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Would you be willing to pay the original builder a fee when you resell your home? That’s an obligation some developers are trying to slap on homeowners in their communities.

Many condo and townhouse dwellers are already familiar with the "flip tax," more formally known as a resale fee. Typically calculated as a percentage of the sale price, it’s a fee due to the condo association or community when an owner sells. These charges fund common-area maintenance or provide a boost to reserve funds, which benefits the association’s homeowners.

But in some new developments, homebuilders are including in contracts a 1% fee to be paid to them every time the house is sold — for 99 years. And the money doesn’t go for improvements or upkeep: It’s just money in the builders’ pockets.

That has the real estate industry and consumer protection groups up in arms.

"It’s of no benefit to consumers," said Kathleen Day, of the Center for Responsible Lending. "It’s another innovative way to price gouge. Every extra dollar they suck out of people’s wallets takes away from other spending. It’s not good for the economy."

The issue has attracted the attention of Washington, where Rep. Brad Sherman, D-Calif., is leading a charge against the fees. "Consumers are not in a position to deal with another level of complexity, one that pits plain vanilla homes against ones that come with fees," he said.

Freehold Capital Partners, the New York-based financial company that is developing the program, claims it has already signed up thousands of developers nationwide, representing hundreds of billions of dollars of development.

The company’s plan is to monetize that future income — essentially allowing developers to get paid now rather than later. To do that, Freehold would bundle together the estimated income from the future fees and sell that package to investors. It claims this new "asset" would be worth about 5% of the original home prices.

One company that is working with Freehold is Thieman Enterprises, a developer based in Ohio. "I think it’s a fantastic program," said owner Ted Thieman. "I can get my development going again."

He said he needs the upfront cash to fund the building of infrastructure — roads, sewers and other essentials. Working with Freehold to sell the fee package on to investors would potentially give him enough cash to get projects going and land construction loans more easily.

Ohio, though, has banned the practice. Thieman thinks that removing this potential funding source will discourage development low interest personal loan. He said he will relocate one of his development plans to West Virginia, where he has acquired land. He’s disappointed for his home state.

"We can bring billions into Ohio and jump-start the economy," he said.

A Utah builder, Development Associates, initiated a similar program several years ago in order to recover some of the up-front costs of its developments. But after complaints from homebuyers, who said they were unaware of the fees, the company withdrew them.

Some developers regularly include "transfer fees" in their sales contracts, including Lennar, one of the nation’s largest builders. But the fees Lennar collects go to local housing-assistance organizations and charities, not back into its own pocket. That has helped keep the practice off lawmakers’ radar.

Still, most real estate experts are against these fees. A coalition of real estate industry organizations and community groups recently sent a letter to Treasury Secretary Tim Geithner recommending that he not allow Freehold’s securitization plan to go forward.

In the letter, the coalition quoted Rep. Sherman, who called the fees "a new predatory scheme."

In the past month, the Federal Housing Finance Agency proposed restricting Fannie Mae and Freddie Mac from buying or backing any mortgages that include home resale fees.

Freehold, of course, defends the program. Chief Operating Officer William White argues that the 1% resale fee will actually benefit consumers by lowering home prices: "No one will pay the same for a home with a [resale fee] as they would for the same home without the fee," he said.

That would make buying a home easier — but reselling one at a profit harder. Meanwhile, builders could offset their lower initial selling prices by either collecting on the back-end income stream from future sales, or selling those future earnings off to investors.

No securitization package has yet been created, according to White. But he’s optimistic: "We have been pleased with Wall Street’s response to date."

Whether the program will ever gets off the ground is an open question: 18 states have already banned or restricted the practice, and if the FHFA proposal goes through, it could derail it entirely.

Sherman does not think the idea is dead. Not yet.

"We’ve wounded the beast, but we haven’t put a stake through its heart," he said. 

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Stocks rallied Thursday after better-than-expected earnings and forecasts from 3M, Caterpillar, AT&T and UPS helped reassure investors about the pace of the economic recovery.

The Dow Jones industrial average (INDU) rose 202 points, or 2%. The S&P 500 (SPX) index jumped 24 points, or 2.3%. The Nasdaq (COMP) composite gained 58 points, or 2.7%.

Stocks slumped Wednesday after Federal Reserve Chairman Ben Bernanke told Congress the outlook for the economy was "unusually uncertain," adding to worries about the pace of the recovery.

But the tone was positive Thursday, on the back of improved earnings, better-than-expected housing market news and a surge in European markets.

After the close, Dow component Microsoft (MSFT, Fortune 500) reported higher quarterly sales and earnings that topped estimates, thanks to strong sales of its Windows 7 and a better personal computer market than in recent months. Shares were barely changed after the close.

Also after the close, Dow component American Express (AXP, Fortune 500) reported higher quarterly sales and earnings that topped expectations. But AmEx’s CEO said the company remains cautious about the economic outlook and shares dipped 1% in after-hours trading.

Quarterly results: Dow component Caterpillar (CAT, Fortune 500) reported higher quarterly sales and earnings that topped estimates due to better sales of gear for the mining, infrastructure and energy industries. Caterpillar also boosted its 2010 profit forecast. Shares gained 1.7%.

Fellow Dow component 3M (MMM, Fortune 500) reported higher quarterly sales and earnings and said that full-year 2010 profit will exceed its earlier targets, thanks to strong demand in both the United States and abroad. The company is seen as a good proxy for the economy due to the breadth of its business, which includes everything from Scotch tape to films for flat-screen TVs. Shares gained 3%.

UPS (UPS, Fortune 500) reported higher quarterly sales and earnings that topped estimates and said that 2010 earnings will surpass its earlier forecasts. The delivery company cited an increase in package revenue in both the United States and abroad. Shares gained 6%. UPS is often seen as an economic bellwether due to the nature of its business.

Dow component AT&T (T, Fortune 500) reported higher quarterly earnings that topped estimates and higher revenue that was shy of estimates. The company also lifted its 2010 forecast, citing cost cutting and a surge in wireless business, thanks to its exclusive iPhone deal with Apple. Shares gained 2.4%.

Late Wednesday, eBay (EBAY, Fortune 500) reported higher quarterly sales and earnings that topped estimates, thanks to strength at its PayPal only payments unit. The online auctioneer also lowered the high end of its full-year 2010 profit forecast, citing the impact of the weaker euro. Shares gained 3.8% Thursday.

Housing: Sales of existing home sales fell 5 no faxing payday loan.1% in June from May levels, according to a report from the National Association of Realtors released Thursday. But the drop was smaller than expected. Sales rose nearly 10% from a year earlier.

Jobs: The House voted to extend jobless claims benefits until November, ending a seven-week old debate between lawmakers that saw federal benefits for the long-term unemployed run out. President Obama is expected to sign the extension shortly.

Earlier, the Department of Labor reported that the number of Americans filing new claims for unemployment rose to 464,000 last week from a two-year low of 427,000 in the prior week. Economists surveyed by Briefing.com thought claims would rise to 445,000.

Continuing claims, a measure of Americans who have been receiving benefits for a week or more, fell to 4,487,000 from 4,710,000 in the previous week. Economists surveyed by Briefing.com expected 4,600,000.

Deals: General Motors said it will buy auto financing firm AmeriCredit (ACP) in a $3.5 billion all-cash deal. The deal gives GM a lending unit after selling its majority stake in GMAC in 2006. The deal was also seen as a key step as GM prepares its initial public offering for later this year, after the government restructured it in bankruptcy. AmeriCredit shares jumped 23%.

Dell: Computer maker Dell (DELL, Fortune 500) agreed to pay $100 million to settle fraud charges with the Securities and Exchange Commission. Chairman Michael Dell and former CEO Kevin Rollins will pay $4 million each. Dell shares finished 2.5% higher.

Leading indicators: The index of leading economic indicators fell 0.2% in June, the Conference Board reported, after rising 0.5% in May. Economists expected the index to have fallen 0.4%.

World markets: European markets rose, with Britain’s FTSE 100 up 1.9%, Germany’s DAX up 2.5% and France’s CAC 40 up 3%.

Asian markets ended mixed. Japan’s Nikkei fell 0.6%, while Hong Kong’s Hang Seng gained 1.1% and the Shanghai Composite gained 0.3%.

Currencies: The euro gained versus the dollar. The dollar rose versus the Japanese yen.

Commodities: U.S. light crude oil for September delivery rose $2.46 to $79.02 a barrel on the New York Mercantile Exchange.

COMEX gold for August delivery rose $2.80 to $1,194.60 an ounce.

Bonds: Treasury prices fell, raising the yield on the 10-year note to 2.93% from 2.89% late Wednesday. Debt prices and yields move in opposite directions.

Market breadth: Breadth was positive. On the New York Stock Exchange, winners beat losers by over six to one on volume of 1.18 billion shares. On the Nasdaq, advancers beat decliners by five to one on volume of 2.28 billion shares. 

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New York state legislators approved more emergency spending, a new menu of business tax incentives and higher cigarette taxes in votes on Monday.

Legislators enacted another one-week emergency spending plan, staving off a government shutdown while everyone waits on a budget for the full fiscal year to be finalized in ongoing closed-door negotiations.

The state budget is nearly three months late and it must resolve a $9.2 billion deficit.

Lately, Gov. David Paterson has used the short-term spending plans to force votes on slices of the overall state budget, a rare piecemeal process.

After Monday’s separate votes, legislators have locked in roughly 70 percent of the budget for the total fiscal year, according to Democratic estimates.

To date, $5.53 billion of the state deficit has been erased through a mix of actions that raise revenue, and some spending cuts.

Legislators have yet to address $3.65 billion in red ink, according to Sen. Carl Kruger (D-Brooklyn).

The latest emergency spending plan, approved Monday, keeps bare-bones operations going through June 27. The bill passed the Senate 33-28, with Sen. Roy McDonald (R-Saratoga) breaking ranks with his party to vote for the bill. The legislation passed by a wider margin in the Assembly, which is dominated by Democrats.

“This year’s assault on taxpayers’ wallets has only just begun,” said Senate Minority Leader Dean Skelos (R-Long Island).

In addition, a majority of senators approved a budget bill setting full fiscal-year funding in the areas of transportation, economic development, public protection and the environment.

The bill passed the Assembly late last week by a 79-52 vote. A Senate vote count was not immediately available.

The bill enacts a transportation plan allotting $1.8 billion for roadwork this fiscal year, a drop of 9 percent, or $187 million, from last year.

The bill cuts a range of business benefits. The state is shrinking a range of hi-tech programs by $25 million, including matching grants and technology transfer incentives.

The bill also eliminates a $71 million subsidy for small businesses providing mandated coverage for mental health treatment, known as Timothy’s Law. Businesses will still be required to continue the coverage for employees.

Also, the bill enacts the state’s new menu of business tax incentives, called Excelsior Jobs. It replaces the signature Empire Zones program, which shuts off to new applicants after June 29.

Business lobbies have hammered the Excelsior Jobs benefits as mere shells of the incentives the state offered under Empire Zones. The new incentives are limited to specific industries, and the state will spend $50 million on them this fiscal year—compared with $550 million in annual Empire Zone spending.

Upstate Democrats indicated more needs to be done to help businesses.

“The Excelsior Jobs program is a good start. We will continue to develop incentives,” said Sen. William Stachowski (D-Buffalo). “This program lays the foundation for additional strategies.”

Skelos and other Republicans accused Democrats of gutting the state’s economic development tools.

“Surely now other states will be stepping up their efforts to lure companies that want to escape New York’s high taxes,” Skelos said.

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Biotech stocks took a turn for the worse in 2009 as the major players dealt with regulatory, manufacturing and political issues as well as a deep recession, but their fortunes could turn in the new year if they get added patent protection.

They were the exception in what was otherwise a bullish year for health care stocks, which benefited as investors sought defensive plays in a turbulent market.

Biotech stocks were the laggards of the Standard & Poor’s 500 Health Care index, on track to post a nearly 8 percent loss for the year, while the rest of the health care sector has logged gains of up to 66 percent, according to FactSet.

The decline in bellwethers such as Amgen and Genzyme was a key factor in weighing down the overall sector. On a broader scale, concerns included a backlog of drug approvals at the Food and Drug Administration, a decline in buyout activity, and fears over health care reform.

While the S&P 500 index is on track to gain about 25 percent in 2009, its large biotech components are down about 7.8 percent. The Nasdaq Biotechnology Index, with a broader array of biotech companies, rose 17 percent, but that pales in comparison with the broader Nasdaq composite, which is set to gain about 45 percent.

Pharmaceutical companies, which saw a flurry of buyout and merger activity, are among the strongest performers with a 25 percent boost, a reversal from a lackluster 2008. But the lines between pharmaceutical and biotech companies are diminishing through a range of buyout and development deals. Traditional pharmaceuticals are made by synthesizing chemicals, while biotech-based drugs are made using living cells.

Meanwhile, hospital operators and insurers are on track to rally 62 percent, despite the recession, on hopes that health care reform in Washington could result in more insured patients and revenue in the future.

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Air Canada has become the first Canadian airline to offer in-flight Internet access to at least some of its passengers.

The airline launched a 10-week trial period Friday, during which select flights on the Montreal-Los Angeles and Toronto-Los Angeles routes will offer Web surfing.

Access will cost $9.95 (U.S.) for a laptop and $7.95 for smartphones and PDAs.

The service, known as Gogo, will initially be available only when flying over the territorial U.S.

At the end of the 10-week trial on Jan. 29, the airline will consider expanding the service to other routes.

A spokesperson for Air Canada said a full launch of the service will depend on the outcome of the trial, regulatory approval and developing the necessary ground infrastructure in Canada to provide a domestic network.

Initially, the system will be available on Aircell, a U.S.-only high-speed mobile network for aviation. Air Canada said it hopes to assist in the development of a Canadian air-to-ground network in the near future.

The airline’s chief domestic competitor, WestJet, said it has no immediate plans to offer wireless on its flights but said it will continue to evaluate the concept.

In-flight Internet access through the Gogo network is already available on some U.S. airlines, including Virgin America, Delta, AirTran and American Airlines.

With files from Reuters

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Latvia is close to ending a dispute with international donors including Sweden and the International Monetary Fund that jeopardized its bailout loan and raised devaluation speculation, the premier’s office said.

“Latvia is on the way to coming to an agreement with its international lenders,” said Liga Krapane, Prime Minister Valdis Dombrovskis’s spokeswoman. The premier in Helsinki today told reporters the country is “working on additional measures,” adding he expects an “intermediate conclusion” when European Union Monetary Affairs Commissioner Joaquin Almunia visits Riga on Oct. 13.

The IMF, European Union and Sweden, which agreed a 7.5 billion-euro ($11 billion) loan in December, have heightened the pitch of calls urging Dombrovskis to commit to budget cuts of 500 million lati ($1 billion) a year until 2012. Swedish Premier Fredrik Reinfeldt said on Oct. 5 Latvia “must correct” its deficit and Riksbank Governor Stefan Ingves has said the country may be left “in the cold” if it doesn’t comply.

“The message has been heard,” said Nils Muiznieks, a political scientist at the University of Latvia, by phone yesterday. “The chances of coming to an agreement have improved massively” after Swedish admonishments.

Finance Minister Einars Repse has had meetings with officials from the Nordic states, EU members, the IMF, the World Bank and the U.S. Treasury, and “everyone was in agreement that Latvia has to work according to the program,” he told Latvian Independent Television last night.

‘Depressive Forces’

Repse added the government must find places to cut expenditure and may have to introduce a real-estate tax to meet the terms of the loan.

Sweden’s banks are the biggest in the Baltic states. Stockholm-based Swedbank AB, the region’s biggest lender, rose 4.5 percent to 63.50 kronor in Stockholm. SEB AB rose 1.1 percent to 45.2 kronor. The krona gained as much as 0.5 percent against the euro, was trading at 10.3113 ending two days of losses.

The yield on Latvia’s 5.5 percent government bond due March 2018 dropped 4 basis points today to 6.94 percent. The OMX Riga stock index closed 0.4 percent higher after plunging 3.1 percent yesterday. The lats was little changed at 0.7095 per euro.

Sweden’s debt office said in March that it would lend Latvia about 720 million euros, as part of the international loan, next year. The country currently has the rotating presidency of the European Union.

‘Depressive Forces’

The Baltic region, part of the Soviet Union until 1991, is enduring the severest recession in the EU; Latvia’s output slumped 18.7 percent in the second quarter, Lithuania plunged 20.2 percent and Estonia’s economy contracted 16.1 percent. The three will face “depressive economic forces” through next year, SEB said in an Oct. 7 report.

Donors have questioned the commitment of Latvia to fulfilling the terms of its loan after a report revealed some of the promised cuts weren’t implemented. Latvian public wages have fallen about 5 percent in the first half of the year, compared with a targeted 35 percent agreed, the IMF said in an Oct. 2 report. The Washington-based fund also said that a reliance on “one-off” measures to cut the budget deficit threatens to delay the euro adoption strategy.

Latvia, which like Lithuania and Estonia pegs its currency to the euro, has tried to persuade donors it can achieve an agreed 8.5 percent deficit of gross domestic product next year by cutting its budget by 325 million lati, 175 million lati less than the lenders say is necessary. Lawmakers have also balked at donor recommendations to introduce a real-estate tax.

‘Basically Agreed’

The Finance Ministry is now preparing additional measures to find the 175 million lati in budget cuts, spokesman Aleksis Jarockis told the Baltic News Service today no telecheck payday loans.

The government has “basically agreed to prepare additional measures to reach the size of the fiscal consolidation which would satisfy the international loan providers,” Dombrovskis told the British Broadcasting Corp. today.

“Most likely they will reach an agreement somewhere in between” 325 million and 500 million, said Martins Kazaks, chief economist of Swedbank’s Latvian unit. Lawmakers have until November to reach an agreement on the size of the cuts.

“If Latvia does not cut, then they will have to make expenditure cuts three times those now” if loans are suspended, he said. “If you have the option of losing a finger compared to a whole arm, then go for the finger.”

Lawmakers in Riga, mindful of elections in a year, have decried the bailout terms and Dombrovskis is struggling to soften the blow for households. His efforts have thrown oil on the flames of speculation that Latvia may be forced to devalue the lats.

Mortgage Proposal

The premier on Oct. 6 asked civil servants to look into the feasibility of capping mortgage holders’ liabilities to the value of the collateral offered against their loans. That was interpreted by some investors as a sign the government is paving the way for a devaluation by limiting the domestic losses such a move would incur.

The central bank in an Oct. 7 statement questioned the timing, arguing such legislation “should have been adopted earlier, for purposes of slowing down lending, or it should be postponed: this is the most inappropriate moment possible.”

A devaluation would hit corporate loans and bring with it a “wave of insolvencies,” according to Commerzbank AG currency strategists Lutz Karpowitz and Antje Praefcke, who say the mortgage proposal is no prelude to a controlled devaluation.

The banks have signaled they may rethink their commitment to the country if the proposed legislation were to pass.

‘Limits for Everything’

“You always have to evaluate the conditions within which you operate, but Latvia is one of our four home markets and we have no other intentions than to keep it as one of our home markets,” Swedbank spokesman Thomas Backteman said by telephone today. “But there are of course limits for everything, including our presence in individual countries, if the legal system or other things change radically and make it impossible to operate there.”

This isn’t the first time Latvia has stared down the tunnel of ruin. Lawmakers in June struck an 11th hour agreement on budget cuts to satisfy lenders and ensure the flow of payments. That agreement was pushed back until after municipal and European parliament elections.

The difference now, is Latvia is no longer in danger of running out of money after 1.6 billion euros from the EU, IMF and World Bank was transferred, enough to last at least until March, said Annika Lindblad, an analyst with Nordea AB.

Political efforts to contain the fallout of the recession come as households handle wage cuts that make loan repayment impossible and slumping property values. House prices fell 71 percent in June from a peak in March 2007, according to real- estate broker Latio.

More than half of Latvian mortgages issued by Swedbank exceeded the value of their collateral at the end of the second quarter, Jenny Clevstrom, a bank spokeswoman in Stockholm, said on July 24.

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Dominique Strauss-Kahn is trying to keep the spotlight on the International Monetary Fund as the world’s focus shifts from the financial crisis to economic recovery.

With IMF members gathering in Istanbul this week, its managing director wants to turn the lender into an insurance fund that they can draw on in difficult times. That would expand its role beyond giving loans to distressed economies. His problem is that some of the 186 members aren’t ready to give power to an IMF they say is controlled too much by rich nations.

“It’s all very well for him to be arguing this is the role the fund should play,” Ngaire Woods, a professor of international political economy at Oxford University, said in an interview. “But the legitimacy problem the fund has to overcome to be a trusted reserve pool is massive.”

The financial crisis has seen the IMF rescue economies from Hungary to Ukraine and put it back on the front line of global policy making. As the world recovers, Strauss-Kahn, 60, says a central fund worth as much as $1 trillion would help prevent the global imbalances that led to the crisis. That’s because nations would feel less need to build up currency reserves during times of growth to protect themselves from future turmoil, he says.

If successful, Strauss-Kahn’s strategy may have the effect of slowing the purchases of dollar-denominated securities such as U.S. Treasury bonds that kept global interest rates low before the crisis.

Officials from emerging economies want assurances that a shift in voting power at the Washington-based IMF will continue in their favor. Germany has 5.9 percent of the votes at the IMF and China has just 3.7 percent even though China is now a bigger economy.

‘Legitimacy’

Mexican central bank Governor Guillermo Ortiz said in Istanbul on Oct. 5 he’s concerned “legitimacy” is “not likely to happen anytime soon.” His Brazilian counterpart Henrique Meirelles said a day earlier that “self-insurance works better.”

“The IMF is accountable to its shareholders and that’s going to be an issue” for Strauss-Kahn, Nobel Prize-winning economist Joseph Stiglitz said in an interview in Istanbul. “Some countries would like to return to business as usual as the crisis passes.” While Strauss-Kahn is doing a “fantastic” job, “it’s very hard to take charge of such a complex institution and navigate it through change.”

To succeed, Strauss-Kahn needs to win over countries that the IMF alienated in the late 1990s during the Asian crisis. Then, the lender forced governments from Indonesia to South Korea to cut spending, raise interest rates and sell state-owned companies in return for loans, attracting criticism that it prolonged the economic pain.

‘Long Memories’

While the IMF has retreated from attaching as many strings to loans, Thailand’s Finance Minister Korn Chatikavanij in May said seeking IMF help still carries a stigma in Asia. Asian countries have created their own reserve pool and no economy from the region has needed to turn to the lender in the current crisis.

“Asia governments do have long memories,” said Huw McKay, senior international economist at Westpac Banking Corp. in Sydney. “They remembered how they were treated in the Asian crisis and wouldn’t want to put themselves into that position again.”

Strauss-Kahn says the crisis shows it’s time both for the IMF to retool itself and Asian economies to break with the past.

“Given the costs associated with reserves accumulation, there is clearly a need for reliable emergency financing and hence for a global lender of last resort,” he said last week in Istanbul. “The fund has the potential to serve as an effective and reliable provider of such insurance.”

Strauss-Kahn’s Report

Strauss-Kahn is scheduled to flesh out his plan in a report to IMF officials next year.

Emerging nations are also winning more power at the fund. President Barack Obama and other Group of 20 leaders last month agreed to a transfer of at least 5 percentage points of so- called quotas from countries with disproportionate influence at the fund. Quotas determine voting shares and access to IMF loans.

Strauss-Kahn also already has an insurance system with the so-called flexible credit line that has attracted Mexico, Poland and Colombia. While reserved to economies it deems as sound, it comes with no strings attached.

Still, the IMF would require a “substantial increase” in resources for it to be global, according to Strauss-Kahn. While the IMF’s finances got a boost in April when G-20 leaders agreed to triple its resources to $750 billion, the additional $500 billion is not necessarily permanent.

‘Temporary’ Resources

Bundesbank President Axel Weber said yesterday there are “moral-hazard issues” arising from “the vast increase in fund resources,” which “should be viewed as a temporary measure.”

For Strauss-Kahn, the risk is that the IMF misses the chance presented by the crisis to take on a central role in preventing future crises, said Jim O’Neill, chief economist at Goldman Sachs Group Inc.

“The IMF has been given loads of opportunities here and needs to seize the moment,” O’Neill said. “I’m not convinced they will. Strauss-Kahn is doing a good job, but they should be bolder. They are still beholden to those who own them.”

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U.K. consumer confidence jumped in September by the most since 1995 as optimism about the economy’s prospects rebounded, GfK NOP said.

An index of sentiment rose to minus 16, the highest since January 2008, from minus 25 the previous month, the market researcher said in an e-mailed statement today in London. A gauge of confidence in the economy for the next year increased 13 points to 4, the highest in more than a decade.

“Psychologically important is the fact that confidence in people’s own personal finances for the next 12 months and confidence in the general economy over the next 12 months both moved into positive territory, after being in the red for well over a year,” Nick Moon, Social Research managing director at GfK, said in the statement.

Marks & Spencer Group Plc, the U.K.’s largest clothing retailer, today reported the smallest drop in same-store sales for two years and said confidence among customers “has reached the bottom.” Chancellor of the Exchequer Alistair Darling predicted this week that an economic recovery may be under way by the end of the year.

The pound rose for a second day against the dollar after the GfK report. The U.K. currency traded at $1.6058 as of 8:49 a.m. in London.

The index of personal finances in the next year rose 5 points to 5, the report showed. The index measuring the climate for major purchases rose 11 points to minus 15. GfK surveyed 1,999 people from Sept. 4 to Sept. 13.

M&S Sales

Retailers saying sales increased this month from a year earlier outnumbered those reporting declines by 3 percentage points, compared with a reading of minus 16 points in August, the CBI said yesterday.

M&S said that sales at U.K. stores open at least a year fell 0.5 percent in the 13 weeks ended Sept. 26. That beat the average estimate of nine analysts surveyed by Bloomberg News for a 1.6 percent drop. The retailer raised its margin forecast.

Moss Bros Group Plc, the U.K.’s third-largest suit retailer, said yesterday it may restart opening new stores this year amid signs the decline in sales is slowing.

The U.K. economy shrank 0.6 percent in the second quarter, less than previously estimated, as the slump in manufacturing and construction started to ease, the Office for National Statistics said yesterday.

Today’s report still showed that consumers, who have 1.5 trillion pounds ($2.4 trillion) in debts, may be getting keener to save. GfK’s measure of whether now is a good time to save rose to minus 5 from minus 10. The household savings ratio, a measure of savings as a proportion of post-tax income, jumped to 5.6 percent in the second quarter, the most since 2003, the statistics office said yesterday.

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Mexico’s central bank left its benchmark interest rate unchanged for a second month on an improved economic outlook and said future decisions may depend on the inflationary impact of fiscal legislation in Congress.

The bank’s five-member board, led by Governor Guillermo Ortiz, held the rate at 4.5 percent, matching the forecasts of all 19 economists surveyed by Bloomberg. The bank cut borrowing costs at its first seven monthly meetings of 2009, lowering the rate by 3.75 points from 8.25 percent at the end of 2008.

The central bank may raise borrowing costs in the first quarter of next year if it sees signs that changes to tax laws approved by lawmakers are fueling inflation, said Pedro Tuesta, senior economist for Latin America at 4Cast Inc. in New York. The bank also said future decisions would depend on the economy.

“If there’s an impact that substantially modifies inflation, they may have to think about raising rates,” Tuesta said in a telephone interview. “They probably won’t do anything until they see the actual impact in February or March.”

On Sept. 8, President Felipe Calderon proposed tax legislation as part of his 2010 budget proposal that would increase income, corporate and sales taxes in a bid to offset diminishing oil revenue and prevent a credit-rating reduction.

Tax Proposal

The proposal calls for imposing a new 2 percent sales tax that would be used to fight poverty. The income tax rate for high-earning individuals as well as corporations would also rise to 30 percent, before dropping to 29 percent in 2013 and returning to 28 percent in 2014.

Calderon’s economic package, if approved by lawmakers, would add less than 1 percentage point to the inflation rate, Finance Minister Agustin Carstens said Sept. 9.

“You have higher taxes, and that should increase prices,” said Benito Berber, an economist with RBS Securities Inc. in Stamford, Connecticut. “It’s going to be inflationary.”

The government also said this month it plans to gradually raise gasoline and diesel prices as it did before it suspended increases in January.

The bank may raise rates as early as November if the government’s plan to boost fuel prices and increase taxes spurs inflation, said Mario Correa, an economist at Grupo Financiero Scotiabank in Mexico City.

“Inflation hasn’t ceased to be a concern,” Correa said in a telephone interview. “It’s still well above the official target.”

Inflation Outlook

The annual inflation rate fell to 5.08 percent in August, the lowest level in more than a year, as costs declined for tourism packages, local telephone services and avocados.

The central bank forecasts inflation at between 4.75 percent and 5.25 percent in the third quarter, and between 4 percent and 4.5 percent in the fourth quarter. Its inflation target is 3 percent. The government forecasts annual inflation will be 4.3 percent at the end of this year.

Banco de Mexico said in a statement accompanying its decision today that the economy will improve in the second half of the year after a “highly severe” contraction in the first half.

“The most recent indicators for industrial production, employment and consumer confidence indicate that the economy touched bottom and is beginning an expansionary phase,” the bank said.

Mexico’s $1.09 trillion economy contracted 10.3 percent in the second quarter and job losses accelerated as the recession in the U.S., which buys about 80 percent of Mexican exports, sapped demand for its products.

The central bank forecasts the economy will shrink as much as 7.5 percent this year, which would be the biggest contraction since the 1930s.

Auto Production

The recession in Latin America’s second-largest economy is easing on restoration of credit, rising auto output and growing consumer demand in the U.S, Deputy Finance Minister Alejandro Werner said yesterday. Industrial production fell 6.5 percent in July, which was less than the 9.1 percent forecast by economists in a Bloomberg survey.

“All indicators point toward a bottoming of the economy in the second quarter,” Berber said. “There’s no reason to continue cutting.”

At 4.5 percent, the key lending rate is the lowest since Ortiz began targeting the overnight lending rate in 2005. Previously, Banco de Mexico implemented monetary policy by targeting the money supply through a system known as the “corto.”

Lower interest rates can help prompt businesses to invest and consumers to buy on credit. Cheaper loans also can spur inflation by strengthening demand.

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Israel’s August inflation figures may provide a sneak preview for investors eager to learn whether Bank of Israel Governor Stanley Fischer will raise rates again at the end of the month.

Fischer, who became the first central bank governor to lift rates since signs of easing in the global recession began, may decide on a further increase if the inflation rate is higher than expected, said Ayelet Nir, chief economist at Tel Aviv- based Israel Brokerage & Investments Ltd. The components of the August consumer price index, and whether they show demand-pull inflation or one-time, government-initiated increases, will also play a role, she said.

“The difficulty in the decision is that the Bank of Israel is trying on the one hand to avoid high inflation and on the other hand not to harm growth,” Nir said. Growth “is still very fragile so the decision is very, very hard.”

Fischer has been trying to find a balance between unwinding an expansionary monetary policy while containing a shekel rally in a country where exports make up almost half of gross domestic product. The bank said its Aug. 25 decision to raise the key rate by a quarter point to 0.75 percent was aimed at returning inflation to within the target range of 1 percent to 3 percent.

If Fischer raises rates too early he can harm growth, both because it may cause the shekel to appreciate, which hurts exporters, and also because it dampens spending, Nir said. On the other hand, inflation also has repercussions for growth, she said.

Unanimous

The August consumer price index is expected to dip to 3 totally free credit score.2 percent from 3.5 percent the previous month, according to the median estimate of a Bloomberg survey of nine economists. The Jerusalem-based Central Bureau of Statistics will report the inflation data at 6:30 p.m. on Sept. 15.

All four central bank officials who participated in the rate-setting meeting last month favored raising the rate, with one of the four supporting a half-point increase, according to the minutes.

“If inflation is as expected or higher, there is a good chance of another rate hike,” said Jonathan Katz, a Jerusalem- based economist at HSBC Holdings Plc., who predicted the last increase. The minutes of the last rate meeting show that the “monetary bias is still toward higher rates.”

Israel’s growth rate is expected to be flat this year, and will rise to 2.5 percent in 2010, the Bank of Israel said Sept. 1. The bank’s previous forecast in April was for a 1.5 percent contraction this year and growth of 1 percent next year.

Water Tax

Much of the rise in the August consumer price index is likely to be due to the government’s new drought tax on water, which isn’t relevant in the interest rate decision, Nir said.

There will also be “demand-based inflation,” she said, citing increases in the consumer confidence index, retail sales and credit card spending. “Part of the price increases are because of this.”

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