By Lucia Mutikani

WASHINGTON (Reuters) – U.S. single-family homebuilding tumbled in October likely as Hurricanes Helene and Milton depressed activity in the South while permits rose slightly, indicating that an anticipated rebound probably would be muted by higher mortgage rates.

The report from the Commerce Department on Tuesday suggested that residential investment, which includes homebuilding, remained subdued at the start of the fourth quarter after contracting in the last two quarters. The housing market has been battered by higher borrowing costs as the Federal Reserve tightened monetary policy to combat inflation.

“Despite the weather impact on building down in the South, the recession in residential housing construction remains deep in the woods with no daylight seen for buyers facing supply shortages as they hunt for new single-family homes,” said Christopher Rupkey, the chief economist at FWDBONDS. 

“The housing shortage and affordability issues will remain unless there is a big jump in new construction.” 

Single-family housing starts, which account for the bulk of homebuilding, plunged 6.9% to a seasonally adjusted annual rate of 970,000 units last month, the Commerce Department’s Census Bureau said. Data for September was revised higher to show homebuilding rising to a rate of 1.042 million units from the previously reported pace of 1.027 million units.

Single-family starts dropped 10.2% in the densely populated South, large parts of which were devastated by Helene in late September. Milton struck Florida in October. Ground-breaking on single-family housing projects plummeted 28.7% in the Northeast, but increased 4.6% in the Midwest and the West.

Single-family homebuilding slipped 0.5% from a year ago.

Starts for multi-family housing jumped 9.8% to a pace of 326,000 units. Overall housing starts dropped 3.1% to a rate of 1.311 million units. Economists polled by Reuters had forecast housing starts would drop to a rate of 1.330 million units. Starts fell 4.0% from a year ago.  

New single-family construction has regained ground after taking a beating from a resurgence in mortgage rates during the spring. Momentum has, however, been restricted by new housing supply at levels last seen in 2008, hurricanes in the U.S. Southeast as well as still-elevated borrowing costs.

PERMITS RISE SLIGHTLY     

There is a dearth of previously owned homes on the market, especially entry-level properties. Most homeowners have mortgages below 4%, reducing the incentive to move from their houses.

Permits for future construction of single-family housing gained 0.5% to a rate of 968,000 units, the highest level since April. They rose in the Northeast and South, but declined in the Midwest and West. Mortgage rates initially fell as the U.S. central bank started cutting interest rates in September. 

They have, however, erased that decline on strong economic data and concerns that President-elect Donald Trump’s policies, including tariffs on imported goods and mass deportations of migrants, could reignite inflation. 

The yield on the benchmark 10-year U.S. Treasury note has risen to a 5-1/2-month high and remains not too far from that level. Mortgage rates track the 10-year note.

While a National Association of Home Builders survey on Monday showed homebuilder sentiment rose to a seven-month high in November, that was largely due to builders “expressing increasing confidence that Republicans gaining all the levers of power in Washington will result in significant regulatory relief for the industry.”

Multi-family building permits dropped 3.0% to a rate of 393,000 units in October. Building permits as a whole fell 0.6% to a rate of 1.416 million units. They decreased 7.7% from a year ago.

The number of houses approved for construction that were yet to be started dropped 1.1% to 279,000 units last month. 

The single-family homebuilding backlog was unchanged at 143,000 units. The completions rate for that housing segment declined 1.4% to 986,000 units.

Overall housing completions dropped 4.4% to a rate of 1.614 million units. The number of housing units under construction fell 1.9% to a rate of 1.465 million units. 

The inventory of single-family housing under construction was unchanged at a rate of 644,000 units.

OTTAWA (Reuters) – Canada’s annual inflation rate accelerated more than expected to 2.0% in October as gas prices fell less than the previous month, data showed on Tuesday, likely diluting chances of another large rate cut in December.

Analysts polled by Reuters had forecast that the inflation rate would speed up to 1.9% from 1.6% in September. In August, the annual rate was 2%.

On a monthly basis, the consumer price index rose by 0.4% after two consecutive monthly declines, Statistics Canada data showed. The monthly gain also beat market expectations of a 0.3% increase.

While it was the first pick up in the annual inflation rate since June, the rise was broadly in line with central bank forecast for it rise back to its 2% after lower energy prices fueled a quicker than expected slowdown in headline inflation in recent months.

In October, Statistics Canada said a smaller 4% annual drop in gasoline prices compared with September’s 10.7% decrease led to the acceleration. Excluding gasoline, the inflation rate remained at 2.2% for the third straight month.

This was last inflation data to be released ahead of the Bank of Canada’s interest rate announcement on Dec. 11, when money markets see a roughly 60% chance of at least a 25 basis point cut.

The bank has lower its policy rate by 125 basis points over its last four policy setting meetings, including a 50 bp cut in October, when Governor Tiff Macklem said there would be further easing if the economy evolved roughly in line with forecasts.

The bank’s preferred measures of core inflation, CPI-median and CPI-trim, also edged up. CPI-median – or the value at the middle of the set of price changes in a month – increased to 2.5% from 2.3% in September, while CPI-trim – which excludes the most extreme price changes – rose to 2.6% from 2.4%.

Price increases of store-bought food also accelerated to 2.7% in October from 2.4% in September, Statscan said, noting that this was the third consecutive month where grocery price rises outpaced headline inflation.

Services price inflation rate decelerated to 3.6%, the slowest annual pace since January 2022, while goods prices rose by 0.1% after a 1% decline in September.

By Nelson Bocanegra

BOGOTA (Reuters) -Colombia will need a budget adjustment of 56 trillion pesos ($12.7 billion) to comply with its fiscal rule this year, an independent committee of experts said on Tuesday.

The Andean country may also require a budget adjustment of 39 trillion pesos ($8.8 billion) in 2025, a report from the Autonomous Fiscal Rule Committee (CARF) said.

Colombia’s government has already made cuts to its 2024 budget amid fiscal difficulties, and has been weighing further measures, including a possible 33 trillion peso trim.

The finance ministry in June announced a cut worth 20 trillion pesos due to lower than expected income.

The CARF already warned in July that Colombia could need additional adjustments to comply with the fiscal rule in 2024 and 2025 due to possible risks to tax collection goals, despite previous government announcements.

The fiscal rule was created in 2011 to impose policy constraints meant to block deterioration of public finances. To comply with the rule in 2024, the government would have to keep debt at 55.3% of GDP, rising to 56.4% of GDP in 2025.

PARIS (Reuters) – France’s 2025 belt-tightening budget heads to the Senate next week, but few doubt the government will soon be obliged to bypass lawmakers with a risky constitutional measure that rams the legislation through parliament.

With French public finances increasingly out of control, the 2025 budget bill seeks to squeeze 60 billion euros in savings via tax hikes and spending cuts. The aim is to cut the deficit to 5% of economic output next year from over 6% this year. 

Lacking a majority in the deeply divided parliament, Prime Minister Michel Barnier told L’Ouest France newspaper last week that he did not see how the budget could be passed without invoking article 49.3 of the constitution.

The 49.3, famously used by the previous government to push through President Emmanuel Macron’s pension reform against a backdrop of street protests, allows the text to be adopted without a vote – but usually also triggers a no-confidence motion against the government.

Barnier’s weak coalition is propped up by the far-right National Rally (RN), which could join forces with the left to topple his government, making the 49.3 a risky option for him.

So far, Barnier has decided to let parliament go through the movements of reviewing and debating the budget before he calls time in order to give lawmakers the impression he is not riding roughshod over their role as legislators.

But with a vote on the overall budget scheduled for Dec. 12, Barnier’s patience may be wearing thin. 

Below is a run-down on the state of France’s budget negotiations.

WHERE DOES THE BUDGET LEGISLATION STAND?

In an unprecedented move for modern France, a majority of lawmakers in the lower house of parliament rejected the government’s 2025 budget bill last week after leftist lawmakers heavily revised the legislation.

A left-wing alliance, which has the single biggest block of seats but falls far short of a lower house majority, had added 75 billion euros ($79 billion) in new tax hikes to the bill.

Budget Minister Laurent Saint Martin described the additional tax burden as unacceptable “Frankenstein” legislation that would violate the constitution and EU fiscal rules alike.

The rejection means the Senate will begin its review of the government’s original, unamended bill on Monday Nov. 25. ahead of the final vote on Dec. 12.

WHAT WILL HAPPEN NOW?

Senate finance committee chair Claude Raynal has said the upper house, where Barnier’s conservatives have the most seats but fall short of a majority, would likely make fewer changes to the bill than the lower house.

After the senate vote, a panel of lawmakers from both houses will then have to try to agree on a new version of the bill, but with little time for sweeping revisions.

As that version would likely be rejected again in the full lower house, the government will then have little choice but to invoke article 49.3 of the constitution to ram the budget through without a vote.

WHAT ARE THE CONSEQUENCES OF BYPASSING PARLIAMENT?

Left-wing lawmakers in the lower house have said they would then trigger a vote of no-confidence against the government, which could potentially bring it down if it passes.

To survive, Barnier needs the far-right RN to abstain from the vote. While some RN lawmakers have brandished the threat of not cooperating, its head Jordan Bardella has said the decision will depend on whether the final cut of the budget reflects their demands.

The RN will also have to make a political calculation about whether it gains anything from triggering a political crisis as new legislative elections cannot be held before next summer.

Still, a recent request by prosecutors for RN leader Marine Le Pen to face an obligatory five-year ban from politics for her alleged role in embezzlement of EU funds may cause the RN to reassess its loyalty to propping up Barnier’s administration, some analysts have suggested. Le Pen denies the allegations.

($1 = 0.9489 euros)

By Naomi Rovnick and Alun John

LONDON (Reuters) – The euro could fall to the key $1 mark in the next month before rebounding, potentially alongside other Europe assets given how negatively investors view the region, the chief investment office of Europe’s biggest asset manager Amundi said on Tuesday.

U.S. stocks, and the dollar have surged after Donald Trump’s victory in the Presidential election earlier this month, while stocks outside the U.S. have struggled, as investors balance the implications of higher U.S. growth with the implications of possible tariffs.

The euro has been among the biggest victims of the dollar’s surge, falling back to around $1.05, from above $1.08 at the start of November.

“We could even see parity for the euro to the dollar in the next month, but it is very mechanical, there is a lot of demand for dollars linked to the surge in U.S. assets,” said Vincent Mortier, chief investment officer at Amundi, which oversees almost 2.2 trillion euros of client funds.

“But then next year we believe the euro will strengthen again,” he said. Amundi forecasts the common currency at $1.16 by the end of 2025.

The euro last traded below $1 in late 2022.

Mortier said extreme negative sentiment towards Europe also set the region’s stocks up for a sharp rally on good news, similar to that seen in China earlier this year, when hopes of major package of stimulus measures sent investors rushing to snap up unloved stocks.

“Catalysts for a European market recovery would be Germany responding to tariff risks with fiscal stimulus or Russia pulling back from Ukraine”, he said.

Germany is due to hold elections in the coming months after the implosion of its ruling coalition earlier in November. There is a possibility that a new government could reform its constitutionally enshrined debt break, which critics say contributed to its current economic decline.

There was still value in European government bonds, Mortier added, and said Amundi was also buying 10-year U.S. Treasuries in the expectation yields would fall from here, as so-called Trump trades may have run too far, but expected short term volatility in government bond markets.

Mortier said U.S. stock valuations boosted by excitement over artificial intelligence were unusually high and volatility unusually low.

“The last thing you want is to be betting on only five or ten U.S. equity names,” he said. “We need to be very agile.”

WASHINGTON (Reuters) -International Monetary Fund staff and Ukrainian authorities have reached an agreement that would give Ukraine access to about $1.1 billion, the IMF said on Tuesday, adding that its executive board must still weigh in on the deal.

If approved, the agreement would bring the total amount disbursed to Ukraine under the program to $9.8 billion, the IMF statement said, adding that the board was expected to review the deal in coming weeks.

“The outlook remains exceptionally uncertain and Russia’s war in Ukraine continues to take a heavy toll on Ukraine’s people, economy, and infrastructure,” the funds’ staff wrote, adding that despite those challenges the program “remains on track.”

“The economy has continued to show resilience despite the devastating challenges arising from Russia’s war in Ukraine, which has now lasted 1,000 days,” it added.

“However, risks remain exceptionally high given uncertainty on the intensity and duration of the war, including from the continued attacks on energy infrastructure.”

IMF staff, which met with Ukrainian officials Nov. 11-18, said the country’s real GDP growth was expected to be 4% this year but slow to 2.5%-3.5% in 2025 amid energy infrastructure damage and labor shortages.

Inflation in Ukraine also reached 9.7% year-over-year in October over rising food and labor costs “but inflation expectations remain well anchored,” IMF staff concluded.

KYIV (Reuters) – Ukraine’s parliament approved the 2025 state budget in the final reading on Tuesday, channelling more funds for Kyiv’s defence efforts as Russia’s full-scale invasion reached its 1,000th day.

Ukraine plans to spend 2.22 trillion hryvnias ($53.7 billion), or about 26% of its gross domestic product, on defence and security next year, officials said.

By Shaloo Shrivastava

BENGALURU (Reuters) – The Bank of England will keep Bank Rate on hold in December as global inflation worries resurface, according to a Reuters poll of economists who were split on the impact U.S. President-elect Donald Trump’s proposed tariffs would have on the UK economy.

Trump’s proposed tariffs, a 10% levy on imports from all foreign countries and 60% on imports from China, was expected to slow global growth and reignite inflationary pressures, limiting room for most central banks to ease policy.

Nearly 90% of economists, or 22 of 25, who answered an additional question in the Nov. 13-19 poll said the proposed tariffs would be implemented early next year.

However, they were split on the impact it would have on the UK economy over the next two to three years. While 11 of 21 said it would be insignificant, the rest said significant.

Those findings contrasted with a Reuters survey on the euro zone economy, where a majority of economists, 34 of 39, said Trump’s proposed tariffs would have a significant impact.

“A universal U.S. tariff could significantly impact the global economy…although the UK has a goods trade deficit with the U.S. and may not face the most severe tariffs,” said Stefan Koopman, senior market economist at Rabobank.

SLOW AND STEADY FOR BOE

Starting its easing cycle in August, the BoE has taken Bank Rate from a 16-year high of 5.25% to 4.75% with two cuts of 25 basis points.

All 66 economists surveyed expected no change from the BoE in December. Poll medians showed rates falling 25 basis points every quarter next year, dropping to 3.75% by end-2025.

Every respondent who expressed a view predicted the next cut would come early next year.

Of 58 economists who provided forecasts until end-2025, 50% or 29 of 58, predicted Bank Rate to fall 100 basis points next year. While 19 said 125 bps or more, 10 said by 75 bps or less.

Among 15 Gilt-Edged Market Makers, five each predicted 125 or 100 basis points of cuts, three said 75 bps while two said 150 bps.

“The Autumn Budget was notably more expansionary than anticipated – raising the prospect of stronger demand in the near term – while the increase in employer National Insurance Contributions is likely to add to inflationary pressures,” noted economists at Goldman Sachs.

“We look for wage growth to fall back notably given that headline inflation is now close to target.”

Poll medians showed inflation would average 2.5% in 2024, 2.3% in 2025 and 2.1% in 2026, broadly unchanged from last month’s survey.

The UK economy was forecast to grow 0.9% this year and 1.4% in 2025 and 2026, close to the BoE’s own predictions. Earlier in November the BoE cut its growth forecast for this year to 1.0% from 1.25% but raised its 2025 forecast to 1.5% from 1.0%.

(Other stories from the Reuters global economic poll)

By Rajendra Jadhav

SATARA, India (Reuters) – Indian Prime Minister Narendra Modi has taken several pro-farmer but inflation-stoking measures in recent months, such as easing curbs on rice and onion exports, but that may not prove enough for him to sway an election on Wednesday in a key state.

Maharashtra, which includes the city of Mumbai, is a major grower of sugarcane, soybean, cotton and onions, but opinion polls – which have a patchy record in India – suggest Modi’s alliance may struggle to retain the local legislature as farmers say they have yet to benefit from the recent measures.

An opinion poll by Lok Poll, covering more than 86,000 people in Maharashtra, showed last week that a coalition of opposition parties including Congress could wrest back the state with up to 162 of the 288 seats. It said low prices for crops such as soybean and cotton were a factor.

Other surveys have also said the BJP alliance could lose. Votes will be counted on Nov. 23.

Modi’s Bharatiya Janata Party (BJP) lost its parliamentary majority in national elections held between April and June partly due to farmers’ anger with the export curbs, which they felt prioritised Indian consumers above growers by keeping domestic prices low.

In that national election, opposition parties won two thirds of the parliamentary seats in Maharashtra.

“We faced a setback during the parliamentary elections because of the restrictions on onion exports,” senior BJP leader and Maharashtra deputy chief minister, Devendra Fadnavis, told an election rally on Sunday.

“We have now lifted those curbs and Prime Minister Narendra Modi’s government will not impose export bans abruptly.”

India has removed export restrictions on rice and onions, and raised the tariffs on imported edible oil in a bid to help local growers of mustard and soybean get better prices at home.

TOO LATE

But farmers say the steps have come too late, as they had already harvested and sold their produce like onions to traders, who are now benefiting from a surge in domestic prices.

Retail inflation soared to its highest level in 14 months in October, partly due to high prices of edible oils, onions and tomatoes.

“When we were selling onions in March and April, the government didn’t allow exports,” said farmer Mahesh Gore in Maharashtra’s Nashik district.

“We were forced to sell onions at 10 rupees per kg. If they had allowed exports then, we could have got double the price. Now prices are at 50 rupees, but only traders are benefiting.”

In recent years, India restricted onion exports whenever wholesale prices rose above 20 rupees.

Other farmers say they are not getting a good price for crops like soybeans because of a global glut now.

Mahesh Khade said he was barely getting 3,900 rupees per 100 kg now for soybeans compared with 4,600 rupees a decade ago. Prices of diesel, fertilisers, and other inputs have more than doubled in the same period.

“They have ignored farmers’ interests,” Khade said, adding he would switch sides now and vote for the opposition.

The BJP did not respond to requests for comment.

($1 = 84.38 rupees)

FRANKFURT (Reuters) – The German economy is likely to stagnate in the last three months of the year as the labour market continues to soften and possible new trade tariffs loom, the country’s central bank said on Tuesday.

Europe’s largest economy unexpectedly grew, albeit only by 0.2%, in the three months to September but the Bundesbank said there was little to suggest this would continue as demand from abroad and investment both remained weak.

“All of the key demand components therefore currently offer little reason for a noticeable short-term recovery in the German economy,” the Bundesbank said in its monthly report.

In addition, it warned “political demands for new tariff barriers pose considerable additional risks for international trade”, a likely reference to the protectionist stance of U.S. President-Elect Donald Trump which could hit Germany’s export-oriented economy hard.

A bleak domestic picture helps explain a shift in the Bundesbank’s stance inside the European Central Bank from a laser-focus on fighting inflation to a greater emphasis on stimulating growth via lower borrowing costs.

High wage growth, until recently a source of worry about a potential new leg-up in inflation, had likely peaked in the third quarter at 8.8% for collective agreements and was now likely to be “noticeably lower”, the Bundesbank said.

“In view of the long-lasting economic weakness and significantly lower inflation rates, it is to be expected that the upcoming wage negotiations will result in noticeably lower agreements than in the past two years,” it said.