Russian economy seen growing from 2017 onwards: World Bank

A man walks in front of the Novokuibyshevsk refinery near the city of Samara, October 28, 2010. REUTERS/Nikolay Korchekov/File Photo

MOSCOW (Reuters) – Russia’s oil-dependent economy is expected to grow from 2017 onwards, supported by higher global crude prices and oil production rising to new post-Soviet highs, the World Bank said on Tuesday.

The international lender said it expected Russian gross domestic product to grow by 1.3 percent in 2017 and by 1.4 percent in 2018 and 2019, following two years of economic contraction.

Greater oil earnings would “positively influence consumer and investor sentiment, leading to a recovery of domestic demand and modest economic growth in 2017-19,” the World Bank said in a semi-annual report.

It said its latest growth forecasts were based on the assumption that crude prices would average $55 a barrel this year, $60 in 2018 and $61.5 in 2019, and that an OPEC/non-OPEC agreement to restrict output was extended.

It cited International Energy Agency data as forecasting that Russia’s oil output would rise to 11.38 million barrels per day (bpd) this year and 11.54 million bpd next year, due to rising production by small- and medium-size energy companies.

The World Bank said rising consumption and a recovery in investment activity would drive Russia’s economic growth, citing the 2018 soccer World Cup that Russia is set to host as giving a potential boost to public investment.

Inflation is forecast to stabilize near the central bank’s target of 4 percent, but Russia’s longer-term growth prospects are constrained by low productivity, it added.

In November the World Bank forecast the Russian economy would grow 1.5 percent this year.

(Reporting by Andrey Ostroukh; Editing by Alexander Winning)

Mexico private sector eyes more NAFTA content in future products

FILE PHOTO - Trucks wait in a long queue for border customs control to cross into the U.S. at the Otay border crossing in Tijuana, Mexico, February 2, 2017. REUTERS/Jorge Duenes/File photo

By Dave Graham

MEXICO CITY (Reuters) – A modernization of the NAFTA trade deal should protect existing industrial supply chains in North America, but could seek to source more work for future products from the member states to help create jobs, a top Mexican negotiator in the process said.

The government of U.S. President Donald Trump on Thursday triggered the process to start renegotiating the North American Free Trade Agreement (NAFTA) between the United States, Canada and Mexico, which could usher in formal talks by mid-August.

Trump has threatened to jettison the 23-year-old accord if he cannot rework it in favor of the United States, arguing it has gutted U.S. manufacturing by outsourcing jobs to Mexico.

NAFTA’s supporters say the integration of lower-cost Mexico into production chains has safeguarded employment by enabling North America to compete better with Asian and European rivals.

Mexican business leaders say toughening rules that stipulate a certain amount of content must be sourced from North America to qualify for NAFTA certification could be one way of allaying U.S. fears, and pave the way for an agreement on the revamp.

Offering insight into how Mexico may seek to broker a deal, Moises Kalach, a linchpin of the country’s private sector defense of NAFTA, said U.S. business leaders and government officials were increasingly persuaded that existing supply chains should not be disrupted – but that future production lines could be tailored to provide more work for North America.

“Obviously, innovation and technology have been changing the way and even form of how products are made, and there’s an opportunity to have certain products and innovations made with a lot more regional integration, without doing damage to current lines of production,” Kalach, who heads the international negotiating team of Mexico’s Consejo Coordinador Empresarial business lobby, said by phone from Washington.

“This is part of the proposal that we want to put on the table, that we want to push,” Kalach added, speaking after U.S. Trade Representative Robert Lighthizer had kicked off a 90-day consultation process with Congress and others over NAFTA.

Elaborating, Kalach said new products and materials in industries like carmaking and electrodomestic goods – sectors where Mexico runs a sizeable trade surplus with the United States – could be made with higher NAFTA content in the future.

Trump argues Mexico’s surplus with the United States proves that the deal has hurt U.S. industry. Supporters of NAFTA say U.S. consumer demand has fueled the U.S. deficit and point out that the Mexican surplus has fallen since peaking a decade ago.

The deal underpins more than $1 trillion of trilateral trade.

U.S. Trade Representative Lighthizer said in Washington that NAFTA had been successful for U.S. agriculture, investment services and the energy sector, but not manufacturing.

Kalach said after Thursday’s announcements it was still unclear exactly what the United States would seek in the renegotiation.

Thomas Donohue, head of the U.S. Chamber of Commerce, said in a statement on Thursday that the NAFTA renegotiation should do “no harm”, and urged leaders to move quickly to avoid crimping investment and overly politicizing the talks.

(Editing by Frank Jack Daniel and Lisa Shumaker)

Americans without college degree report worsening finances: Fed survey

Applicants fill out forms during a job fair in Los Angeles November 20, 2009.

WASHINGTON (Reuters) – The overall financial situation of U.S. households continues to improve but Americans without a college degree feel they are struggling more compared to a year previously, according to a Federal Reserve survey released on Friday.

The annual survey, which was conducted in October 2016, is now in its fourth year and acts as a temperature check on the financial wellbeing of U.S. families.

Seventy percent of those surveyed said that they were either “living comfortably” or “doing okay,” an improvement from 69 percent the prior year and 62 percent in 2013.

The improving statistics in part reflect a buoyant jobs market. Since the last survey the unemployment rate has declined to 4.4 percent from 5.0 percent, and is now near what many economists would consider full employment.

U.S. stocks have risen as well as home prices, both of which can also contribute to household wealth. However, that masks deep disparities and wage growth has remained sluggish even though the economy has largely recovered from the financial crisis.

Forty percent of respondents with a high school degree or less said they were struggling financially, one percentage point more than in 2015, at a time when those with more education felt their situation had improved. Seventeen percent of those with a college education described themselves the same way.

There were also differences based on race and ethnicity. Fifty-one percent of white adults said they felt better off than their parents compared to 60 percent of black adults and 56 percent of Hispanic respondents.

Former manufacturing towns helped propel President Donald Trump to the White House last November and there have been growing concerns over the lack of well-paying jobs for those without a college degree.

“The survey findings remind us that many American households are struggling financially, including fully 40 percent of those with a high school diploma or less,” Federal Reserve Board Governor Lael Brainard said in a statement.

Elsewhere, the survey showed that improved incomes did not necessarily mean large savings or job stability.

Forty-four percent of respondents said they would struggle to meet emergency expenses of $400, a drop of 2 percentage points from 2015, while 17 percent of workers, and 24 percent with a high-school education of less, said their work schedule was changed by their employer from week to week.

Within that, two-thirds received their schedule six days or less in advance and 37 percent had either on-call scheduling or received notice one day or less in advance, the Fed said.

The survey tallied the responses of 6,643 adults aged 18 and over.

(Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci)

Hush money scandal jeopardizes Brazil’s feeble recovery

Demonstrators shout slogans during a protest against Brazil's President Michel Temer in Sao Paulo, Brazil, May 18, 2017. The sign reads "Out Temer and Elections now!." REUTERS/Nacho Doce

By Alonso Soto

BRASILIA (Reuters) – Hopes Latin America’s largest economy could emerge from its worst-ever recession this year were plunged into doubt on Thursday after President Michel Temer was shaken by allegations he condoned bribing a potential witness.

Fears the scandal could force Temer to step down or derail his ambitious reform agenda drove the biggest daily drop in the Brazilian real since 1999, while the benchmark Bovespa stock index closed 9 percent lower.

Government officials, lawmakers and economists told Reuters the crisis surrounding Temer, 76, could slow the pace of interest rate cuts and diminish consumer and business confidence enough to extend the recession into a third year.

Central Bank data this week suggested Brazil’s economy finally grew in the first three months of the year after eight consecutive quarters of contraction. A second month of job growth in April also fueled hopes of a recovery.

“The government went from its best moment to its worst moment in a matter of seconds,” said a Temer aide, who asked for anonymity to speak freely. “Even the opposition was betting on the approval of the reforms. Now we need to reestablish normalcy.”

Since he took office following the impeachment of leftist President Dilma Rousseff a year ago, Temer has regained investors’ confidence with measures to stop hemorrhaging in public finances. The government recorded a budget deficit of more than 10 percent of gross domestic product last year.

In a defiant address to the nation, Temer insisted that he would not resign and his ministers tried to ease market alarm by promising to push ahead with reforms.

Still, the specter of renewed political uncertainty raised doubts about the recovery and senior politicians said they could not press on with reforms in the midst of calls for Temer to step down.

Senator Ricardo Ferraço, a Temer ally in charge of drafting the government’s labor reform, said he had halted his work until the political crisis was resolved.

The lawmaker sponsoring the government’s flagship pension reform, Arthur Maia, also said there was no room to advance on the legislation in the midst of the turmoil created by the allegations against Temer.

“This certainly makes approval of the reforms more difficult,” Senator Valdir Raupp, a close ally to Temer, told Reuters. “Halting legislative work is the worst path to take. We have to see how things evolve in coming days.”

CAUTIOUS CENTRAL BANK

Government officials also said they worry the crisis could hamper investors’ interest in multi-million dollars auctions of oil rights, hydroelectric plants and infrastructure projects later this year. Temer was betting on those investments to add momentum to the recovery

Risks that labor and pension reforms could stall will likely prompt the central bank to slow the pace of interest rate cuts, limiting a source of relief for businesses battered by the recession, economists said.

The sharp depreciation of Brazil’s real could raise inflation expectations and cut short the easing cycle, economists said. The real closed down nearly 8 percent at 3.38 per US dollar.

“Although there is still room to cut rates, the central bank will be more cautious on the pace of easing,” said Alessandra Ribeiro, partner with consultancy Tendencias.

“The scandal compromises the recovery, which could be much weaker than originally expected or even fizzle away.”

Earlier this week, many market economists expected a more aggressive 125-basis-point rate cut at the bank’s next meeting on May 31. Investment banks expected the bank’s benchmark Selic rate to drop below 8 percent this year.

A surge in Brazilian interest rate futures shows traders are scaling back their bets for steeper rate cuts.

For Jose Carlos Martins, head of construction industry group CBIC, political paralysis would further undermine an economy struggling with more than 14 million unemployed.

“The chaos in the markets should serve as a warning for Congress to continue with the reforms,” Martins said. “Paralysis will send a terrible message to everyone.”

(Reporting by Alonso Soto; Editing by Andrew Hay)

NAFTA demise fears fade as U.S. firms committed to Mexico: lobby

Frederic Garcia, president of the Executive Council of Global Companies (CEEG), gestures during an interview with Reuters in Mexico City, Mexico May 17, 2017. REUTERS/Carlos Jasso

By Dave Graham and Ana Isabel Martinez

MEXICO CITY (Reuters) – Companies no longer fear the North American Trade Agreement (NAFTA) will collapse and top U.S. multinationals in Mexico are committed to investing in the country going forward, the head of a global business lobby said on Wednesday.

Frederic Garcia, President of Mexico’s Executive Council of Global Companies (CEEG), said preparations to renegotiate NAFTA and growing awareness of the accord’s economic benefits had all but put an end to fears that the deal would be scrapped.

“There was a moment where the probability, or the perception that NAFTA would end, was very strong,” Garcia said in an interview in Mexico City. “But today I think there’s an awareness that it will continue. The big worry that the deal could come to an end is an issue that’s behind us.”

The CEEG represents a host of multinationals in Mexico including AT&T Inc <T.N>, Coca-Cola Co <K.O>, General Motors Co <GM.N>, Microsoft Corp <MSFT.O>, Exxon Mobil Corp <XOM.N>, Nestle, HSBC, Siemens and IBM Corp <IBM.N>, which it says account for around 40 percent of total foreign direct investment.

It and other business associations have been active in extolling the benefits of NAFTA to Americans to counter threats by U.S. President Donald Trump to dump the 23 year-old accord that binds the United States, Mexico and Canada.

Mexico’s Economy Minister Ildefonso Guajardo said on Tuesday he expected the U.S. government to notify Congress early next week of plans to rework the accord, yielding talks by late August.

It was not yet clear how NAFTA would be revamped, but if Mexico’s efforts to update its free trade deal with the European Union proved instructive, it could include provisions to boost corporate compliance and adherence to the law, Garcia said.

Trump said last month he was ready to renegotiate NAFTA with Mexico and Canada, though since taking the presidency in January he also has maintained that the United States could withdraw from the agreement if talks did not work in favor of his homeland.

Arguing the accord has destroyed U.S. jobs, Trump has menaced multinationals manufacturing in Mexico with punitive tariffs, and his threats to quit NAFTA. This sent the peso to a record low in January.

Earlier that month Ford abruptly canceled a $1.6 billion plant in central Mexico following verbal attacks by Trump. But as the rhetoric from the White House began to moderate, the peso has recovered somewhat, and fears for NAFTA’s future have eased.

Last week, a Mexican business lobby said it expected investment to drop slightly this year due to uncertainty over Trump, but Garcia said the CEEG would make no forecasts over projected outlays to avoid drawing attention to the matter.

“As far as the U.S. firms in the CEEG go, from the first day of the new U.S. administration they’ve stated their great interest to continue operating in Mexico (and) their great interest to continue investing in Mexico,” he said.

However, they had done so in such a way as to preserve their interests with the U.S. administration, Garcia added.

(Editing by Diane Craft)

Illinois’ unpaid bills reach record $14.3 billion

FILE PHOTO - Bruce Rauner talks to the media after a meeting with Barack Obama at the White House in Washington December 5, 2014. REUTERS/Larry Downing/File Photo

By Karen Pierog and Dave McKinney

CHICAGO (Reuters) – Illinois’ unpaid bill backlog has hit a record high of $14.3 billion as the legislature nears a May 31 budget deadline, the state comptroller’s office said on Wednesday.

The bill pile jumped from $13.3 billion after the governor’s budget office this week reported more than $1 billion in liabilities held at state agencies, the comptroller said.

Illinois is limping toward the June 30 end of its second straight fiscal year without a complete budget due to an impasse between Republican Governor Bruce Rauner and Democrats who control the legislature.

“It’s clear the Rauner Administration has been holding bills at state agencies in an attempt to mask some of the damage caused by the governor’s failure to fulfill his constitutional duty and present a balanced budget,” Comptroller Susana Mendoza, a Democrat, said in a statement, adding that the governor’s office was keeping lawmakers in the dark about the true size of the backlog.

Eleni Demertzis, Rauner’s spokeswoman, said instead of the “same tired partisan attacks,” Mendoza should be talking “to her party leaders about working with Republicans to pass a budget that is truly balanced and job-creating changes that will grow our economy.”

Lawmakers face a May 31 deadline to pass budget bills with simple-majority votes. The Senate on Wednesday passed pieces of a long-awaited package to stabilize state finances, including for the current and upcoming fiscal years, authorization to borrow $7 billion to pay down the bill backlog and an overhaul to state pensions.

But the House-bound legislation faces an unclear future. The Senate defeated legislation to implement the budget bill, putting its fate in doubt, while Rauner remains another question mark.

He has conditioned his support of a budget on passage of changes to workers compensation laws and a long-term freeze on property taxes. A bill for a two-year local property tax freeze fell four votes shy in the Senate, leaving a significant opening for the governor to reject the entire Democratic-crafted spending package.

The busy legislative day also included Senate passage of a gambling-expansion bill authorizing a Chicago-owned casino and a school funding revamp that allocates $215 million to help Chicago’s cash-strapped schools pay teacher pensions this year.

Rauner’s office rejected the school bill, but did not immediately comment on the other legislation.

Illinois’ reliance on continuing appropriations, court-ordered spending and partial budgets has caused the unpaid bill backlog to balloon from $9.1 billion at the end of fiscal 2016.

(Editing by Meredith Mazzilli and Matthew Lewis)

U.S. jobless claims fall; continuing claims at 28-1/2-year low

FILE PHOTO: Job seekers speak with potential employers at a City of Boston Neighborhood Career Fair on May Day in Boston, Massachusetts, U.S., May 1, 2017. REUTERS/Brian Snyder

WASHINGTON – New applications for U.S. jobless benefits unexpectedly fell last week and the number of Americans receiving unemployment aid hit a 28-1/2-year low, pointing to rapidly shrinking labor market slack.

Initial claims for state unemployment benefits decreased 4,000 to a seasonally adjusted 232,000 for the week ended May 13, the Labor Department said on Thursday. That pushed claims close to levels last seen in 1973.

Data for the prior week was unrevised and claims have now decreased for three consecutive weeks. Economists polled by

Reuters had forecast first-time applications for jobless benefits rising to 240,000.

Claims have now been below 300,000, a threshold associated with a healthy labor market, for 115 straight weeks. That is the longest such stretch since 1970, when the labor market was smaller. The labor market is close to full employment, with the

unemployment rate at a 10-year low of 4.4 percent.

A Labor Department official said there were no special factors influencing last week’s data and only claims for Louisiana had been estimated.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 2,750 to 240,750 last week, the lowest level since February.

Last week’s claims data covered the survey week for May’s nonfarm payrolls. The four-week average of claims fell 2,000 between the April and May survey periods suggesting further job gains this month. The economy created 211,000 job in April after

adding only 79,000 positions in March.

Labor market strength and tightening could allow the Federal Reserve to raise interest rates next month.

Expectations of a June rate hike have also been supported by data such as retail sales and industrial production, which suggested that economic growth picked up early in the second quarter after rising at an anemic 0.7 percent annualized rate in

the first quarter.

The U.S. central bank increased its benchmark overnight interest rate by 25 basis points in March and has forecast two more increases this year.

Thursday’s claims report also showed the number of people still receiving benefits after an initial week of aid dropped 22,000 to 1.90 million in the week ended May 6, the lowest level since November 1988.

The so-called continuing claims have remained below 2 million for five straight week. The four-week moving average of continuing claims declined 20,000 to 1.95 million, the lowest level since January 1974.

((Reporting by Lucia Mutikani; Editing by Paul Simao))

Shock and shrug: U.S. stocks brush off latest round of global threats

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., May 15, 2017. REUTERS/Brendan McDermid

By Lewis Krauskopf

NEW YORK (Reuters) – Another global shock. Another collective yawn by U.S. stock investors.

Equity investors appeared to largely brush off the latest apparent threat to the world’s security: A global cyber attack, which began spreading on Friday that by Monday had infected computers in more than 100 countries. Adding to global jitters, North Korea said it had successfully conducted a mid- to-long-range missile test and would continue such launches “any time, any place.”

Yet major U.S. stock indexes moved higher on Monday, with the benchmark S&P 500 <.SPX> touching a record high, as stocks continued to rally even as many investors worry about unbridled optimism and expensive valuations.

“I am really on pins and needles to be honest with you because there are so many threats to this stability and this complacency which have not yet been priced into the market,” Peter Kenny, senior market strategist at Global Markets Advisory Group in New York.

“It is just a question of what straw is going to break the camel’s back and then there is going to be all sorts of reasons that the market should have sold off,” Kenny said.

While past cyber attacks may have had limited impact on the market, the WannaCry attack was described as having “unprecedented” global reach at a time people increasingly rely on technology to store their sensitive data. The attack follows hacking incidents during the U.S. and French elections.

“The cyber attack I would have imagined would have created some nervousness and anxiety, and throw in North Korea over the weekend, I’m confused on why the market is doing what it’s doing,” Ken Polcari, director of the NYSE floor division at O’Neil Securities in New York.

U.S. equities continued to move upward on Monday, a trend that has been firmly in place since the U.S. presidential election in November. Helped by higher oil prices, the benchmark S&P 500 <.SPX> rose 0.5 percent on Monday and set a new all-time high. In Europe, where the attack took center stage, investors also showed limited concerns. European shares closed higher while the UK’s FTSE 100 <.FTSE> edged up to end at a record high.

Indeed, the main impact from the attack appeared to be a rush to own shares of cyber security firms, the Purefunds ISE Cyber Security ETF <HACK.P> up 3.2 percent, U.S.-listed FireEye Inc <FEYE.O> up 7.5 percent and Symantec Corp <SYMC.O> gaining 3.2 percent.

To be sure, market watchers said that cyber threats have typically had limited impact on the market. Nicholas Colas, chief market strategist at Convergex, a global brokerage company based in New York, said for the market to become concerned, an attack would need to be more narrowly targeted, such as hitting a company that consumers depend on such as Apple Inc <AAPL.O> or major banks.

“If you want to get U.S. investors’ attention you’d have to shut down major banks’ ATM systems,” said Colas.

The market’s ability to push higher underscored worries about investors being overly complacent and optimistic about the direction of stocks.

The S&P 500 has risen more than 12 percent since the election of President Donald Trump spurred by expectations that his tax cut proposals and planned infrastructure spending will help economic growth. While threats to Trump’s plans have rattled investors they have failed to cause any significant pull back in stocks.

The CBOE Volatility Index <.VIX>, better known as the VIX and the most widely followed barometer of expected near-term stock market volatility, last week closed at 9.77, its lowest close since December 1993. On Monday, the VIX fell 0.11 point at 10.29.

“I’d say the market has been overly complacent for quite some time,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut. “There are a lot of people shorting volatility, which means investors are not worried about much of anything right now.”

(Additional reporting by Caroline Valetkevitch, Megan Davies, Sinead Carew and Chuck Mikolajczak in New York and Vikram Subhedar in London; Editing by Megan Davies and Lisa Shumaker)

Iran’s re-engagement with the world at stake in Friday presidential vote

Iran's President Hassan Rouhani registers to run for a second four-year term, in Tehran.

By Parisa Hafezi

ANKARA (Reuters) – Iranians vote for president on Friday in a contest likely to determine whether Tehran’s re-engagement with the world stalls or quickens, although whatever the outcome no change is expected to its revolutionary system of conservative clerical rule.

Seeking a second term, pragmatist President Hassan Rouhani, 68, remains the narrow favorite, but hardline rivals have hammered him over his failure to boost an economy weakened by decades of sanctions.

Many Iranians feel a 2015 agreement he championed with major powers to lift sanctions in return for curbing Iran’s nuclear program has failed to produce the jobs, growth and foreign investment he said would follow.

The normally mild-mannered cleric is trying to hold on to office by firing up reformist voters who want less confrontation abroad and more social and economic freedom at home.

In recent days he has adopted robust rhetoric, pushing at the boundaries of what is permitted in Iran. He has accused his conservative opponents of abusing human rights, misusing religious authority to gain power and representing the economic interests of the security forces.

Rouhani’s strongest challenger is hardline cleric Ebrahim Raisi, 56, who says Iran does not need foreign help and promises a revival of the values of the 1979 Islamic Revolution.

He is backed by Iran’s elite Revolutionary Guards, the country’s top security force, their affiliated volunteer Basij militia, hardline clerics and two influential clerical groups.

Another prominent conservative, Tehran Mayor Mohammad Baqer Qalibaf, withdrew from the race on Monday and backed Raisi, uniting the hardline faction and giving Raisi’s chances a boost.

Under Iran’s system, the powers of the elected president are circumscribed by those of the conservative supreme leader, Ayatollah Ali Khamenei, who has been in power since 1989. All candidates must be vetted by a hardline body.

Nevertheless, elections are fiercely contested and can bring about change within the system of rule overseen by Shi’ite Muslim clerics.

CLOSE ALLY

The main challenger Raisi is a close ally and protege of Khamenei, and was one of four Islamic judges who ordered the execution of thousands of political prisoners in 1988. Iranian media have discussed him as a potential future successor to Khamenei, who turns 78 in July.

Raisi has appealed to poorer voters by pledging to create millions of jobs.

“Though unrealistic, such promises will surely attract millions of poor voters,” said Saeed Leylaz, a prominent Iranian economist who was jailed for criticizing the economic policies of Rouhani’s hardline predecessor Mahmoud Ahmadinejad.

Although the supreme leader is officially above the fray of everyday politics, Khamenei can sway a presidential vote by giving a candidate his quiet endorsement, a move that could galvanize hardline efforts to get the conservative vote out.

“Raisi has a good chance to win. But still the result depends on the leader Khamenei’s decision,” said a former senior official, who declined to be identified.

So far in public Khamenei has called only for a high turnout, saying Iran’s enemies have sought to use the elections to “infiltrate” its power structure, and a high turnout would prove the system’s legitimacy.

A high turnout could also boost the chances of Rouhani, who was swept to power in 2013 on promises to reduce Iran’s international isolation and grant more freedoms at home. The biggest threat to his re-election is apathy from disappointed voters who feel he did not deliver improvements they hoped for.

“The result depends on whether the economic problems will prevail over freedom issues,” said an official close to Rouhani. “A low turnout can harm Rouhani.”

Polls taken by International Perspectives for Public Opinion on May 10 show Rouhani still leads with about 55 percent of the votes, although such surveys do not have an established record of predicting election outcomes in Iran.

If no candidate wins more than 50 percent of votes cast, the top two candidates will compete in a runoff election on May 26.

Because the conservatives are now mostly united behind Raisi, the result is likely to be closer than four years ago, when Rouhani won more than three times as many votes as his closest challenger en route to a victory in a single round.

SLOW PACE OF CHANGE

Opposition and reformist figures are backing Rouhani, and his recent fiery campaign speeches have led to a surge of public interest. But voters’ expectations of radical change are low.

“I had decided not to vote … Rouhani failed to keep his promises. As long as Khamenei runs policy, nothing will change,” said art student Raika Mostashari in Tehran.

But she eventually decided to vote for Rouhani, she said, because former president Mohammad Khatami, spiritual leader of the pro-reform movement, had publicly backed him.

Rouhani’s signature accomplishment has been his nuclear deal, which could be in jeopardy if he loses power, even though it was officially endorsed by Khamenei and all candidates say they will abide by it.

U.S. President Donald Trump has frequently called the agreement “one of the worst deals ever signed” and said Washington will review it.

Although the agreement lifted international sanctions, the United States continues to impose unilateral measures that have scared off investors. Washington cites Iran’s missile program, its human rights record and support for terrorism.

Some experts say Iranian establishment figures may want to keep Rouhani in power to avoid being cast back into isolation.

“With the deal in jeopardy, the system will be in vital need of Rouhani’s team of smiling diplomats and economic technocrats to shift the blame to the U.S. and keep Iran’s economy afloat,” said Iran analyst Ali Vaez of the International Crisis Group.

Polls expected to open at 03:30 GMT and close at 13:30 GMT, which can be extended. Final results are expected by Sunday.

(Writing by Parisa Hafezi; editing by William Maclean and Peter Graff)

U.S. housing starts unexpectedly fall for second straight month

FILE PHOTO -- Construction workers build a single family home in San Diego, California, U.S. on February 15, 2017. REUTERS/Mike Blake/File Photo

WASHINGTON – U.S. homebuilding unexpectedly fell in April amid a persistent decline in the construction of multi-family housing units and a modest rebound in single-family projects, pointing to a slowdown in the housing market recovery.

Housing starts dropped 2.6 percent to a seasonally adjusted annual rate of 1.17 million units, the Commerce Department said on Tuesday. That was the lowest level since last November and followed a downwardly revised rate of 1.20 million units in March.

Economists polled by Reuters had forecast groundbreaking activity rising to a rate of 1.26 million units last month from a previously reported rate of 1.22 million units in March.

Homebuilding increased 0.7 percent on a year-on-year basis.

Single-family homebuilding, which accounts for the largest share of the residential housing market, rebounded 0.4 percent to a pace of 835,000 units last month. That left the bulk of the 5.1 percent decline in March intact.

Single-family starts surged 19.4 percent in the Midwest and advanced 9.1 percent in the West. They fell 3.4 percent in the South and tumbled 29.2 percent in the Northeast.

Some of the drop in starts, especially in the Northeast, could be weather-related after a snowstorm lashed the region in March. Demand for housing remains underpinned by a tightening labor market, characterized by an unemployment rate at a 10-year low of 4.4 percent.

A survey on Monday showed homebuilders’ confidence rose in May, with bullishness about current sales and over the next six months.

Last month, starts for the volatile multi-family housing segment dropped 9.2 percent to a pace of 337,000 units. Multi-family starts have declined for four straight months.

Building permits fell 2.5 percent, driven by a 4.5 percent drop percent in the single-family segment. Multi-family permits rose 1.4 percent.

((Reporting by Lucia Mutikani; Editing by Paul Simao))