Dubai’s reputation as investment magnet takes hit amid ‘standstill’ on $60B debt

The Associated Press

DUBAI, UNITED ARAB EMIRATES — Just a year after the global downturn derailed Dubai’s explosive growth, the city is now so swamped in debt that it’s asking for a six-month reprieve on paying its bills — causing a drop on world markets today and raising questions about Dubai’s reputation as a magnet for international investment.

The fallout came swiftly and was felt globally after Wednesday’s statement that Dubai’s main development engine, Dubai World, would ask creditors for a “standstill” on paying back its $60 billion US debt until at least May.

The company’s real estate arm, Nakheel — whose projects include the palm-shaped island in the Gulf — shoulders the bulk of money due to banks, investment houses and outside development contractors.

In total, the state-backed networks nicknamed Dubai Inc. are $80 billion in the red and the emirate needed a bailout earlier this year from its oil-rich neighbour Abu Dhabi, the capital of the United Arab Emirates.

Markets took the news badly — with the Dubai woes and the continued fall of the U.S. dollar giving investors twin worries. Dubai’s move raised concerns about debt across the Gulf Region. Prices to insure debt from Abu Dhabi, Qatar, Saudi Arabia and Bahrain all rose by double-digit percentages Thursday, according to data from CMA DataVision.

“Dubai’s standstill announcement … was vague and it remains difficult to discern whether the call for a standstill will be voluntary,” said a statement from the Eurasia Group, a Washington-based research group that assesses political and financial risk for foreign investors interested in Dubai.

“If it is not, Dubai World will be going into default and that will have more serious negative repercussions for Dubai’s sovereign debt, Dubai World and market confidence in the UAE in general,” the statement added.

Dubai became the Gulf’s biggest credit crunch victim a year ago. But its ruler, Sheik Mohammed bin Rashid Al-Maktoum, had continually dismissed concerns over the city-state’s liquidity and claims it overreached during the good times.

When asked about the debt, he confidently assured reporters in a rare meeting two months ago that “we are all right” and “we are not worried,” leaving details of a recovery plan — if such a plan exists — to everyone’s guess.

Then, earlier this month, he told Dubai’s critics to “shut up.”

“He needs to produce a recovery plan that will be respected by those who want to do business with Dubai,” said Simon Henderson, a Gulf and energy specialist at the Washington Institute for Near East Policy. “If he does not do it right, Dubai will be a sad place.”

After months of denial that the economic downturn even touched the glitzy city-state, the Dubai government earlier this year showed signs of trying to deal with the financial fallout that has halted dozens of projects and touched off an exodus of expatriate workers.

In February, it raised $10 billion in a hastily arranged bond sale to the United Arab Emirates central bank, which is based in Abu Dhabi. The deal — seen by many as Abu Dhabi’s bailout of Dubai — was part of a $20-billion bond program to help Dubai meet its debt obligations.

On Wednesday, the Dubai Finance Department announced the emirate raised another $5 billion by selling bonds — all taken by two banks controlled by Abu Dhabi.

Abu Dhabi’s ruling Al Nahyan family has been more conservative with its spending, investing oil profits into infrastructure, culture and state institutions. During Dubai’s real estate bonanza, the Nahyans saw their flashy neighbour race ahead with development plans and tourism plans that had plenty of hype but few details on how they would be pulled off.

Some did materialize. The more than 800-metre Burj Dubai is scheduled to open in January as the world’s tallest building. But many other projects, including a tower even taller than the Burj Dubai and satellite cities in the desert, are still just blueprints.

The standstill will likely not immediately affect CityCentre, an $8.5-billion casino complex opening next month in Las Vegas that is half-owned by Dubai World. A Dubai World subsidiary and casino operator MGM Mirage agreed with banks in April to fully fund and finish the six-tower, 27-hectare development of plush resorts, condominiums, a retail mall and one casino on the Las Vegas Strip.

However, the standstill’s effect may be felt on the famous Keeneland thoroughbred horse auctions near Lexington, Ky., where Sheik Mohammed is a prominent bidder.

Last week, Sheik Mohammed demoted several prominent members of Dubai’s corporate elite and replaced them with members of the ruling family, including his two sons, one of whom is Mohammed’s designated heir.

Businessmen who fell out of favour were closely associated with Dubai’s phenomenal success. They include the head of Dubai World, Sultan Ahmed bin Sulayem, and Mohammed Alabbar, the chief of Emaar Properties, developer of the Burj Dubai and hundreds of other projects.

“He is trying to shake things up,” said Christopher Davidson, a lecturer on the Gulf at Britain’s Durham University and an author of two books on the UAE.

However, Davidson added, Mohammed’s decision to replace those who helped put Dubai on the world map with his relatives might be “read as an increase in autocracy which does not look good internationally.”

Not everyone is upset at Dubai Inc.’s transformation into a family business, analysts say.

Mohammed’s latest moves may have pleased Abu Dhabi more than the foreign investors, but it is Abu Dhabi that still has the strongest incentives to save Dubai from its financial misery.

“By shifting the power base back to the family things are as they should be as far as Abu Dhabi is concerned,” said Mohammed Shakeel, a Dubai-based analyst for the Economist Intelligence Unit.

After an expensive adventure in doing things the Western way, it’s “going back to basics” for Dubai, Shakeel added.

Chinese leaders pledge to stick to stimulus to boost the economy

By Joe McDonald BEIJING — Chinese leaders pledged Friday to stick to stimulus spending and easy credit to support growth next year, making clear their unease about the stability of China’s nascent recovery from the global crisis.

Ending a closely watched annual planning meeting, the Communist Party leadership gave no sign it planned an early exit from the stimulus despite a recent upturn in growth. But it said stimulus efforts will shift emphasis from state-led investment to encouraging more consumer spending and private investment.

“The message the report is meant to send is that the central government is still not completely relieved about the domestic and international situation,” said Lu Zhengwei, chief economist for Industrial Bank in Shanghai. In a statement carried by state media, party leaders promised to “continue a proactive fiscal policy and a moderately easy monetary policy” — a reference to Beijing’s four trillion yuan ($586 billion) stimulus and lavish bank lending

Home ownership becomes more expensive in third quarter

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By The Canadian Press

TORONTO - The cost of homeownership in Canada became more expensive in the third quarter, according to a report by RBC Economics Research.

The bank says this hasn't happened since the spring of 2008 and was due to a slight rise in mortgage rates and higher property values. The RBC index measures the proportion of pre-tax household income needed to service the costs of owning a home.

During the third quarter, the benchmark detached bungalow moved up by one per cent to 40.2 per cent and the standard townhouse rose by 0.7 per cent to 32.3 per cent.

The standard condo climbed by 0.5 per cent up to 27.6 per cent and a standard two-storey home increased 1.2 per cent to 45.8 per cent.

RBC says housing demand has outgrown supply, leading to a more competitive market and widespread increases in home values.

"With such strong momentum in the housing market and the cyclical low in mortgage rates behind us, it seems unlikely that affordability will improve in the near future," said RBC senior economist Robert Hogue.

"The housing market still faces obstacles, as mortgages have become more difficult to handle for many Canadians amid challenging labour conditions. This is likely to persist until the economic recovery is well established and job creation is sustained next year."

Consumers need to prepare for higher mortgage rates next year: advisers

by Kristine Owram, THE CANADIAN PRESS

Thursday, November 19, 2009provided by

TORONTO - The Canadian housing market has seen a stronger and faster rebound from the recession than any other segment of the economy, due in large part to enticingly low mortgage rates.

But rates this low - 5.59 per cent for a five-year fixed-rate mortgage and 2.25 per cent for a five-year variable-rate mortgage at one bank - can't last forever, and experts are advising borrowers to prepare for higher rates within the next 12 months.

"We have to realize those are emergency interest rates," said CIBC economist Benjamin Tal.

"Interest rates will rise - it's just a question of time, it's not a question of if. And if that's the case, we have to make sure that when we borrow this money we can afford the same mortgage 200 or 300 basis points higher. That's the key responsibility now of borrowers and lenders, to make sure that what we do, we do it in a prudent way."

Depending on whether they are fixed or floating-rate, mortgages are tied to either the bond market or the Bank of Canada's key lending rate, which are closely related. The central bank's rate has been sitting at a record low of 0.25 per cent since the spring and it has said it will keep it steady until at least next June to help stimulate the ailing economy.

On Wednesday, three of Canada's biggest banks - Royal Bank (TSX:RY), Bank of Montreal (TSX:BMO) and TD Bank (TSX:TD) - announced that they will cut posted rates for fixed-rate mortgages by up to 0.25 percentage points. On Thursday, CIBC (TSX:CM), Laurentian Bank (TSX:LB) and Scotiabank (TSX:BNS) followed suit by cutting their five-year mortgages by 0.25 per cent to 5.59 per cent, in the case of CIBC and Scotiabank, and 5.6 per cent at Laurentian.

But mortgage lenders agree that rates are nearing the bottom and will begin to rise again in 2010.

"The only sort of assurance that you hear in the marketplace is the Bank of Canada's going to try to maintain that rate until June. But past that, there are already warnings that if there need to be adjustments, the adjustments could be a little more abrupt than we've been used to in the past," said Martin Beaudry, vice-president of retail lending at ING Direct.

CIBC's Tal said that with rates this low, "it's almost a crime not to take a mortgage out," but warned that consumers need to be prepared for higher interest rates later on and what this could mean for their personal finances.

For example, a $200,000 mortgage with a term of 25 years and an interest rate of 2.25 per cent has monthly payments of $876.26. For the same mortgage with an interest rate of five per cent, the monthly payments become $1,169.18.

And this doesn't only apply to variable-rate mortgages, but to fixed-rate mortgages that are coming up for renewal, Tal said.

"It's not just variable rates, because five years from now the rates will be much higher, so you don't want to find yourself in a situation five years from now where you can't afford the house," he said.

"It's important to be extremely prudent and not to be totally blinded by those rates."

Both John Turner, director of mortgages at BMO, and ING's Beaudry said they've seen an increase in the number of people opting for fixed-rate mortgages to ensure some certainty when interest rates begin to rise again.

"In the first six months (of 2009), we saw well over 60 per cent of our applications being for variable-rate mortgages, and in particular in our case five-year variable-rate mortgages," Beaudry said.

"Towards the latter part of the summer, until now, the trend has reversed to where we're seeing about 70 to 80 per cent of our applications going for five-year fixed-rate mortgages."

Turner agreed, saying 60 to 70 per cent of BMO's customers were opting for variable-rate mortgages in the past, but lately "there's been a slight shift to fixed."

The key is finding a monthly payment you feel comfortable with and then thinking ahead - if you have a variable-rate mortgage, or a fixed-rate mortgage that's coming up for renewal soon, will you be able to afford to continue to make your payments if interest rates go up?

Turner said now is the time to begin making more frequent payments, while interest rates are still low, if you can afford it. This will reduce your principal more quickly and will mean lower payments down the road when interest rates are higher.

"For example, if you have a $200,000 mortgage and you opt to pay biweekly (instead of monthly), you knock four years off your mortgage and save about $47,000 in interest just by doing that," he said.

As well, if you have a variable-rate mortgage, it's important to keep an eye on interest rates and lock in if you feel they're getting too high, said Jim Murphy, president and CEO of the Canadian Association of Accredited Mortgage Professionals, or CAAMP.

The association also recommends that homeowners renew their mortgages before the scheduled renewal dates given the current low level of interest rates.

However, Murphy predicted that when interest rates do start to go up it will be a gradual climb, and Canadians shouldn't worry about a sudden jump in the number of people who are forced to default on their mortgages.

"I think people are predicting that rates will start to increase in 2010 at some point in time, but it'll be more of a slow, measured increase as it goes up, and most Canadians who have variable products will have the ability to lock in," Murphy said.

CAAMP says the volumes of residential mortgage credit outstanding is forecast to grow by seven per cent between 2009 and 2011, and is predicted to pass $1 trillion in 2010. The average mortgage interest rate was 4.55 per cent as of October, down from 5.41 per cent a year ago.

Canadian real estate recovery will be weak

THE CANADIAN PRESS

Canada’s real estate market didn’t fall as hard or fast as in the U.S., but some spots did suffer steep losses and a recovery will be slow as buyers worry about another potential economic dip, a new report suggests.

Total losses in value across Canada will average between 10 to 20 per cent compared to the highs of two years ago, according to the study by PricewaterhouseCoopers and the Urban Land Institute.

But some areas saw a much deeper drop. The report released Wednesday predicts a slow recovery to begin by the end of next year.

“For 2010, we are rating only fair investment outlooks for most property types and predict generally weak conditions for development,” said Chris Potter of PricewaterhouseCoopers.

“Limp demand threatens to soften property cash flows across all sectors and most markets.”

The report is based on surveys of more than 900 real estate developers, lenders, brokers and consultants in both Canada and the U.S.

It shows Canadian industry is still worried about suffering more economic shocks, particularly from the U.S. financial system.

That is despite conservative banking practices in Canada and stricter regulation that saved many Canadian investors from overleveraging during the recent housing recession.

The report forecasts a relatively stable market for developments such as condos, hotels and other developments, which will favour buyers over sellers.

The report says the prospects for apartment investments rank barely above a fair rating at 5.44 out of 10, followed by office at 5.04, retail at five, industrial/distribution at 4.68 and hotels at 3.69.

“We expect to see developers curbing their activity in light of softened demand as bankers rein in construction loans,” said Lori-Ann Beausoleil, also of PricewaterhouseCoopers.

She said certain condo projects will likely “stall out” until residential prices firm up in Vancouver and Toronto.

Beausoleil said Canadian office markets performed better than expected, with vacancies averaging about eight per cent, with rates much higher in cities such as Calgary where demand remains weak.

Optimism returns to Canadian businesses, confidence highest since 2007

BY JULIAN BELTRAME

OTTAWA — Canada’s business leaders are turning bullish about the economy after a year of doom and gloom, a new survey suggests.

The Conference Board of Canada’s fall business confidence survey finds corporate leaders believe the recession is finally over and that the economy will rebound in the next six months.

The mood of confidence is particularly strong considering that recent indicators, particularly gross domestic product data for July and August, were disappointing.

Yet 63 per cent of business leaders surveyed said they expect the economy to improve over the next half-year, as opposed to only seven per cent who thought it will deteriorate.

Significantly, about a year ago the responses were almost exactly reversed.

The 16-point surge in the fall survey brought the confidence index to 97.8, the highest level since 2007.

The survey of about 2,000 representative firms from across the country was conducted between Sept. 14 and Oct. 22.

“After a year of despondency, Canadian business leaders are sensing an end to the deepest recession in a generation,” the Conference Board said about the results.

“Respondents appear very encouraged by signs of nascent recovery. More than half the respondents believe the present is a good time to expand their stock of machinery and equipment.”

Despite the apparent optimism, business still said they were concerned about under-utilization in their production levels, with 29 per cent describing their operations as substantially below capacity.

As well, leaders said they were concerned about the impact a strong dollar will have on their sales, the still weak demand, and about the ease of obtaining financing.

But it is in the forward indicators that business leaders were decidedly optimistic.

Almost 61 per cent said they expected their financial position to improve in the next six months, and more than half expect better profitability.

As well, more than half said it was a good time to expand, with 16 per cent saying they expected to increase their level of capital spending by more than 20 per cent in the next six months.

The Conference Board’s survey is roughly in line with results obtained by the Bank of Canada in September. The central bank’s survey of businesses showed 69 per cent of large firms optimistic their sales would increase in the coming year, and 42 per cent saying they expected to shift to hiring.

The Canadian Press

Fed creates 'sweet spot' for markets

Paul Vieira, Financial Post - Equity markets, which have been on the ropes as of late, might have been given a second wind Wednesday as the U.S. Federal Reserve declared its easy-money strategy was here to stay for the foreseeable future.

"What the Fed has done is create a sweet spot for the equity market," said Andrew Pyle, wealth advisor and markets commentator at ScotiaMcLeod. "What has happened to date can continue in an environment where rates are not going to be pushed up. It has given the equity market a lot more room to play with."

Stock markets in Canada and the United States ended up with small gains following the release of the Fed statement, which acknowledged improvements in the U.S. economy such as an expansion in consumer spending and stable financial markets. But it reiterated that record low interest rates would remain in place for an extended period, as inflation expectations are expected to remain subdued "for some time."

As a result, market players can continue to borrow short-term cash at very low rates to invest in higher-yielding assets. Low rates are also likely to be a boost to future corporate earnings, as borrowing costs remain cheap.

Keith Summers, chief investment officer and portfolio manager for Tricoastal Capital Management Ltd., said the Fed statement has removed the risk of a significant market correction.

"The result of what they are saying, which is easy money is here for the foreseeable future, is going to reassure people that the market is not going to be abandoned to its own devices," Mr. Summers said. "Because of that there will be a bias toward buying as opposed to selling."

Benchmark indexes in Toronto and New York have surged more than 50% from 52-week lows hit in March, as investors bet on an economic recovery. In recent weeks market indexes have shed some of the gains, as investors engaged in profit-taking on the belief that the market has fully priced in the recovery story.

The Fed statement offered some guidance as to when it might begin raising rates. In the only significant change from previous statements, the U.S. central bank said its record-low rate policy would continue due to "low rates of resource utilization, subdued inflation trends, and stable inflation expectations." Should those elements change, then all bets are off, analysts said.

"This appears to spell out the Fed's criteria for beginning rate normalization," Michael Woolfolk, senior currency strategist at Bank of New York Mellon, said. "While the language was subtle, the clear message is to keep inflationary concerns to a minimum and to curb talk of higher rates."

But analysts such as Mr. Pyle said the guidelines provided are somewhat vague because they don't indicate, for example, how much slack has to be removed from the economy before a rate hike is warranted. In contrast, the Bank of Canada said it is prepared to keep its key benchmark rate at the record-low level of 0.25% until June 2010, conditional on inflation remaining subdued.

"The longer you keep this low interest-rate environment going, the greater the shock will be for households, businesses and investors when someone is forced to change the environment. We are setting ourselves up for a huge risk," he said.

One factor that could force the Fed to move is further deterioration in the U.S. dollar, Mr. Pyle added. The U.S. dollar lost ground following the Fed decision, on improved risk appetite. Mr. Woolfolk said the U.S. dollar could lose further ground against major currencies, such as the euro, unless job data due out on Friday is worse than expected.

Gold seen as a hedge against greenback

Alia McMullen, Financial Post
Gold soared to a record high Tuesday after India surprised the market with the biggest single purchase of the commodity by a central bank in the past 30 years -- a signal governments around the world are becoming increasingly uncomfortable about the sliding value of the U.S. dollar.

"It's certainly indicative that the monetary authorities in India are not overwhelmingly upbeat about the outlook for the U.S. dollar," said Erik Nilsson, senior international economist at Scotia Capital. "Bear in mind too that we're talking about a jurisdiction that has had a long standing love affair with gold."

Mr. Nilsson said India had increased its gold reserves to hedge against its U.S.-dollar holdings, which total about US$268.4-billion.

He said the increasing demand for gold as a hedge against the greenback was helping to set the stage for an alternative reserve currency or asset to the U.S. dollar, a proposal that has been trumpeted by countries such as China, France, India and Russia. However, any such change would not come quickly, Mr. Nilsson said.

The cost of an ounce of gold rose US$30.90 Tuesday to hit a record US$1,084.90 after it was announced the Reserve Bank of India had purchased 200 tonnes of the precious metal from the International Monetary Fund.

The IMF said the purchases were made in installments between Oct. 19 and Oct. 30 for a total value of US$6.7-billion.

Timothy Green, author of The Ages of Gold, said it was "the biggest single central-bank purchase that we know about for at least 30 years."

Indeed, the purchase amounts to almost half of the 403.3 tonnes that the IMF approved for sale in September to diversify its sources of funding. The IMF owns more than 3,000 tonnes of gold.

Bart Melek, global commodities analyst at BMO Capital Markets, said the Reserve Bank of India's gold purchase pushed the country's gold reserves up to 7.1% of its total reserve assets. He said other countries, including China and Russia, have also been buying more gold, a trend that would likely continue while the U.S. economy remained volatile. On average, countries hold about 12.6% of their reserves in gold, up from 9.9% a year ago. Some of this represents an increase in gold holdings, but another driver of the increased proportion is the rise in the value of gold.

The price of gold has surged 52% since bottoming on Nov. 12 last year.

"Historically, gold has been a hedge against instability, has been a hedge against inflation, has been known to behave counter cyclically to equity markets," Mr. Melek said. "Gold has reasserted its historic role of being a hedge, basically insurance against bad stuff, against everything from geopolitical problems to inflation to dollar issues."

He said in the bullish case, gold could continue to push higher to average US$1,300 on an annual basis by the end of 2010 or early 2011.

Brian Christie, analyst at Desjardins Securities, said central-bank demand would be an important driver of the gold price, with India's purchase adding to the positive momentum for the commodity.

"China is rumoured to be interested in some or all of the remaining IMF bullion; however, it is likely very sensitive to price," Mr. Christie said. "Since the transaction with India was done at fair market value, the Chinese could be waiting for a pullback in the gold spot before pursuing this purchase further."

With holdings of US$2.3-trillion, China is the largest holder of U.S.-dollar reserves and has been actively looking to diversify its portfolio.

Hopes for recovery get a boost from manufacturing, construction and home sales news

By Martin Crutsinger

WASHINGTON — Hopes for the fledgling U.S. economic recovery got a boost Monday from better-than-expected news on manufacturing, construction and contracts to buy homes.

The surprisingly strong readings provided some comfort that the U.S. economy is packing more momentum than assumed going into the end of the year. Still, with jobs scarce, lending tight and consumers wary of spending, it’s unclear whether the gains can be sustained as government stimulus programs wind down.

The U.S. Institute for Supply Management’s gauge of manufacturing activity grew in October at the fastest pace in more than three years. It was driven by businesses’ replenishing of stockpiles, higher demand for American exports and support from the U.S. government’s $787-billion US stimulus program.

The ISM index shot up to 55.7 in October, the third straight reading above 50, which signals growth in the sector. It was the highest level since April 2006.

“It clearly looks like we are seeing a turnaround in the manufacturing sector,” said David Wyss, chief economist at Standard&Poor’s in New York.

Economists cautioned that the manufacturing pattern seen in the past two post-recession recoveries likely will be repeated this time: In each case, early strength in manufacturing, led by companies’ restocking of inventories, faded within a few months.

Wyss agrees that the ISM index could dip below 50 in the first quarter of next year. But he thinks that would be a temporary slump and not a sign that the economy was dipping back into recession.

“A bit of a slip in manufacturing would be consistent with a sluggish recovery,” he said.

The overall economy, as measured by the gross domestic product, expanded at a 3.5 per cent rate in the July-September quarter. That number provided compelling evidence that the longest recession since the 1930s was ending. Wyss said he expects GDP growth to slow to around 1.7 per cent in the current quarter and to remain sluggish in the first half of next year.

Other economists are more optimistic, with some forecasting that GDP growth could come in around three per cent in the current quarter. They pointed to the government report Monday that construction spending rose a bigger-than-expected 0.8 per cent in September, fuelled by the strongest jump in home construction in six years. The gain in housing offset continued weakness in construction of office buildings, hotels and shopping centres.

In a third report, the National Association of Realtors said the volume of signed contracts to buy previously occupied homes rose 6.1 per cent in September to a reading of 110.1. That’s the highest level since December 2006. And it’s more than 21 per cent above a year ago.

The eighth straight monthly gain came as the housing market rebounds from the worst downturn in decades. The improvement has been aided by federal intervention to lower mortgage rates and bring more buyers into the market. For example, the contracts to buy homes rose as buyers scrambled to qualify for a tax credit for first-time buyers that expires at the end of this month. Congress is moving to extend the credit until April 30.

“We think this recovery is sustainable,” said Sal Guatieri, an economist at BMO Capital Markets. “We think there is enough government stimulus in place to push the economy forward and manufacturing will be getting support from a weakening U.S. dollar and strength in Asia which will boost exports.”

Manufacturing in China, which posted the strongest growth of the world’s major economies in the third quarter, expanded for an eighth straight month in October, according to a survey by a government-sanctioned industry group. European surveys also showed growth despite the recent climb by the euro and pound against the dollar. That currency gap makes Europe’s exports more expensive.

The expanding signs of a U.S. rebound gave an initial boost to investors on Wall Street Monday, but the rally lost steam on a retreat in financial stocks. The Dow Jones industrial average added about 75 points in late afternoon trading, while broader indexes were mixed.

At the White House, President Barack Obama said the public and private sectors must find more ways to create jobs to continue the recovery. In remarks at the start of a meeting with his economic advisers, Obama credited his stimulus package for recent better economic figures, including the manufacturing boost.

But layoffs continue. Sun Microsystems Inc. said in October it plans to eliminate up to 3,000 jobs before it’s acquired by Oracle Corp.

In October, the ISM said 13 of the 18 manufacturing industries surveyed expanded, led by petroleum and coal production, apparel and furniture. Three industries shrank.

“There’s still a lot of caution from our clients,” said Richard Zambacca, president of Think Resources, an engineer staffing company in Atlanta. “People are looking for funding.”

The Associated Press

CMHC forecasts continued new housing rebound

The Canadian Press

OTTAWA — The national housing agency is reporting that housing starts have started to recover and it expects the recovery to continue.

Canada Mortgage and Housing Corp. predicts starts will reach 141,900 this year and increase to 164,900 in 2010.

The CMHC’s fourth-quarter market outlook forecasts housing markets will continue to strengthen over the next year as economic conditions improve.

It says demand for existing homes has rebounded and both new and existing home markets are characterized by lower inventory levels.

However, the national housing agency says the strong pace of sales in the second and third quarters partly reflects delayed activity and is not likely to be sustained.

The CMHC says it expects the level of sales to move back closer in line with anticipated economic conditions.

It predicts existing home sales will reach 441,300 units in 2009 and increase to 445,150 units in 2010, while the average price is expected to be $312,950 in 2009 and $324,500 in 2010.