the National Flood Insurance Program owed $25 billion to U.S. taxpayers because it borrowed to cover past disaster losses. In August, President Donald Trump signed a disaster relief bill that forgave $16 billion of that debt. Congress is still considering a long-term fix to the program.

Eric Letvin, a deputy assistant administrator for the National Flood Insurance Program, said he thinks FEMA is largely successful at ensuring communities control risky development. But he acknowledged the agency could do better.

“It’s one of the areas I want to focus on for improvement, especially in the post-disaster environment,” he said.

Only 23 percent of the more than 22,000 communities that participate in the flood insurance program had an audit by federal or state floodplain-management authorities in the eight years ending in 2016, FEMA documents show.

Some communities may not need an audit: They have little new development or a low risk of flooding. But the list of areas without a recent visit includes fast-growing major cities like Miami and Houston, each of which has seen severe flooding recently.

In interviews with Reuters, state and local officials in Texas could not recall the last time federal or state auditors visited Houston, but it has been at least eight years.

“I don’t know,” said Jamila Johnson, who took the helm of the city’s floodplain office in 2009. “That was before I became the city’s floodplain manager.”

FEMA recommends to each state that an auditor visit all high-risk communities every five years. In its 2010 risk ratings, it listed Houston as the top priority in Texas for auditing.

Texas is not alone. In 13 of 50 states, no federal or state auditor visited the highest-risk community between 2009 and 2016, a Reuters review of FEMA documents found.

FEMA isn’t keeping up, either. Despite its own guidance requiring it to produce community risk ratings annually, it hasn’t done so since 2010.

Meanwhile, building continues in many flood-prone areas. There is no comprehensive way to quantify flood damage to properties built illegally. But if newer structures are built in adherence with the rules, flood specialists said, such buildings should rarely flood. Communities with many illegal buildings or inaccurate maps, on the other hand, are likely to have a high percentage of flood insurance claims from new structures in risky areas.

A Reuters analysis of all flood insurance claims filed between 2000 and 2015 found that, nationwide, 27 percent of claims in high-risk areas came from owners of newer structures. States with a high percentage of such claims included Alabama (59 percent), Mississippi (50 percent), and North Carolina (44 percent).

About 41 percent of claims in Florida and 31 percent in Texas came from newer structures.

The total cost of insurance claims for structural damage to new buildings in risky areas, in adjusted 2017 dollars: $9.5 billion.

On top of that, as in the cases of Becerra and Keeble, FEMA sometimes doles out disaster aid. Data are not available to ascertain how much of that aid goes to people living in illegal structures.

Such losses suggest something is awry, floodplain managers and researchers said. Either the community is failing to enforce its floodplain-management rules, or maps do not accurately detail the community’s flood risk.

FEMA delegates the job of conducting most audits to state officials. Those officials, in turn, say they lack resources to visit more communities. For each of the past five budget years, FEMA has allotted a total of $10.4 million to the states and territories, which must match 25 percent of the money. But the dollars must also be spent on other initiatives, such as public outreach.

The number and frequency of visits varies widely by state. In Florida, FEMA and state officials have visited 64 percent of the communities participating in the flood insurance program. In Texas, the number is 12 percent.

Alfredo Becerra’s flooded home is but one example Reuters found of the results of decades of lax oversight in the Houston area.

Becerra’s property is in a floodway – an area that carries the bulk of any floodwaters downstream and where the most destructive damage is likely. Under FEMA regulations, when Becerra built his home in 1985, Patton Village officials should have required that the house be certified as standing at an elevation above expected flood levels. City officials were also obliged under FEMA rules to require an engineering study to prove the structure wouldn’t cause floodwaters to rise even higher, damaging other properties.

Patton Village officials had no records indicating any of those steps were taken. Becerra said he did not know his property was in a floodway.

He received temporary housing assistance that paid for his stay in a hotel for at least two weeks. He says he also received $15,000 in federal disaster aid to repair the damage to his home. He did not have flood insurance.

Leah Tarrant, the mayor of Patton Village since 2013, acknowledges the village hasn’t done its part to control development.

“Honestly, we have never really dealt with floodplain management,” she said. “I’m just being honest with you.”

In surrounding Montgomery County, dozens of properties in multiple communities were built after official flood maps detailed the floodway and floodplain boundaries, according to a March 2017 FEMA audit of the county and a Reuters analysis of appraisal records and flood maps. Many of the houses had no evidence of the required hydrologic studies or proof that the building’s lowest floor exceeded the expected heights of floodwaters. Some flooded during Harvey.

Most of the properties identified by Reuters are in unincorporated areas, which fall under the jurisdiction of county government.

When questioned about the floodway structures, Mark Mooney, the county’s floodplain manager, said the county banned development in the floodway until 2014. He said he couldn’t explain how, if such a ban was in place, so many homes had been built inside the floodway over the last three decades.

“Some of the listed properties could have been constructed without the county being contacted for necessary permits,” Mooney said. “Unfortunately, we do not have a staff that can police daily, when and where everything gets built in our large county. We will definitely follow up.”

RESISTANCE AND POLITICS

Reuters obtained documents from FEMA summarizing the results of 6,253 audits of floodplain-management enforcement conducted between 2009 and 2016 in all 50 states. Auditors identified serious issues in 13 percent of those visits.

It often takes years, or even decades, to bring a community into compliance after an audit failure. As of Jan. 1, 2017, serious violations remained unresolved for three years or longer in 119 communities across the country. That list includes places at high risk of flooding such as Boca Raton, Florida, and St. Bernard Parish, Louisiana.

Monroe County, Florida, where FEMA spent decades trying to eliminate illegal construction, shows why so many known problems persist: Community resistance and politics often impede enforcement efforts.

Years before Hurricane Irma struck the county, authorities identified thousands of suspected illegal enclosures. By the time the storm hit, they had not yet inspected half of those properties to see if they complied with floodplain codes. As of the end of November, the county’s property owners had been paid $62 million in insurance claims for flood damage from Irma.

FEMA first noticed problems in Monroe County during two visits in the 1980s. But the county’s leadership was uncooperative and remained so for years, said Brad Loar, who retired in 2014 as director of the FEMA Region IV mitigation division.

“They pretty much resisted anything that we wanted to talk to them about,” said Loar, who was involved in the first FEMA visit in 1982. “We didn’t see a whole lot of understanding or corrective action for most of the whole thing.”

What auditors found in Monroe County is typical of the Florida Keys. Living space in high-risk areas is supposed to be elevated above expected 100-year floodwater heights. Here, though, property owners often furnish ground-floor enclosures, either to expand their living space or to rent out the extra rooms. The low-rent enclosures are popular with the waiters, cooks, maids and other service industry workers essential to the area’s tourism industry.

When FEMA officials returned to audit Monroe County a third time in 1995, they found the illegal living spaces had become so widespread that sanctions were warranted.

Had FEMA placed Monroe County on probation after the 1995 visit, the agency would have put one of the most hurricane-prone areas in the country on the road to losing flood insurance. Instead, FEMA pressured the county to agree in 2002 to a pilot project that called for inspections of about 5,700 properties.

Property owners with insurance were told they needed to request an inspection from the county before renewing their policies. Also, owners of the 5,700 properties who sought a building permit for any reason had to agree to an inspection.

The inspection program caused a row in county politics that lasted 11 years. Although county government had begun cooperating with FEMA, contractors complained that the inspections deterred residents from upgrading their homes. Residents complained they couldn’t sell their places. Local, state and federal officials faced calls from residents and contractors to end the inspections.

In 2011, homeowners and contractors lobbied the Florida legislature to ban local authorities from conducting the building-permit inspections. FEMA officials argued against the legislation until, local activists said, U.S. Senator Bill Nelson, a Florida Democrat, stepped in and pressured the agency to back off.

“It was huge,” lobbyist John November said of Nelson’s involvement. “Without his participation … that pilot program might still be going on.”

By the time the pilot program ended in 2013, only half of the 5,700 properties FEMA suspected of having illegal enclosures had been inspected.

Despite the lingering problems, Monroe County is a FEMA poster child. The agency describes the community as “one of the best examples” of compliance in the country.

(Additional reporting by Gary McWilliams. Edited by Janet Roberts.)

U.S. job growth speeds up, unemployment rate falls

FILE PHOTO: Job seekers listen to a recruiter at the Colorado Hospital Association job fair in Denver, Colorado, U.S. on October 4, 2017

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth accelerated in October after hurricane-related disruptions in the prior month, but a sharp retreat in annual wage gains and surge in the number of people dropping out of the work force cast a cloud over the labor market.

Nonfarm payrolls increased by 261,000 jobs last month as 106,000 leisure and hospitality workers returned to work, the Labor Department said in its closely watched employment report on Friday. That was the largest gain since July 2016 but below economists’ expectations for an increase of 310,000 jobs.

Data for September was revised to show a gain of 18,000 jobs instead of a decline of 33,000 as previously reported. Some aspects of the report, however, were downbeat.

Average hourly earnings slipped by one cent, leaving them unchanged in percentage terms, in part because of the return of the lower-paid industry workers. That lowered the year-on-year increase to 2.4 percent, which was the smallest since February 2016. Wages shot up 0.5 percent in September, lifting the annual increase in that month to 2.9 percent.

Still, October’s job growth acceleration reinforced the Federal Reserve’s assessment on Wednesday that “the labor market has continued to strengthen,” and probably does little to change expectations it will raise interest rates in December. The U.S. central bank has lifted rates twice this year.

“The weakness in wages will not go unnoticed at the Fed, particularly for members that remained more concerned over the inflation outlook,” said Michael Hanson, chief U.S. economist at TD Securities in New York. “Overall, sustained job growth and labor market slack at pre-crisis lows keeps December in play.”

Although the unemployment rate fell to near a 17-year low of 4.1 percent, it was because the labor force dropped by 765,000 after a surprise jump of 575,000 in September.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell four-tenths of a percentage point to 62.7 percent.

Prices of U.S. Treasuries rose after the data. The dollar <.DXY> gained against a basket of currencies and stocks on Wall Street were largely flat.

 

LABOR MARKET TIGHTENING

The sharp moderation in job growth in September was blamed on hurricanes Harvey and Irma, which devastated parts of Texas and Florida in late August and early September and left workers, mostly in lower-paying industries such as leisure and hospitality, temporarily unemployed.

Economists, however, remain optimistic that wage growth will accelerate with the labor market near full employment. Last month’s one-tenth percentage point drop in the unemployment rate took it to its lowest reading since December 2000. The jobless rate is now below the Fed’s median forecast for 2017.

A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, dropped to 7.9 percent last month, the lowest level since December 2006, from 8.3 percent in September.

Tepid wage growth supports the view that inflation will continue to undershoot the Fed’s 2 percent target and could raise concerns about consumer spending, which appears to have been largely supported by savings this year.

The economy grew at a 3.0 percent annualized rate in the third quarter. Growth has remained strong even as President Donald Trump and the Republican-led Congress have struggled to enact their economic program.

Republicans in the U.S. House of Representatives on Thursday unveiled a bill that proposed slashing the corporate tax rate to 20 percent from 35 percent, cutting tax rates on individuals and families and ending certain tax breaks. The plan has been met with opposition from small businesses, realtors and homebuilders.

A separate report from the Commerce Department on Friday showed the U.S. trade deficit increased 1.7 percent to $43.5 billion in September as rising exports were offset by a surge in imports. Exports, which were the highest since December 2014, are being buoyed by a weakening dollar and strong global growth.

Monthly job growth has averaged 162,000 over the past three months. The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population.

The slowing job growth trend largely reflects employers’ difficulties in finding qualified workers. Some economists believe the impact of the hurricanes was still holding back employment growth.

Private payrolls surged by 219,000 jobs in October after falling by 3,000 in September. Manufacturing employment increased by 24,000 jobs. The retail sector lost 8,300 jobs last month.

Construction payrolls gained 11,000 in October, likely boosted by hiring related to the clean-up and rebuilding efforts in the wake of the hurricanes. There were increases in professional and business services payrolls. Healthcare employment also rose last month.

 

(Reporting by Lucia Mutikani; Editing by Paul Simao)

 

Beijing seen poised for fresh South China Sea assertiveness

Beijing seen poised for fresh South China Sea assertiveness

By Greg Torode and Ben Blanchard

HONG KONG/BEIJING (Reuters) – China has quietly undertaken more construction and reclamation in the South China Sea, recent satellite images show, and is likely to more powerfully reassert its claims over the waterway soon, regional diplomats and military officers say.

With global attention focused on North Korea and Beijing engrossed in its Party Congress, tensions in the South China Sea have slipped from the headlines in recent months.

But with none of the underlying disputes resolved and new images reviewed by Reuters showing China continuing to develop facilities on North and Tree islands in the contested Paracel islands, experts say the vital trade route remains a global flashpoint.

Some expect China to land its first deployments of jet fighters onto its runways in the Spratly islands in coming months, while regional military officers say it is already using the new facilities to expand naval and coast guard deployments deep into Southeast Asia.

“They’ve built these extensive facilities and both Chinese civilian and PLA experts have always made it clear that when the strategic time is right, they’re going to start using them more fully,” said Bonnie Glaser, a China security expert at Washington’s Center for Strategic and International Studies.

“I think it is a question of when, rather than if, China will start to assert its interests more forcefully in the South China Sea … and that is likely to be at a time of China’s choosing,” Glaser told Reuters.

Rival claimant Vietnam, meanwhile, is nearing completion of reclamations and an extended runway on its base on Spratly Island, the satellite images show.

CALM AFTER THE STORM

The build-up of the Spratlys symbolizes China’s growing assertiveness over the South China Sea during President Xi Jinping’s first term and was highlighted in his address to the Communist Party Congress this month.

“Construction on islands and reefs in the South China Sea has seen steady progress,” Xi told the Congress.

The issue is likely to come up during U.S. President Donald Trump’s visit to Asia, which begins this week.

“We remain concerned about tensions in the South China Sea, in particular those caused by land reclamation and militarization of disputed outposts and the willingness of some to resort to coercive tactics to assert their claims,” said Michael Cavey, a spokesman for the U.S. State Department.

“We have consistently called on China, as well as other claimants, to refrain from any further land reclamation, construction of new facilities, and militarization of the disputed features.”

Responding to Reuters’ questions, Chinese Defence Ministry spokesman Ren Guoqiang reiterated the islands were irrefutably Chinese territory.

“You can’t say that the construction on our islands and reefs in the South China Sea and the building of necessary defensive facilities is an expansion of military deployments,” he said.

“We believe that at present the situation in the South China Sea is generally good, and all relevant parties should work hard together to protect the peace and stability of the South China Sea.”

China’s ambassador to Washington, Cui Tiankai, said on Monday the United States should not try to “interfere” in regional efforts to resolve disputes in the South China Sea.

For a graphic on Spratly Islands, click http://fingfx.thomsonreuters.com/gfx/rngs/1/6/12/index.html

China has been seeking to soothe fellow claimant the Philippines and accelerating talks with the wider ASEAN grouping, amid concerns in Washington about the long-term security of the waterway through which some $3 trillion in trade a year passes.

In a speech in Singapore earlier this month, the most senior U.S. military chief in the region said even while Washington pushed Beijing for help on North Korea, it would still hold China accountable for actions that countered international rules and norms.

“We also want Beijing to do more to stop provocative actions in the East China Sea and the South China Sea, where the Chinese are building up combat power and positional advantage in an attempt to assert de-facto sovereignty over disputed maritime features,” Admiral Harry Harris, commander of the U.S. Pacific Command, said.

China claims much of the area through its controversial nine-dash line, which overlaps rival maritime claims by Vietnam, the Philippines, Malaysia, Taiwan and Brunei.

TACTICS NOT STRATEGY

A recent study by the U.S. government-linked RAND Corp weighing the risks of a conflict between the United States and China moved the South China Sea up its list of potential flashpoints.

Placing it above Taiwan but below the Korean peninsula, the study notes the waterway has “become the unanticipated focal point of U.S.-Chinese … rivalry”.

While the Pentagon has embarked on more regular freedom-of-navigation patrols, or FONOPS, to challenge Beijing’s claims, some analysts believe Washington is struggling to counter China’s creeping domination of the area.

“China appears to be pursuing a well-thought out and long-term strategy to achieve dominion over the South China Sea while America responds with ad hoc tactical maneuvers,” said Ian Storey, a South China Sea expert at Singapore’s Yusof Ishak Institute.

“FONOPS are tactics not strategy, and they have not made China rethink its plans for the South China Sea one iota.”

Ni Lexiong, a naval expert at the Shanghai University of Political Science and Law, said there was little need for China to dramatically increase deployments now, but much depended on the actions others.

“As long as others don’t intentionally go and provoke clashes, things will be fine,” he added. “The issue is that some countries, like the United States, go and stir things up.”

(Reporting by Greg Torode and Ben Blanchard; Additional reporting by David Brunnstrom in WASHINGTON and Venus Wu in HONG KONG; Editing by Lincoln Feast)

U.S. factory activity jumps, construction spending unchanged

A man walks his dog past a mural depicting factory workers in the historic Pullman neighborhood in Chicago

By Lindsay Dunsmuir

WASHINGTON (Reuters) – U.S. factory activity jumped in June suggesting economic growth in the second quarter gained some steam, while construction spending held steady in May.

The Institute for Supply Management (ISM) said on Monday its index of national factory activity rose to a reading of 57.8 last month from 54.9 in May.

A reading above 50 in the ISM index indicates an expansion in manufacturing, which accounts for roughly 12 percent of the overall U.S. economy.

The ISM survey’s new orders sub-index rose to 63.5 in June from 59.5 the prior month. A measure of factory employment increased to a reading of 57.2 from 53.5 in May.

According to ISM, comments from those surveyed generally reflected expanding conditions, “with new orders, production, employment, backlog and exports all growing in June compared to May and with supplier deliveries and inventories struggling to keep up with the production pace.” Fifteen of the 18 manufacturing industries reported growth in June.

The dollar rose to a session high against a basket of currencies after the data, while the yield on the 2-year U.S. Treasury note rose to a more than eight-year high. U.S. stocks extended gains.

 

CONSTRUCTION SPENDING MIXED

Meanwhile, U.S. construction spending unexpectedly remained flat in May but federal government outlays on construction projects were the highest in more than four years.

The Commerce Department said on Monday that construction spending in May remained unchanged at $1.23 trillion. Spending in April was revised to show it declining 0.7 percent after a previously reported 1.4 percent fall.

Economists polled by Reuters had forecast construction spending rising 0.3 percent in May. Construction spending increased 4.5 percent from a year ago.

Federal government construction spending jumped 6.4 percent in May to its highest monthly level since January 2013.

The May construction spending release included revisions to data back to January 2015, the Commerce Department said.

In May, private construction spending fell 0.6 percent, the biggest decline since October 2015, after declining 0.2 percent in April. Investment in private residential construction also declined 0.6 percent, the biggest fall since July 2014, after rising 0.5 percent the prior month.

Spending on private nonresidential structures fell 0.7 percent in May, the fifth straight monthly decline.

Investment in public construction projects rose 2.1 percent in May after dropping 2.7 percent in April.

Outlays on state and local government construction projects increased 1.7 percent in May after falling 2.7 percent in April.

 

(Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci)

 

Factory activity hits two-year high as orders surge

An employee is seen passing the nose of a Boeing 737 MAX during a media tour of the Boeing 737 MAX at the Boeing plant in Renton, Washington

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. factory activity accelerated to a two-year high in December amid a surge in new orders and employment, suggesting some of the oil-related drag on manufacturing was fading.

Other data on Tuesday showed construction spending hitting a 10-1/2-year high in November, which could provide a lift to fourth-quarter economic growth. The reports suggested president-elect Donald Trump was inheriting a strong economy, marked by a labor market that is near full employment, from the Obama administration.

The Institute for Supply Management (ISM) said its index of national factory activity rose 1.5 percentage points to a reading of 54.7 last month, the highest since December 2014. A reading above 50 indicates an expansion in manufacturing, which accounts for about 12 percent of the U.S. economy.

A gauge of new orders jumped 7.2 percentage points, to the highest level since November 2014. A measure of factory employment rose 0.8 percentage point, to the highest level since June 2015.

A collapse in oil prices in 2015, together with a surge in the dollar, have hobbled manufacturing. Much of the impact has been through weak business spending on equipment, which has contracted for four consecutive quarters.

But with oil prices rising and touching 18-month highs on Tuesday, manufacturing is starting to perk up. Gas and oil well drilling has risen over the last several months.

In a separate report, the Commerce Department said construction spending increased 0.9 percent to $1.18 trillion in November, the highest level since April 2006. It was boosted by gains in both private and public sector investment

Construction spending in October was revised up to show a 0.6 percent rise instead of the previously reported 0.5 percent increase. Construction spending was up 4.1 percent from a year ago in November.

Workers construct a new house in Leyden Rock in Arvada, Colorado, U.S.

Workers construct a new house in Leyden Rock in Arvada, Colorado, U.S. on August 30, 2016. REUTERS/Rick Wilking/File Photo

November’s solid increase and October’s upward revision to construction spending could prompt economists to raise their gross domestic product estimates for the fourth quarter.

The Atlanta Federal Reserve is currently forecasting GDP increasing at a 2.5 percent annualized rate in the fourth quarter. The economy grew at a 3.4 percent rate in the third quarter.

The dollar rose to a fresh 14-year high against a basket of currencies after the data, while prices for U.S. government debt fell. U.S. stocks were trading higher.

Spending on private construction projects jumped 1.0 percent in November to its highest level since July 2006 as single-family home building, as well as home renovations, increased.

Investment in private nonresidential structures — which include factories, hospitals and roads — rose 0.9 percent after tumbling 1.5 percent the prior month.

Public construction spending gained 0.8 percent in November to the highest level since March. It was the fourth straight month of increases. Outlays on state and local government construction projects rose 0.6 percent, also gaining for a fourth consecutive month.

Federal government construction spending surged 3.1 percent after rising 0.2 percent in October.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

U.S. housing starts tumble from nine-year high

A carpenter works on a new home at a residential construction site in the west side of the Las Vegas Valley in Las Vegas

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. homebuilding fell more than expected in November, tumbling from a nine-year high as construction activity declined broadly, which could prompt further downward revisions to fourth-quarter economic growth estimates.

Groundbreaking on new housing projects dropped 18.7 percent to a seasonally adjusted annual rate of 1.09 million units, the Commerce Department said on Friday. Last month’s percentage decline was the largest in nearly two years.

Housing starts data is very volatile month-to-month.

There were, however, some silver linings in the report. October’s starts were revised up to a 1.34 million-unit rate, the highest since July 2007. In addition, building permits for single-family homes, the largest segment of the market, rose to a nine-year high in November.

Economists had forecast housing starts slipping to a 1.23 million-unit rate last month from October’s previously reported 1.32 million pace. Coming on the heels of data this week showing weak retail sales and industrial production in November, the plunge in groundbreaking activity could result in fourth-quarter gross domestic product forecasts being trimmed again.

The Atlanta Federal Reserve is forecasting GDP rising at a 2.4 percent annualized rate in the fourth quarter after increasing at a brisk 3.2 percent rate in the third quarter.

U.S. Treasury debt prices rose on the data, while the dollar was little changed against a basket of currencies.

Starts fell in all four regions last month. October’s surge in homebuilding had widened the gap between permits and starts. As such, a drop in housing starts was widely anticipated to bring them more in line with permits.

The housing market remains on solid ground even as mortgage rates have jumped to more than two-year highs following the election of Donald Trump as the next president.

A survey on Thursday showed homebuilders’ confidence in December hitting its highest level since July 2005, with builders anticipating strong sales.

Trump’s surprise victory last month led to a surge in U.S. government bond yields amid investor concerns that the business mogul’s proposed expansionary fiscal policy agenda could fan inflation. Mortgage rates closely track movements in U.S. Treasury yields.

Since the Nov. 8 presidential election, the fixed 30-year mortgage rate has increased about 60 basis points to average 4.16 percent in the week ending Dec. 15, the highest since October 2014, according to data from mortgage finance firm Freddie Mac.

Last month, single-family home building, which accounts for the largest share of the residential housing market, fell 4.1 percent to an 828,000-unit pace. Single-family starts rose to a nine-year high in October.

The housing market is being supported by a tightening labor market, which is starting to drive up wages.

Housing starts for the volatile multi-family segment tumbled 45.1 percent to a 262,000-unit pace.

Permits for future construction fell 4.7 percent in November. Single-family permits rose 0.5 percent last month to their highest level since November 2007. Building permits for multi-family units dropped 13.0 percent.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

U.S. Construction spending rises to 8 1/2 year high

Construction is seen on a new housing development along the riverfront in Detroi

WASHINGTON, May 2 (Reuters) – – U.S. construction spending rose to an 8-1/2-year high in March and the prior month’s outlays were revised higher, pointing to sustained strength in the sector despite a sharp downturn in spending by energy firms.

Construction spending increased 0.3 percent to the highest level since October 2007, following an upwardly revised 1.0 percent jump in February, the Commerce Department said on Monday.

Economists polled by Reuters had forecast construction spending rising 0.5 percent in March after a previously reported 0.5 percent decline in February.

Construction outlays were up 8.0 percent from a year ago.

Though February’s outlays were revised higher, construction spending for January was revised down to show a 0.3 percent drop instead of the previously reported 2.1 percent increase.

A drop in nonresidential construction investment helped to hold down economic growth to a meager 0.5 percent annualized rate in the first quarter. Much of the weakness in spending on nonresidential structures reflected relentless aggressive spending cuts in the energy sector, which is reeling from last year’s plunge in oil prices.

In March, construction spending was supported by a 1.1 percent surge in private construction, which hit its highest level since October 2007. Outlays on private residential construction increased 1.6 percent. Spending on private nonresidential structures, which also includes factories and offices, advanced 0.7 percent to the highest level since October 2008.

Public construction outlays fell 1.9 percent in March as outlays on state and local government construction projects, the largest portion of the public sector segment, declined 1.4 percent. Federal government construction spending tumbled 7.4 percent in March.

(Reporting by Lucia Mutikani; Editing by Paul Simao)