China says weapons won’t stop unification with Taiwan

Taiwan navy fast attack boats take part in a military drill in Kaohsiung port, southern Taiwan. REUTERS/Pichi Chuang

BEIJING (Reuters) – China’s Defence Ministry said on Thursday it was futile for Taiwan to think it could use arms to prevent unification, as the self-ruled democratic island looks to fresh arms sales by the United States amid what it sees as a growing Chinese threat.

China has never renounced the use of force to bring under its control what it deems a wayward province, and Taiwan’s defense ministry says China has more than 1,000 missiles directed at the island.

The Trump administration is crafting a big new arms package for Taiwan that could include advanced rocket systems and anti-ship missiles to defend against China, U.S. officials said earlier this month, a deal sure to anger Beijing.

China is deeply suspicious of Taiwan President Tsai Ing-wen, believing she wants to push the island toward formal independence, a red line for China. She says she wants to maintain peace with China.

“Separatist Taiwan independence forces and their activities are the greatest threat to peace and stability in the Taiwan Strait,” Chinese Defence Ministry spokesman Wu Qian told a monthly news briefing.

“It is futile to ‘use weapons to refuse unification’, and is doomed to have no way out,” he added, without elaborating.

Defeated Nationalist forces fled to Taiwan after losing a civil war to the Communists in 1949.

Proudly democratic Taiwan has shown no interest in being ruled by autocratic China.

(Reporting by Ben Blanchard; Editing by Clarence Fernandez)

Tillerson seeks to keep focus on Islamic State in delicate Turkey visit

Turkish Prime Minister Binali Yildirim, accompanied by Foreign Minister Mevlut Cavusoglu (3rd R), meets with U.S. Secretary of State Rex Tillerson (3rd L) in Ankara. Hakan Goktepe/Prime Minister's Press Office/Handout via REUTERS

By Lesley Wroughton

ANKARA (Reuters) – U.S. Secretary of State Rex Tillerson held talks with Turkey’s leaders on Thursday in a one-day visit to a NATO ally crucial to the fight against Islamic State but increasingly at odds with Washington and its European partners.

Tillerson held a closed-door meeting with President Tayyip Erdogan at which he was expected to discuss the U.S.-led fight against Islamic State, including the planned offensive against its Syrian stronghold of Raqqa, where Turkey has been angered by U.S. support for Kurdish militia fighters.

He earlier met Prime Minister Binali Yildirim and discussed efforts to defeat Islamic State in Syria and Iraq, Yildirim’s office said. A U.S. State Department official said Tillerson had emphasized Turkey’s “important role” in regional security.

Erdogan has been incensed by Washington’s readiness to work with the Kurdish YPG militia in the fight against Islamic State. Ankara sees the YPG as an extension of PKK militants who have fought a three-decade insurgency inside Turkey and are deemed a terrorist group by the United States and European Union.

U.S.-Turkish relations have also been strained by the continued presence in the United States of Turkish cleric Fethullah Gulen, blamed by Erdogan for a failed coup last July and whom Ankara wants extradited.

Ties soured under former U.S. President Barack Obama and officials in Ankara have been hoping for a reset under President Donald Trump. But there have been few signs of improvement.

Tillerson’s visit comes less than three weeks ahead of a referendum at which Erdogan is seeking constitutional change to boost his powers, a move which his opponents and some European allies fear will bring increasing authoritarianism.

Senior U.S. officials have said Tillerson will not meet the Turkish opposition during the visit, a sign that he will seek to avoid discussion of domestic issues while trying to keep the focus on the fight against Islamic State.

But his trip has been further clouded by the arrest in New York on Monday of an executive of Turkey’s state-run Halkbank <HALKB.IS>, who is accused of conspiring in a multi-year scheme to evade U.S. sanctions on Iran.

Shortly after Tillerson’s arrival in Ankara, Justice Minister Bekir Bozdag told broadcaster A Haber that the arrest was a “completely political move” designed to tarnish Turkey and Erdogan, and questioned the evidence in the case.

Tillerson is expected to say the arrest of Halkbank deputy General Manager Mehmet Hakan Atilla is a matter for the U.S. justice authorities and not political. He is hoping his visit can focus instead on the campaign to retake Raqqa.

U.S. officials say Tillerson, who has said the number one priority in Syria for President Donald Trump’s administration is defeating Islamic State, will emphasize the importance of Kurdish YPG forces in the Raqqa offensive.

(Editing by Nick Tattersall and Ralph Boulton)

Heroin use, addiction up sharply in the U.S.: study

FILE PHOTO - A man injects himself with heroin using a needle obtained from the People's Harm Reduction Alliance, the nation's largest needle-exchange program, in Seattle, Washington April 30, 2015. REUTERS/David Ryder/File Photo

By Patricia Reaney

NEW YORK (Reuters) – Heroin use in the United States has risen five-fold in the past decade and dependence on the drug has more than tripled, with the biggest jumps among whites and men with low incomes and little education, researchers said on Wednesday.

Whites aged 18 to 44 accounted for the biggest rise in heroin addiction, which has been fueled in part by the misuse of opioid prescription drugs.

The findings are troubling because the people most affected have few resources to deal with the problem, said Dr. Silvia Martins, an associate professor of epidemiology at Columbia University Mailman School of Public Health, and her colleagues.

“We are seeing that heroin use has increased in the past 10 years,” Martins said in a phone interview. “It is more prominent among whites with lower incomes and education and young adults.”

Heroin use, which includes those who have tried the drug but not become dependent on it, and addiction also rose more among unmarried adults. Although a jump was seen among women, it as was not as prominent as for men.

The researchers found no differences in heroin use or addiction among the major regions of the country.

The findings, published online in the journal JAMA Psychiatry, followed a statement from the American College of Physicians calling for drug addiction and substance abuse disorders to be treated as a chronic medical condition like diabetes or hypertension.

It also coincided with the expected appointment of New Jersey Governor Chris Christie to head a federal commission to combat the problem. Christie has declared opioid drug abuse a public health crisis.

Martins agreed drug addiction should be treated as an illness.

“By recognizing it is a disease, more people will become aware that they need to seek help, or if they are frequent users, to know that addiction is preventable,” she said.

Martins and her colleagues uncovered the trend by analyzing two studies, one from 2001-2002 and another from 2012-2013, and data from 43,000 long-term heroin users.

In 2001-2002, there were similar rates of heroin use between whites and non-whites, but by 2013 there was a significant race gap, according to the study.

Martins called for expanding treatment programs, overdose prevention and medication-assisted treatment, and for a change in doctors’ prescribing practices for opioids.

“I think some level of regulation is needed,” she said. “At the same time people who truly need that medication should get it but with greater supervision.”

(Reporting by Patricia Reaney; Editing by Patrick Enright and Paul Simao)

Fourth-quarter economic growth revised higher, boosted by consumer spending

Commuters wait to ride New York City Subway in New York, December 12, 2013. REUTERS/Eric Thayer

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. economic growth slowed less than previously reported in the fourth quarter as robust consumer spending spurred the largest increase in imports in two years.

Gross domestic product increased at a 2.1 percent annualized rate instead of the previously reported 1.9 percent pace, the Commerce Department said on Thursday in its third GDP estimate for the period. The economy grew at a 3.5 percent rate in the third quarter.

The government also said that corporate profits after tax with inventory valuation and capital consumption adjustments increased at an annual rate of 2.3 percent in the fourth quarter after rising at a 6.7 percent pace in the previous three months.

Profits were held back by a $4.95 billion settlement between the U.S. subsidiary of Volkswagen AG <VOWG_p.DE> and the U.S. federal and state governments for violation of environmental regulations.

Data on trade as well as consumer and construction spending suggest that economic growth moderated further at the start of 2017. The Atlanta Federal Reserve is forecasting GDP rising at a rate of 1.0 percent in the first quarter.

With the labor market near full employment, the data likely understate the health of the economy. GDP tends to be weaker in the first quarter because of calculation issues the government has acknowledged and is trying to resolve.

A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits fell 3,000 to a seasonally adjusted 258,000 for the week ended March 25.

Claims have now been below 300,000, a threshold associated with a healthy labor market for 108 straight weeks. That is the longest stretch since 1970 when the labor market was smaller.

The economy grew 1.6 percent for all of 2016, its worst performance since 2011, after expanding 2.6 percent in 2015.

Prices of U.S. government debt fell after the data. U.S. stock index futures pared losses, as did the U.S. dollar <.DXY> against a basket of currencies.

STRONG IMPORT GROWTH The moderate economic expansion poses a challenge to President Donald Trump, who has vowed to boost annual growth to 4 percent by slashing taxes, increasing infrastructure spending and cutting regulations. The Trump administration has offered few details on its economic policies.

Economists polled by Reuters had expected fourth-quarter GDP would be revised up to a 2.0 percent rate.

Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, was revised up to a 3.5 percent rate in the fourth quarter. It was previously reported to have risen at a 3.0 percent rate.

Some of the increase in demand was satiated with imports, which increased at a 9.0 percent rate. That was the biggest rise since the fourth quarter of 2014 and was an upward revision from the 8.5 percent pace reported last month.

Exports declined more than previously estimated, leaving a trade deficit that subtracted 1.82 percentage point from GDP growth instead of the previously reported 1.70 percentage points.

There was an upward revision to inventory investment. Businesses accumulated inventories at a rate of $49.6 billion in the last quarter, instead of the previously reported $46.2 billion. Inventory investment added 1.01 percentage point to GDP growth, up from the 0.94 percentage point estimated last month.

Business investment was revised lower to reflect a more modest pace of spending on intellectual property, which increased at a 1.3 percent rate instead of the previously estimated 4.5 percent rate.

There were no revisions to spending on equipment. Investment in nonresidential structures was revised to show it falling at a less steep 1.9 percent pace in the fourth quarter. It was previously reported to have declined at a 4.5 percent rate.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Suspect in threats against Jewish groups appears in U.S. court

The residence of Juan M Thompson is seen after it was searched by police in connection with his arrest on charges of bomb threats made against Jewish organizations across the United States, in St. Louis, Missouri, U.S. March 3, 2017. REUTERS/Lawrence Bryant

By Brendan Pierson and Jonathan Allen

NEW YORK (Reuters) – A former journalist charged with making a wave of bomb threats to U.S. Jewish organizations by telephone while posing as his ex-girlfriend appeared in Manhattan federal court on Wednesday afternoon.

Juan Thompson, 31, was arrested in St. Louis earlier this month and arrived in New York on Wednesday morning. He appeared wearing beige prison garb and flanked by two public defenders at a brief hearing before Magistrate Judge James Francis.

The public defender assigned by Francis to represent Thompson, Mark Gombiner, did not seek bail at the hearing and declined to say afterward when he might. Thompson will remain in custody for now.

Thompson is scheduled to appear again before U.S. District Judge Kevin Castel on April 6.

Prosecutors say Thompson used fake email accounts to impersonate his ex-girlfriend when he sent the bomb threats. The threats were the culmination of months of harassment against the ex-girlfriend that began after she broke up with him last July, they said.

Thompson was a reporter for the Intercept news website until he was fired last year for allegedly inventing sources and quotes.

Before his extradition to New York, he said he was being framed and targeted as a black man.

“Make no mistake: this is a modern-day lynching,” he said in a telephone interview from the Warren County jail in Missouri. “The allegations are false.”

Thompson said he had no anti-Semitic beliefs.

U.S. authorities have been investigating a surge of threats against Jewish organizations, including more than 100 bomb threats against community centers in dozens of states in separate waves since January.

The threats have stoked fears of a resurgence in anti-Semitism and forced the evacuation of many Jewish community centers, including some with daycare for young children.

The organizations Thompson threatened include a Jewish museum in New York and the Anti-Defamation League, according to a criminal complaint in Manhattan federal court. All occurred after the first flood of phone threats in early January.

Last week, an 18-year-old dual Israeli and U.S. citizen was arrested in Israel on suspicion of making dozens of hoax bomb threats to Jewish centers in the United States, Australia and New Zealand. His name was not disclosed.

His motives were not immediately clear. At a court hearing near Tel Aviv, the suspect’s defense lawyer, Galit Bash, said the young man had a growth in his head that causes behavioral problems.

(Editing by Lisa Von Ahn and Matthew Lewis)

A scramble at Cisco exposes uncomfortable truths about U.S. cyber defense

The logo of Cisco is seen at Mobile World Congress in Barcelona, Spain, February 27, 2017. REUTERS/Eric Gaillard

By Joseph Menn

SAN FRANCISCO (Reuters) – When WikiLeaks founder Julian Assange disclosed earlier this month that his anti-secrecy group had obtained CIA tools for hacking into technology products made by U.S. companies, security engineers at Cisco Systems <CSCO.O> swung into action.

The Wikileaks documents described how the Central Intelligence Agency had learned more than a year ago how to exploit flaws in Cisco’s widely used Internet switches, which direct electronic traffic, to enable eavesdropping.

Senior Cisco managers immediately reassigned staff from other projects to figure out how the CIA hacking tricks worked, so they could help customers patch their systems and prevent criminal hackers or spies from using the same methods, three employees told Reuters on condition of anonymity.

The Cisco engineers worked around the clock for days to analyze the means of attack, create fixes, and craft a stopgap warning about a security risk affecting more than 300 different products, said the employees, who had direct knowledge of the effort.

That a major U.S. company had to rely on WikiLeaks to learn about security problems well-known to U.S. intelligence agencies underscores concerns expressed by dozens of current and former U.S. intelligence and security officials about the government’s approach to cybersecurity.

That policy overwhelmingly emphasizes offensive cyber-security capabilities over defensive measures, these people told Reuters, even as an increasing number of U.S. organizations have been hit by hacks attributed to foreign governments.

Larry Pfeiffer, a former senior director of the White House Situation Room in the Obama administration, said now that others were catching up to the United States in their cyber capabilities, “maybe it is time to take a pause and fully consider the ramifications of what we’re doing.”

U.S. intelligence agencies blamed Russia for the hack of the Democratic National Committee during the 2016 election. Nation-states are also believed to be behind the 2014 hack of Sony Pictures Entertainment and the 2015 breach of the U.S. Government’s Office of Personnel Management.

CIA spokeswoman Heather Fritz Horniak declined to comment on the Cisco case, but said it was the agency’s “job to be innovative, cutting-edge, and the first line of defense in protecting this country from enemies abroad.”

The Office of the Director of National Intelligence, which oversees the CIA and NSA, referred questions to the White House, which declined to comment.

Across the federal government, about 90 percent of all spending on cyber programs is dedicated to offensive efforts, including penetrating the computer systems of adversaries, listening to communications and developing the means to disable or degrade infrastructure, senior intelligence officials told Reuters.

President Donald Trump’s budget proposal would put about $1.5 billion into cyber-security defense at the Department of Homeland Security (DHS). Private industry and the military also spend money to protect themselves.

But the secret part of the U.S. intelligence budget alone totaled about $50 billion annually as of 2013, documents leaked by NSA contractor Edward Snowden show. Just 8 percent of that figure went toward “enhanced cyber security,” while 72 percent was dedicated to collecting strategic intelligence and fighting violent extremism.

Departing NSA Deputy Director Rick Ledgett confirmed in an interview that 90 percent of government cyber spending was on offensive efforts and agreed it was lopsided.

“It’s actually something we’re trying to address” with more appropriations in the military budget, Ledgett said. “As the cyber threat rises, the need for more and better cyber defense and information assurance is increasing as well.”

The long-standing emphasis on offense stems in part from the mission of the NSA, which has the most advanced cyber capabilities of any U.S. agency.

It is responsible for the collection of intelligence overseas and also for helping defend government systems. It mainly aids U.S. companies indirectly, by assisting other agencies.

“I absolutely think we should be placing significantly more effort on the defense, particularly in light of where we are with exponential growth in threats and capabilities and intentions,” said Debora Plunkett, who headed the NSA’s defensive mission from 2010 to 2014.

GOVERNMENT ROLE

How big a role the government should play in defending the private sector remains a matter of debate.

Former military and intelligence leaders such as ex-NSA Director Keith Alexander and former Secretary of Defense Ashton Carter say that U.S. companies and other institutions cannot be solely responsible for defending themselves against the likes of Russia, China, North Korea and Iran.

For tech companies, the government’s approach is frustrating, executives and engineers say.

Sophisticated hacking campaigns typically rely on flaws in computer products. When the NSA or CIA find such flaws, under current policies they often choose to keep them for offensive attacks, rather than tell the companies.

In the case of Cisco, the company said the CIA did not inform the company after the agency learned late last year that information about the hacking tools had been leaked.

“Cisco remains steadfast in the position that we should be notified of all vulnerabilities if they are found, so we can fix them and notify customers,” said company spokeswoman Yvonne Malmgren.

SIDE BY SIDE

A recent reorganization at the NSA, known as NSA21, eliminated the branch that was explicitly responsible for defense, the Information Assurance Directorate (IAD), the largest cyber-defense workforce in the government. Its mission has now been combined with the dominant force in the agency, signals intelligence, in a broad operations division.

Top NSA officials, including director Mike Rogers, argue that it is better to have offensive and defensive specialists working side by side. Other NSA and White House veterans contend that perfect defense is impossible and therefore more resources should be poured into penetrating enemy networks – both to head off attacks and to determine their origin.

Curtis Dukes, the last head of IAD, said in an interview after retiring last month that he feared defense would get even less attention in a structure where it does not have a leader with a direct line to the NSA director.

“It’s incumbent on the NSA to say, ‘This is an important mission’,” Dukes said. “That has not occurred.”

(Reporting by Joseph Menn in San Francisco. Additional reporting by Warren Strobel in Washington.; Editing by Jonathan Weber and Ross Colvin)

Trump tells lawmakers he expects deal ‘very quickly’ on healthcare

U.S. President Donald Trump and First Lady Melania Trump host a reception for Senators and their spouses at the East Room of the White House in Washington, U.S., March 28, 2017. REUTERS/Carlos Barria

WASHINGTON (Reuters) – U.S. President Donald Trump told a group of senators on Tuesday that he expected lawmakers would be able to reach a deal on healthcare, without offering specifics on how they would do it or what had changed since a healthcare reform bill was pulled last week for insufficient support.

“I have no doubt that that’s going to happen very quickly,” Trump said at a bipartisan reception held for senators and their spouses at the White House.

“I think it’s going to happen because we’ve all been promising – Democrat, Republican – we’ve all been promising that to the American people,” he said.

A Republican plan backed by Trump to overhaul the U.S. healthcare system was pulled on Friday after it failed to garner enough support to pass the Republican-controlled House of Representatives.

Trump, a Republican, did not mention that failure at the reception nor did he offer specifics on how he planned for lawmakers to reach a consensus on a healthcare bill that would repeal and replace the Affordable Care Act, familiarly known as Obamacare.

Trump told lawmakers at the reception that he would be talking about infrastructure and investing in the military, without offering a time frame or details.

“Hopefully, it will start being bipartisan, because everybody really wants the same thing. We want greatness for this country that we love,” he said.

(Reporting by Ayesha Rascoe; Editing by Leslie Adler, Toni Reinhold)

U.S. envoy to U.N.: Syria’s Assad ‘hindrance to moving forward’

FILE PHOTO - Newly appointed U.S. Ambassador to the United Nations Nikki Haley presents her credentials to U.N. Secretary-General Antonio Guterres at U.N. headquarters in New York City, U.S., January 27, 2017. REUTERS/Stephanie Keith/File Photo

NEW YORK (Reuters) – U.S. ambassador to the United Nations, Nikki Haley, said on Wednesday that Syria’s President Bashar al-Assad is a “big hindrance in trying to move forward” to find an end to the country’s six-year conflict.

“I’m not going to go back into should Assad be in or out, been there, done that, right, in terms of what the U.S. has done,” she told the Council of Foreign Relations. “But I will tell you that he is a big hindrance in trying to move forward, Iran is a big hindrance in trying to move forward.”

With Russian and Iranian military support, Assad has the upper hand in a war with rebels who have been trying to topple him with backing from states including Turkey, Saudi Arabia and the United States. A U.S.-led coalition has also been targeting Islamic State militants in Syria.

“This is one of those situations where the U.S. and Russia could definitely talk and say ‘OK, how can we get to a better solution.’ But the issue of Assad is going to be there,” Haley said.

U.N.-led peace talks are currently being held in Geneva. Haley said U.N. mediator Staffan de Mistura “desperately” wants the United States to be part of finding a solution for the conflict in Syria.

“When you have a leader who will go so far as use chemical weapons on their own people you have to wonder if that’s somebody you can even work with,” she said. Assad’s government has denied using chemical weapons.

“If we don’t have a stable Syria, we don’t have a stable region and its only going to get worse. It really is an international threat right now and we have got to find a solution to it,” Haley said.

(Reporting by Michelle Nichols; Editing by Chizu Nomiyama, Bernard Orr)

California immigration forum highlights state’s red-blue divide

People protest outside before the start of a town hall meeting being held by Thomas Homan, acting director of enforcement for ICE, in Sacramento, California, U.S., March 28, 2017. REUTERS/Stephen Lam

By Sharon Bernstein

SACRAMENTO, Calif. (Reuters) – Supporters and critics of President Donald Trump’s deportation policy packed a gymnasium in California’s heartland on Tuesday, trading jeers and ridicule during a raucous town hall meeting attended by the U.S. Immigration and Customs Enforcement chief.

Sacramento County Sheriff Scott Jones, a pro-Trump Republican who enjoys strong backing in the region’s conservative suburbs, invited acting ICE Director Thomas Homan to address the public forum in the state capital.

The gathering got off to a boisterous start, with Jones’ opening remarks interrupted by shouts and heckling as he warned that spectators who continued to disrupt the meeting, attended by about 400 people, would be ejected.

About a dozen people were eventually escorted out of the hall.

Homan, whose agency has drawn fire for what some civil liberties advocates have criticized as heavy-handed tactics in rounding up and deporting illegal immigrants, insisted ICE was acting in a targeted fashion against those with criminal records.

He said ICE was also focused on individuals who have violated final deportation orders or have returned after being removed from the country.

“We don’t conduct neighborhood sweeps,” he said over cat-calls. “I don’t want children to be afraid to go to school. I don’t want people to be afraid to go to the doctor.”

Still, he warned that ICE intended to “enforce the laws that are on the books.”

Democratic officials in the Sacramento area, home to about 2 million people in California’s Central Valley some 90 miles (145 km) east of San Francisco, have opposed the Trump administration’s immigration crackdown and are leading a charge in the state legislature to fight his policies.

The division illustrates the complicated politics of the capital region, straddling jurisdictions where the predominantly liberal California coast bleeds into the more conservative interior of the state.

Sacramento Mayor Darrell Steinberg, a former top Democrat in the heavily blue state legislature, said at an earlier protest rally that ICE had failed to earn the community’s trust.

He called on Jones to end a county agreement with U.S. authorities in which jailed immigrants sought by federal agents for deportation are kept incarcerated beyond their scheduled release to allow ICE to take them into custody.

Among members of the public who spoke was Bernard Marks, 87, a Holocaust survivor, who said: “I spent 5 1/2 years in a concentration camp because we picked up people. Mr. Jones, history is not on your side.”

Another elderly participant, who identified himself only by his first name, Vincent, suggested those entering the United States illegally violated more than just immigration laws.

“How can an illegal alien get a job unless they’ve stolen a Social Security number,” he asked, visibly shaking with emotion after protesters yelled at him while he spoke.

Jones said earlier the town hall was an attempt to “find common ground by reducing conflicting information, eliminating ambiguity and reducing fear by presenting factual information.”

So many groups vowed to protest at the event that it had to be moved to a larger venue than originally planned.

(Reporting by Sharon Bernstein; Editing by Steve Gorman, Cynthia Osterman and Paul Tait)

Pending home sales surge to 10-month high

A home for sale sign hangs in front of a house in Oakton in Virginia March 27, 2014. REUTERS/Larry Downing

WASHINGTON (Reuters) – Contracts to buy previously owned U.S. homes jumped to a 10-month high in February, pointing to robust demand for housing ahead of the spring selling season despite higher prices and mortgage rates.

The National Association of Realtors said on Wednesday its Pending Home Sales Index, based on contracts signed last month, surged 5.5 percent to 112.3, the highest reading since April. It was also the second best reading since May 2006.

Contract signing last month was likely boosted by unseasonably warm temperatures. The gains reversed January’s 2.8 percent drop. Pending home contracts become sales after a month or two, and last month’s surge implied a pickup in home resales after they tumbled 3.7 percent in February.

Economists had forecast pending home sales rising 2.4 percent last month. Pending home sales increased 2.6 percent from a year ago.

Demand for housing is being driven by the labor market, which is generating wage increases, as it nears full employment. Sales activity, however, remains constrained by tight inventories, which are driving up home prices.

Given labor market strength, economists expect only a modest impact from higher mortgage rates. The 30-year fixed mortgage rate is currently at 4.23 percent, below a more than 2-1/2-year high of 4.32 percent hit in December.

Contracts increased 3.4 percent in the Northeast and jumped 3.1 percent in the West. They surged 11.4 percent in the Midwest and rose 4.3 percent in the South.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)