Finance & Business World

Peru’s central bank will probably keep its benchmark lending rate at a record low as policy makers evaluate signs that an economic recovery has taken hold.

The seven-member board, led by bank President Julio Velarde, will keep its reference rate at 1.25 percent, according to 11 of 12 economists surveyed by Bloomberg. The bank is scheduled to announce its decision after 7 p.m. New York time.

Velarde will pause for a second month, after seven straight cuts earlier this year, to measure the effect of lower borrowing costs on the country’s economy, said Pablo Secada, an economist at the Peruvian Economy Institute. Growth is showing signs of rebounding after the economy stalled in the first half of the year on falling export demand and weaker domestic spending.

“The central bank is aware that the economic recovery has begun, even if it’s moderate,” Secada said in an interview from Lima. “We’re seeing growth in consumer demand, so they have cause not to be pessimistic.”

Brazil, Mexico and Chile have all held their benchmark rates unchanged since August, citing improving economic growth. Peru cut the overnight rate by 5.25 points this year to spur consumer spending after six increases in 2008 pushed borrowing costs up to the highest since 2001.

Peru’s metals output, agriculture and cement sales all increased in August, and unemployment was 8.3 percent that month, down from an almost two-year high of 9.3 percent in March. The improved numbers came after the economy shrank for the first time in eight years in the second quarter.

Metals Pricing

Prices of copper, zinc, lead, tin and silver, which account for 60 percent of Peru’s export revenue, have all gained at least 35 percent this year as increases in U.S. and Chinese manufacturing signal rising demand for industrial materials.

“The market is very promising for business in general,” said Norberto Lassner, president of Neogas Peru, a compressed natural gas distributor that inaugurated a $5 million filling station outside Lima last week. “There’s a great deal of repressed demand.”

Bank loans grew 15 percent this year through September from a year earlier spurred by mortgages and car loans, according to Peru’s banking regulator. Corporate debt offerings totaled 400 million soles ($140 million) in September, the highest monthly figure in two years, securities regulator Conasev said.

Peru’s foreign debt rating was put on review for an increase to investment grade by Moody’s Investors Service last week, citing the country’s “stable” economic policies.

Slowing inflation

The bank may cut the rate by 0.25 point as inflation hovers at a two-year low and Peru’s currency strengthens, said Kathryn Rooney, an emerging-market analyst at Bulltick Securities Corp. The Peruvian sol has advanced 9.5 percent this year, the seventh-best performance against the dollar among 26 emerging- market currencies tracked by Bloomberg.

The country’s annual inflation rate fell in September to 1.2 percent from 1.87 percent through August as food and transport costs declined.

The inflation rate will be lower than policy makers’ target of 1 percent to 3 percent this year on declining consumer demand, Velarde said last month.

Still, after expanding 9.8 percent in 2008, the fastest pace in 14 years, Peru’s economic growth may slow to 1.8 percent in 2009, the slowest pace since 2001, Velarde told reporters in Lima on Sept. 18.

“Domestic demand is taking longer to pick up than expected,” Rooney said in a telephone interview from Miami. “Data shows growth woefully below potential.”

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New Zealand’s manufacturing industry contracted at a faster pace in August as new orders and production slowed, adding to signs of a weaker recovery from the nation’s worst recession in three decades.

The manufacturing index was 48.7 from 49.6 in July, Bank of New Zealand Ltd. and Business New Zealand, a Wellington-based employer group, said on the group’s web site. An index below 50 indicates that manufacturing is contracting.

Companies have reined in production since April last year amid a global recession that curbed export demand and consumer spending. The Reserve Bank last week said the economy may grow just 0.1 percent in the third quarter, the first expansion in seven quarters.

“We don’t believe it spoils the recovery theme,” said Craig Ebert, senior economist at Bank of New Zealand in Wellington absolutely free credit report. “The PMI does sound a cautionary note not to get overly excited about a strong or sustained recovery just yet.”

The index is based on gauges of production, employment, new orders, finished stocks and deliveries.

The recovery in July’s index to a 16-month high had stoked expectations manufacturing was close to expanding again. Instead, the index for new orders fell to 50.3 in August from 55.4 and the production gauge dropped below 50.

Ebert said the slump in demand was exacerbated by a drop in aluminum production from Rio Tinto Group’s Tiwai smelter. Dairy and meat processing increased in the second quarter, suggesting other areas of manufacturing remain weak, he said.

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U.S. Treasury Secretary Timothy Geithner said the Group of 20 nations has been “very successful” in helping to end the global recession and cautioned that it’s too early to remove policies aimed at boosting growth.

“You’re seeing the first signs of positive growth now in this country and countries around the world,” Geithner told reporters in Washington yesterday. “We’ve come a very long way but I think we have to be realistic, we’ve got a long way to go still.”

Geithner spoke as he prepared to leave for a meeting of Group of 20 finance ministers and central bankers Sept. 4-5 in London. The officials are laying the groundwork for a summit meeting later this month in Pittsburgh, where leaders will discuss measures to overhaul supervision of the financial system.

Geithner said talks in London will include the start of a discussion on bank capital standards as well as a “framework” for how the world’s largest industrial and developing economies can cooperate to remove policies to stimulate growth. While it’s “too early” to implement exit strategies, it’s not too soon to talk about them, he said.

The U.S. also wants to discuss how to build a new “international capital accord” to rein in the amount of leverage that financial firms take on, Geithner said. Such an arrangement would set standards for how much capital that financial firms would need to hold in reserve to cushion against potential losses.

‘Timetables’

“We’re going to talk about a framework of design principles, and I think we’re going to start to talk about timetables for what we try to get the world to commit to do in that context,” he said.

International cooperation is needed for any new standards to be effective, Geithner said. He said emerging market nations, many of which already have “pretty conservative” bank supervision in place, will play a bigger role than they have in the past.

“This is not something we can take a long time to do,” he said. “It took the world a very long time to reform the previous system, and that was a consequential and costly failure of cooperation, and we’re not going to repeat that mistake.”

Geithner declined to comment on the recent elections in Japan and said he’s looking forward to working with the new members of the Japanese government.

European finance ministers lined up this week behind proposals to limit bank bonuses as governments sought to forge a common stance on overhauling the financial system before the summit of the Group of 20 nations.

‘Bonus Culture’

“The bonus culture must come to an end,” Swedish Finance Minister Anders Borg, whose nation currently holds the rotating European Union presidency, told reporters yesterday as he arrived for a meeting of EU finance chiefs in Brussels. “The bankers are acting like it’s 1999 and it’s in fact 2009.”

French Finance Minister Christine Lagarde said in Brussels before the meeting that she has “firm proposals to put some order into the system of bonuses.” France will suggest curbing bonus pools as a percentage of a bank’s revenue, imposing a ceiling on payments or taxing them, a Finance Ministry official told reporters earlier this week.

In yesterday’s briefing, Geithner said curtailing executive-compensation is “a critical part of our broader reform agenda.” He said the U.S. has proposed “pretty comprehensive reforms” to give shareholders more control over pay policies and also give managers better incentives to act in the best long-term interests of their banks.

‘Common’ Interests

“If you look at what’s happening across Europe, like in many of these areas, there’s a lot in common in terms of basic strategy,” Geithner said. He declined to comment on specific changes sought by his counterparts, saying he had not yet had detailed discussions on the policy proposals.

Geithner, 48, will be in London the same day the U.S. Labor Department releases its report on the job market in August. A Bloomberg survey of economists shows expectations the unemployment rate rose to 9.5 percent in August from 9.4 percent a month earlier.

A private survey released yesterday showed that companies eliminated more jobs last month than expected, signaling employers have yet to gain confidence a recovery from the deepest recession since the 1930s is taking place. The drop of 298,000 workers followed a revised 360,000 decline in the previous month, according to figures from ADP Employer Services.

It is “very important” to the U.S. to “reinforce the progress we are seeing,” Geithner said.

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On-the-job fatalities dropped in 2008 in part because the recession kept millions of workers at home, according to a government report released Thursday.

Fatal work injuries totaled 5,071 in 2008, a 10% drop from 5,657 deaths the prior year.

"It’s pretty clear to us that the economy has at least some part to play in the lower numbers of fatal work injuries in 2008," said Scott Richardson, a program manager at the Bureau of Labor Statistics. "But it’s not yet clear as to what proportion that was, or to what proportion other factors may have played a part."

The steepest declines were in the construction industry, in which fatalities declined 20% to 969 from 1,204 in 2007. In the sub-category of residential building construction, fatalities dropped even further, by 28%, to 93 deaths.

Construction was still the deadliest industry, with 969 fatalities last year, at a rate of 9.6 per 100,000, the report said. But the highest death rate — 29.4 per 100,000 — was in agriculture, forestry, fishing and hunting, with 651 fatalities in all.

Overall, the rate per 100,000 workers declined to 3.6 from 4.

For Paul Roldan, a business agent who represents the Laborers Local 325 in Jersey City, N.J., the reason for the decline is obvious: Fewer people are on the job as the recession grinds on.

"The work has slowed down drastically and dramatically," said Roldan. "If people aren’t working, then there’s less of a reason to get hurt."

Some 6.7 million jobs were lost in the United States from the beginning of 2008 until July 2009. The unemployment rate in July was 9.4%.

The disparity between workplace suicides and homicides is among the most puzzling details to emerge in the report, according to Richardson, the labor agency analyst.

Workplace suicides rose 28% to 251 deaths in 2008, the biggest increase since the bureau began tracking this information in 1992. But workplace homicides dropped 18% in that same time period, the report said.

"We were surprised at the lower homicide total, simply because a lot of research has showed a lot of correlation between higher unemployment and higher homicide numbers," said Richardson. He added that the suicide figures do not take into account work-related suicides that occur outside of the workplace.

Part of the study focused on racial demographics, showing an 8% decline in fatalities for white workers, but much greater declines for non-whites. Fatalities dropped 16% among black workers and 17% among Hispanic workers, the report said. The decline was especially dramatic among Hispanics born outside the U.S., dropping 24% to 480 deaths in 2008, compared to a 3% drop among U.S.-born Hispanics.

Richardson would not comment on the racial disparity statistics. But Roldan, the labor union business agent, theorized that layoffs hit the private sector the hardest, which tend to hire non-union members, and many of them are immigrants.

"It’s appealing to contractors to hire them more, because it’s more money for them to put in their pockets," said Roldan. 

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SASKATOON–A slow start to the U.S. planting season and extended negotiations with offshore buyers has resulted in another output reduction this year at Potash Corporation of Saskatchewan Inc.

The Saskatoon-based fertilizer giant, the world's largest potash producer, says it will reduce its 2009 output again, this time by 800,000 tonnes.

That brings curtailments this calendar year to 4.7 million tonnes and total curtailments to 5.5 million tonnes since August 2008.

An announcement posted on Potash Corp's website says it does expect demand to return in the second half of 2009 as Brazil approaches its major fertilizing season and buyers in India and China return to the market credit reports.

Potash Corp.'s chief executive said earlier this month that the company may resort to selling fertilizer to China on the spot market if the two sides can't renew a three-year supply deal that expires soon.

China represents about 12 per cent of Potash Corp. total business.

Potash Corp. shares were down $8.81 or seven per cent at $112.19 before midday on the Toronto Stock Exchange.

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Apple on Monday unveiled a new, faster iPhone, lowered the price on its existing model to $99, and released details of its revamped operating system.

But Apple (AAPL, Fortune 500) CEO Steve Jobs did not appear at the company’s World Wide Developers Conference in San Francisco, where the company presented its products.

Instead, Philip Schiller, the company’s senior vice president of worldwide product marketing, demonstrated the new iPhone 3G S, which can perform tasks up to 3.6 times faster than the previous second-generation iPhone, the iPhone 3G.

Apple shares, which were down as much as $5.24 earlier, were $2.07 lower at $142.60 after the presentation. They ended the day down 82 cents, at $143.85.

The iPhone will come in three sizes and prices. The new phone will have a 16-gigabyte model for $199 and a 32-gigibyte version for $299. Apple will continue to sell a second-generation iPhone 3G with 8 gigabytes of memory for $99 — the cheapest price yet for the device.

The prices are subsidized by AT&T (T, Fortune 500), the exclusive wireless carrier for the phone, for customers signing new contracts.

The new phone also comes with a 3-megapixel camera with video capturing and editing capabilities, improved battery life with up to 12 hours of talk time and 30 hours of audio, voice-command control by holding down the home button, and a built-in digital compass.

IPhone OS: Apple also demonstrated its new operating system for the iPhone, days after after competitor Palm (PALM) launched its much-ballyhooed Pre phone.

The new iPhone OS 3.0, which was first unveiled in March, will have cut, copy and paste capabilities for all applications, which iPhone users have long demanded. The operating system will also feature an undo gesture, which will undo the last action by shaking the phone.

"Apple’s in a different environment now than when they launched the iPhone, because there are multiple dealers with better offerings," said Edward Zabitzky, Apple analyst with ACI Research. "Apple really didn’t change the platform very much, but the net result is that they made themselves more competitive."

Fully integrated search, multimedia text messages and auto-fill for passwords have also been added to the iPhone, though the multimedia text messaging will not be available on AT&T (T, Fortune 500) until later in the summer health insurance plans.

The new OS will allow users to rent and purchase movies right from their phones using iTunes, and it will have parental control functionality.

Snow Leopard: Apple said its new operating system, Snow Leopard, will be available in September and can perform some tasks up to 90% faster than the current Leopard OS. Apple said Snow Leopard is more crash resistant than its predecessor and is 6GB smaller.

Rival Microsoft (MSFT, Fortune 500) has said its new Windows 7 operating system will be unveiled in October.

Snow Leopard will cost $29 to upgrade from Leopard, which is $100 less than Apple’s previous upgrade price.

Apple also unveiled a new, faster Safari Web browser. Safari 4 can track changes in many of the most frequently visited Web sites, and uses the iTunes "cover flow" interaction to scan through browser history.

The company redesigned its Quicktime video viewer and editor, giving users the ability to share video on YouTube, MobileMe or iTunes, which enables playback on the iPhone.

New MacBooks: The new 13-inch and 15-inch MacBook Pros will both showcase a 3.06 GHz Intel Core Duo processor, the fastest processor Apple has ever used.

Like the larger 17-inch MacBook Pro, the 15-inch will also feature a new lithium battery that gets up to seven hours of battery life and three times the recharges of most laptops.

The company announced the MacBook air will cost $1,499, a $700 price cut. A 13-inch MacBook Pro will cost $100 less at $1,199, and the the 15-inch and 17-inch MacBook Pros will be $300 less expensive at $1,699 and $2,499, respectively.

The company did not offer a low-priced netbook, as some had expected, but analysts cheered the move.

"They shouldn’t compete in the netbook world, because it would diminish the value of their brand," said Zabitzky. "It would be very foolish for Apple to go after short-term gains for long-term pain."

Jobs, who has been on leave because of illness, is expected to return to work at the end of the month.

– Fortune’s Philip Elmer-DeWitt contributed to this story 

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Americans may have to get used to unemployment greater than 8 percent for the first time since 1983 and an economy that won’t grow much beyond 2 percent as a consequence of the lost confidence in consumer credit that shattered financial markets.

By this time next year, “the market will realize that potential growth for the U.S. is no longer 3 percent, but is 2 percent or under,” Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., said in an interview with Bloomberg Radio.

“We are transitioning to what we call at Pimco a new normal,” El-Erian said. Pimco, in Newport Beach, California, is the biggest bond fund manager with about $756 billion in assets.

The U.S. financial crisis and recession have produced lasting shifts in consumer spending and savings reminiscent of the 1950s that may crimp profits and productivity, said David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto and former chief North American economist at Bank of America Corp.

“This is going to be a new era of frugality,” Rosenberg said. “This isn’t some flashy two- or three-quarter deal. This is a secular change in household attitudes.”

The last time U.S. gross domestic product grew at an annual rate of under 2 percent over a decade was the 1930s, when it expanded at an average 1.3 percent. In the 30 years before the recession that began in December 2007, the average was 2.9 percent. Over the past 15 years, it was 3 percent.

The Cleavers

In the first quarter, after contracting at a 6.3 percent annual rate in the previous three months, the economy shrank by 6.1 percent. It was the weakest six-month performance since the last quarter of 1957 and first quarter of 1958.

The coming decade may, in some ways, remind people of those years during President Dwight D. Eisenhower’s administration, Rosenberg said.

“Life wasn’t so bad for the Cleavers,” he said, referring to the family depicted in “Leave It to Beaver,” the television show that ran from 1957 through 1963. “They weren’t up to their eyeballs in debt and they weren’t a three-car family with a 5,000-square-foot McMansion.”

Behavior by newly ascetic U.S. consumers, whose spending drives more than two-thirds of the economy, will translate into “less return to capital and less-remarkable equity returns,” said Milton Ezrati, senior economist at Jersey City, New Jersey- based Lord Abbett & Co., which manages $70 billion. “The whole picture is muted.”

‘Adrenaline Shot’

Barton Biggs, former chief global strategist for Morgan Stanley, sees the near future as brighter with a “powerful” comeback in equities because of government stimulus packages around the world, he said in an interview with Bloomberg Radio.

“The system has had an incredible adrenaline shot, so I think we’re going to have a pretty strong recovery,” said Biggs, who runs New York-based hedge fund Traxis Partners LP.

U.S. stocks are at the start of a new market that may spur an 88 percent advance in the Standard & Poor’s 500 Index in the next two or three years, said Laszlo Birinyi, founder of Westport, Connecticut-based research and money-management firm Birinyi Associates Inc.

“We’re confident we are in a bull market,” Birinyi said in an interview with Bloomberg Television.

The S&P 500 has rebounded 31 percent since hitting a 12- year low in March. It remains about 43 percent below its October 2007 high, ending at 887 on May 22. Markets in the U.S. were closed yesterday for the Memorial Day holiday.

‘A Major Shock’

At Pimco, El-Erian expects that “markets will revert to a mean, but it will not look anything like that of recent years,” he wrote in his May Secular Outlook report. “The financial system will be de-levered, de-globalized and re-regulated.”

Worldwide, “there are insufficient demand buffers and fast-acting structural reforms to provide for a spontaneous and sustainable recovery in the global economy,” he wrote. “It will be a major shock to those that are trapped by an overly dominant ‘business-as-usual’ mentality.”

Investors will have to get used to “a 5- to 7-percent return game, not a 15- to 20-percent return game,” said Mark MacQueen, partner and portfolio manager at Sage Advisory Services Ltd. in Austin, Texas, which oversees $7.5 billion.

“Things have changed,” MacQueen said. “Wall Street has changed; confidence in the United States has changed.”

Under 8 Percent

A lasting effect of the recession may be a “markedly higher” natural rate of unemployment, said Edmund Phelps, a professor at Columbia University in New York and winner of the 2006 Nobel Prize in economics payday loans. The natural rate is one that neither accelerates nor decelerates inflation.

“It was 5.5 percent,” Phelps said. “Maybe it will be 6.5 percent — maybe 7 percent.”

The U.S. may report on June 5 that the jobless rate moved to 9.2 percent in May, the highest since 1983, from 8.9 percent in April, according to economists surveyed by Bloomberg. In the recession of 1981-1982, unemployment remained at 8.5 percent or higher for two years, beginning in December 1981. It didn’t move below 7 percent until 1986.

Now the rate may not go back under 8 percent until 2013, according to John Ryding, chief economist at RDQ Economics LLC in New York, and Conrad DeQuadros, the firm’s senior economist.

“This unemployment outlook is troubling for the ability of the banking system to make money on consumer loans and credit cards,” they wrote in a report on May 15.

The economy has shed 5.7 million jobs since January 2008, marking the biggest employment loss of any economic slump since the Great Depression.

Highest Debt on Record

Consumers are saddled with debt built up during the boom years. The total amount of U.S. consumer credit rose by an average of 4.9 percent a month at an annual rate from December 2006 to July 2008, according to data compiled by Bloomberg.

Yet it has declined in six of eight months since August 2008, according to data compiled by Bloomberg.

As a percentage of net worth, household debt — including mortgages — is at 27 percent, the highest on record, according Federal Reserve figures.

The personal savings rate, which averaged 0.9 percent from 2004 through 2007, has climbed to 4.2 percent. People are responding in part to a drop in their wealth, with house values down 27 percent since June 2006 after rising 63 percent the previous four years, according to national Case-Shiller data.

Smaller Houses

“That in itself will be a big slowdown in the economy if people are saving instead of consuming,” said Kenneth Volpert, who oversees $180 billion in taxable bonds for Vanguard Group in Malvern, Pennsylvania. The national savings rate could peak at 9 percent, he said.

Household debt was 11 percent of net worth at the end of 1959 and the savings rate was about 8 percent, according to Fed and Commerce Department data. The average size of a home built in 1960 was 1,200 square feet, according to Census figures. That grew to 2,521 square feet by 2007, with 24 percent of new homes larger than 3,000 square feet.

Now, smaller may be back as people seek to devote less of their incomes to mortgage payments, said Ara Hovnanian, CEO of Hovnanian Enterprises Inc., New Jersey’s largest homebuilder.

“For some number of years certainly after this correction you will see that conservatism translate into both the size of the homes and the finishes customers want,” Hovnanian said. That means “fewer European cabinets and appliances and fewer granite countertops.”

$200 Handbags

Shoppers will be restrained, which will result in the number of U.S. malls falling by at least a fifth and weak chains succumbing to bankruptcy, said retail analyst Patricia Edwards, founder of Storehouse Partners LLC in Bellevue, Washington.

In preparation, Coach Inc. has begun to “engineer” its collections so at least half its handbags fall into the $200 to $300 range, compared with 30 percent previously, meaning an average reduction in price of 10 percent to 15 percent, CEO Lew Frankfort said.

Long after the economic contraction has ended, “consumers will spend less on luxury goods than they did before the recession began,” Frankfort said at an April 28 investors’ conference. “We are adapting to what will be a new normal.”

Abercrombie & Fitch Co., a teen-apparel retailer that had avoided offering discounts and promotions, said May 15 it will begin reducing what it charges at its Hollister stores. Brinker International Inc., the owner of the Chili’s Grill & Bar chain, said April 21 that it updated its menus to reflect a focus on “lower price points.”

That’s not to say that debt-fueled shopping sprees, expensive restaurants and run-ups in house values and stock prices won’t ever make a comeback, said Ethan Harris, co-head of U.S. economics research at Barclays Capital in New York.

“Will there be at some time in the next 10 or 20 years another big bubble and collapse? Absolutely,” Harris said. “You can’t entirely change human nature.”

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German industrial production unexpectedly held steady in March, ending a six-month slump and adding to signs that a recession in Europe’s largest economy has reached a trough.

Output was unchanged from February, when it slumped 3.4 percent, the Economy Ministry in Berlin said today. Economists predicted a decline of 1.3 percent, the median of 27 forecasts in a Bloomberg survey showed. The annual rate of decline slowed to 20.4 percent.

“It is very pleasant to see that the decline of production has temporarily come to an end,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “Output only stagnated because of the government’s car-wreckage premium and a construction surge following a tough winter. Still, orders and sentiment indicators are giving promising signals that the worst is behind us.”

Germany’s economy, which will probably contract the most since World War II this year, may benefit from a pick up in the global economy later this year. Factory orders rose in March for the first time since August, data showed yesterday, and business confidence rebounded from a 26-year low last month.

Exports unexpectedly increased for the first time in six months in March, the Federal Statistics Office said today. The government expects the economy to return to growth next year, forecasting a 0.5 percent expansion after a contraction of 6 percent in 2009.

Record Low

Chancellor Angela Merkel has pledged 82 billion euros ($109 billion) to stimulate growth and the European Central Bank cut interest rates to a record low yesterday. ECB President Jean- Claude Trichet said the bank unanimously agreed on a 60 billion- euro plan to buy bonds, stepping up its response to the slump.

Investment-good production rose 2.5 percent in March as a result of a 15 cash advance now.4 percent surge in car and car-parts output, the Economy Ministry said in today’s report. That was offset by a decline in basic and consumer goods. Construction output rose 7.6 percent from February.

Demand for manufacturing goods increased for the first time in seven months in March, boosted mainly by foreign bulk orders, the ministry said yesterday. German business confidence rebounded from a 26-year low in April.

Germany’s BASF SE, the biggest chemical company in the world, on April 30 reported profit that beat analyst estimates after shuttering factories to weather a global slide in demand. Earnings at Siemens AG, Europe’s largest engineering company, jumped after the company accelerated a cost-cutting program and tapped demand for transformers, turbines and medical scanners.

‘Rays of Hope’

“Certain rays of hope have emerged in the past two to three months with regard to a slight improvement of the overall environment,” Bundesbank President Axel Weber said on May 4. “However, a handful of rays of hope is not a reliable sign that the global economy is out of the woods. From today’s perspective, I don’t expect positive growth rates before the second half of next year.”

Munich-based Linde AG, the world’s second-biggest producer of industrial gases, said this week that it no longer is counting on higher 2009 profit and sales and will cut about 3,000 jobs this year. HeidelbergCement AG, the German cement maker owned by billionaire Ludwig Merckle, posted a first- quarter net loss of 63 million euros after global demand for construction slumped.

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U.S. builders probably broke ground on fewer homes in March after an unexpected jump the month earlier as they sought to reduce inventories, economists said before a report today.

Housing starts dropped 7.4 percent to an annual rate of 540,000, according to the median forecast of 72 economists in a Bloomberg News survey. A separate report from the Federal Reserve Bank of Philadelphia may show manufacturing is shrinking in the region at a slower pace this month, economists said.

A glut of unsold properties is pulling home prices down across the U.S., prompting builders to scale back projects. President Barack Obama’s administration has pledged measures to limit foreclosures and the Fed is buying back securities to drive down mortgage rates and spur demand.

“Market fundamentals do not support a near-term recovery,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “While spring has brought some positive signs on the housing front, a rebound is not in the foreseeable future.”

The Commerce Department’s housing report is due at 8:30 a.m. in Washington. Estimates in the survey ranged from 500,000 to 608,000, following a 22 percent gain in February to a 583,000 pace as condo construction almost doubled.

Building permits, a sign of future construction, likely fell 2.7 percent to a 549,000 annual pace, according to the median forecast.

Manufacturing Woes

Home starts have plunged from a peak rate of 2.27 million in January 2006, which capped the biggest housing boom in six decades. Falling construction has weighed on economic growth and plunging prices helped ignite the global credit crisis that led to what may become the worst recession in seven decades.

Manufacturing is another of the hardest-hit parts of the economy, even as the factory industry’s contraction shows signs of slowing. The Philadelphia Fed’s index may rise to minus 32 this month from minus 35 in March, economists said before the 10 a fast cash savings account.m. release. Readings less than zero indicate contraction.

In a sign the housing slump may be nearing a bottom, the National Association of Home Builders/Wells Fargo’s confidence index rose this month to the highest level since October, the group said yesterday. Confidence rose to 14 from 9, as record- low mortgage rates and falling prices started to stir demand. Readings below 50 mean respondents view conditions as poor.

Sales of both new and existing home rose in February. Still, rising unemployment continues to stifle demand as Americans shy away from big-ticket purchases. Job losses have totaled 5.1 million since the downturn began in December 2007, and economists surveyed by Bloomberg predict the jobless rate will reach 9.5 percent by the end of the year.

Jobless Claims

A report from the Labor Department at 8:30 a.m. may show initial jobless claims last week rose to 660,000 while the number of people receiving benefits the prior week rose to a record 5.89 million, according to economists’ forecasts.

With job losses mounting, foreclosure filings rose 30 percent in February from a year earlier, RealtyTrac Inc., a seller of default data, reported. Property values may fall further as foreclosures put even more homes back on the market. Home prices in 20 U.S. cities tracked by the S&P/Case-Shiller index have dropped 29 percent since their peak in July 2006.

Southern California house and condominium sales climbed 52 percent in March from a year earlier as buyers took advantage of prices 35 percent lower than the same period in 2008, MDA DataQuick, a San Diego-based research company, said yesterday.

Homebuilders, having to compete with cheaper resale prices, continue to feel the pinch. Lennar Corp., the fourth-largest in the U.S., reported a wider first-quarter loss than a year earlier and falling orders.

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U.S.-based outsourcer iGate Corp’s bid for fraud-hit Satyam Computer Services Ltd will be well short of the current market price, its chief executive told a television channel on Monday.

“I mean what we have picked up in terms of the financial, I do believe our bid will be quite a bit south of the 90 cents a share, which is currently the market price of Satyam,” Phaneesh Murthy said on CNBC-TV18.

By 0615 GMT, Satyam shares were trading 0.4 percent lower at 45.30 rupees (88 cents) in line with the broader Mumbai market .BSESN.

iGate is among a clutch of firms that have expressed interest in buying Satyam, which has been battling for survival since its founder and Chairman Ramalinga Raju quit on January 7 saying profits had been overstated for years and assets falsified.

New York-listed Satyam said on Friday that Indian and international firms, including private equity companies, had registered to bid for a controlling stake in the company.

Indian engineering firm Larsen & Toubro, IT services firm Tech Mahindra and diversified Spice Group are among those registered as potential bidders.

Murthy said bidding would be a tough task due to the uncertainty about Satyam’s finances and liabilities arising from the class action lawsuits filed in the United States on behalf of Satyam’s shareholders there payday loans guaranteed no fax.

“I think it’s a big struggle for any public company to bid for this company,” he told the television channel.

“Therefore, while I think now there are multiple players in the fray I do believe that net, net the number of players is going to come down dramatically very, very soon.”

Satyam said on Friday it had received an adequate response but did not name or number the bidders.

Two investment banking sources told Reuters some eight potential suitors had registered to bid for a 51 percent stake.

iGate had said on Friday it wanted to see the latest financial statements and an update on Satyam’s liabilities before it decided to make a formal bid.

($1=51.6 rupees)

(Reporting by Sumeet Chatterjee and Narayanan Somasundaram; Editing by Ranjit Gangadharan)

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