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Lee Sachs, a counselor to Treasury Secretary Timothy F. Geithner, plans to step down this year as the banking crisis wanes and the Obama administration winds down its emergency programs.

As an adviser on domestic finance, Sachs helped conduct stress tests on the biggest banks and reshape the $700 billion bailout. He also helped manage trillions of dollars in additional government borrowing and advised Geithner on the market implications of issues from the Greek budget crisis to housing finance.

Sachs says he’s leaving now that markets have stabilized and Geithner has had time to set up a permanent team. “I came back down here to help the president and secretary to design and execute their response to the financial crisis,” he said in an interview. “The financial system is in a much stronger position today than it was a year ago.”

His departure comes as the crisis-response team he established becomes a permanent part of the Treasury Department. A former senior managing director at Bear Stearns Cos., the New York-based investment bank bought by JPMorgan Chase & Co. in 2008, Sachs will be one of the most senior of Geithner’s advisers to step down.

“I am likely going to head back to the private sector at some point in the next couple of months,” said Sachs, 46. He says he’ll take some time off before deciding on his next move, to recover from “running 100 miles-an-hour around the clock to stabilize the financial system” alongside regulators and White House officials.

Sperling May Follow

Another Geithner counselor, Gene Sperling, may also be leaving the Treasury soon. Sperling is under consideration for the post of deputy director of the Office of Management and Budget, according to a person familiar with the matter.

Geithner, 48, yesterday credited Sachs with showing “great judgment and skill in helping the president navigate the greatest financial crisis since the Great Depression.”

One of Sachs’ legacies will be the Office of Capital Markets and Housing Finance, successor to an informal crisis- response team he helped establish in the Treasury’s domestic finance division. Led by Matthew Kabaker, a former executive at Blackstone Group LP, the unit fulfilled one of Geithner’s goals at the start of the new administration.

“In transition, we recognized that the Treasury Department did not have a staff capability to deal with capital markets and finance-related issues,” Sachs said. “We need this team.”

Fannie, Freddie

The Treasury is moving into a long-term planning phase after 18 months of primarily managing the aftermath of the financial crisis. Priorities this year include pressing for an overhaul of financial regulation and starting to design plans for the future structures of mortgage finance companies Fannie Mae and Freddie Mac to bring to Congress in 2011.

Since taking office, the Obama administration has tried to change the $700 billion Troubled Asset Relief Program from a bank rescue into a financial-stability plan. TARP, enacted in October 2008, expires in October.

Geithner’s department last year set up the Public-Private Investment Program with the goal of removing as much as $1 trillion in troubled assets from bank balance sheets. The program has moved forward on a much smaller scale, committing as much as $30 billion in government money for participating funds.

The Treasury also held several additional rounds of capital injections for small banks. Those programs drew few applicants, as banks feared customers and investors would shun firms that accepted money from the TARP.

Clinton Years

Other regulators say Sachs’ strength has been his ability to understand the government’s role in the crisis, which allowed him to start work immediately after the 2008 presidential election. He was already known on Wall Street and in Washington from his early career, which spanned 13 years at Bear Stearns followed by a tour in the Clinton administration under former secretaries Robert Rubin and Lawrence Summers.

“When he called me in November, right away we were communicating, I knew I could trust him, I knew I was working with somebody who knew what they were talking about,” Federal Reserve Vice Chairman Donald Kohn said in an interview. “He’s really knowledgeable about financial markets and financial institutions. He’s seen that world from both sides.”

Kohn, who will step down in June after a 40-year central bank career, described Sachs as “even-tempered,” with a sense of “quiet authority creditreport.” He says they worked closely together when Sachs served in the Clinton administration and spoke daily, sometimes more often, during the height of the financial crisis.

“I have found him an important ally for the Federal Reserve,” Kohn said. “He was very sensitive to the issue of Federal Reserve independence.”

Capital Injections

One example of Sachs’ influence came when regulators were debating how big banks should repay capital injections they received in 2008 at the height of the crisis. Sachs advised regulators on how quickly banks could be expected to raise private capital, as well as how markets might react.

Sachs forged ties to his current boss during the Clinton administration, when Geithner worked in the Treasury’s international affairs division. With Sachs in domestic finance, the two worked on debt crises in Russia and Asia, while also competing on the tennis court and in triathlons.

Geithner is faster. “I think he called me from home as I was crossing the finish line,” Sachs said of one shared racing experience.

Wall Street Resume

Critics said Sachs’ financial-market experience isn’t an automatic advantage. His ties to Rubin, who hired Sachs in 1998, could be seen as a liability after the country’s biggest banks required bailouts, said William Black, a law professor at the University of Missouri-Kansas City.

“‘Market experience’ from individuals that screwed up the markets is an interesting concept,” said Black, who served as a federal bank regulator during the savings-and-loan crisis of the late 1980s and early 1990s.

The post-crisis stigma attached to Wall Street resumes accompanied Sachs to the Obama administration: Since joining the team in late 2008, he was never nominated for a Treasury position that required Senate confirmation.

Instead, Sachs was one several counselors serving Geithner in the first months of the administration, when the Treasury Department had no Senate-confirmed senior officials other than the secretary. Congress has since confirmed Deputy Secretary Neal Wolin and a number of assistant secretaries, without approving the administration’s picks to lead the Treasury’s international affairs and domestic finance divisions.

Nominations Weighed

As a result, nominees Jeffrey Goldstein and Lael Brainard have been serving alongside Sachs, Jake Siewert and Gene Sperling as counselors, while the Senate weighs their nominations. Goldstein, a former private equity executive, has been tapped as the undersecretary of domestic finance. Brainard, who served as Clinton’s deputy director of the White House National Economic Council, has been nominated as the undersecretary for international affairs.

The lack of Senate-confirmed Treasury officials came as the White House fended off criticism from lawmakers including Senator Maria Cantwell, a Democrat from Washington state who has repeatedly faulted Obama administration proposals as being too soft on the financial industry without doing enough to close regulatory loopholes.

In the Clinton administration, market experience was viewed as an asset and not a handicap. Gary Gensler, chairman of the Commodity Futures Trading Commission and Clinton-era Treasury official, said he remembers being “delighted that somebody of Lee Sachs’ caliber and values was willing to join the team.”

Mariner Investment

After Clinton left office, Sachs was a partner at New York- based Mariner Investment Group, which owned a stake in at least one company that specialized in collateralized debt obligations — a type of investment that fueled the crisis.

Before joining President Barack Obama’s transition team after the 2008 election, Sachs earned more than $3 million in salary and partnership income at Mariner in 2008, according to his financial-disclosure forms.

In the 1980s and 1990s, Sachs rose to head of global capital markets and the board of directors at Bear Stearns after graduating from Ohio’s Denison College. Sachs is married to Whitney Sachs, a former attorney, and they have two 14-year-old daughters.

“You can work for the secretary of the Treasury of the United States,” said Michael Berman, president of the Duberstein Group, a Sachs family friend who helped him link up with Rubin’s Treasury. “But when it comes right down to it, the twins are in charge.”

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Irish house prices may fall for a fourth year in 2010 as the deepest recession in the country’s modern history persists, a survey of economists shows.

Home prices will shrink 9 percent, according to the median of six estimates in a Bloomberg News survey. Prices have already fallen 27 percent from their peak in early 2007, based on a monthly index by Dublin-based Irish Life & Permanent Plc.

Ireland’s economy shrank about 7.5 percent last year, almost twice the euro-region average, as a real-estate slump spread into the rest of the economy. That pushed up unemployment and forced the government to bail-out lenders led by Allied Irish Banks Plc and Bank of Ireland Plc. Gross domestic product may shrink 0.8 percent in 2010, marking a third annual contraction, the survey showed.

“The economy is contracting, there’s still housing oversupply there,” said Dermot O’Leary, chief economist at Goodbody Stockbrokers in Dublin. “It’s hard to say we’ve reached a floor.”

Ireland’s recovery will lag behind the revival of many of its euro-area neighbors as companies from Aer Lingus Group Plc to Danske Bank A/S cut jobs, restraining consumer demand. The jobless rate may increase to 13 percent this year from 11.8 percent in 2009, the survey showed.

“It’s going to be a tough one,” Mark Bourke, chief executive officer of Dublin-based IFG Group Plc, said in Dublin yesterday. “There’s very little to indicate there will be a major recovery.”

Budget Gap

In addition to the economic slump, Finance Minister Brian Lenihan is facing a widening budget deficit and is cutting the wages of government workers and welfare payments business card. The actions won’t be enough to reduce the gap this year, according to the survey. Economists see the deficit averaging 11.6 percent of GDP in 2010, little changed from 2009’s 11.7 percent.

Ireland’s fiscal problems are partly related to the government’s reliance on property-related tax revenue during the boom that has since dried up. The European Commission has given Ireland until 2014 to reduce the budget gap to a limit of 3 percent of output.

“I’m confident. We as a country are far better in adversity,” Smurfit Kappa Group Plc Chief Executive Officer Gary McGann said at a Dec. 15 press briefing in Dublin. “We screw it up in the good times.”

There may be some pick-up in economic growth the second half of this year, in tandem with a continuing recovery in overseas demand, economists said, echoing forecasts from the government. The global economy is gathering strength after central banks around the world trimmed borrowing costs close to zero and injected billions of dollars in stimulus measures.

Confidence in the world economy held near a record high in December and the MSCI World Index has surged 71 percent since reaching a 2009 low on March 9. Ireland’s benchmark ISEQ index has gained 60 percent in the same period.

“Export growth is likely to return in a significant way in 2010,” said Rossa White, chief economist at Dublin-based stockbroker Davy. “Second, consumer spending will bottom early in the year and expand slightly as the year progresses.”

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Chevron Corp.’s $40 billion Australian natural gas project will drive a global hunt for construction workers and has prompted calls to ease immigration rules to prevent labor shortages and cost overruns at energy and mining projects fueling the country’s economy.

Contractors for Chevron and partners Exxon Mobil Corp. and Royal Dutch Shell Plc in the Gorgon liquefied natural gas plant plan to pay premiums of as much as 40 percent for welders, pipe fitters, project managers and engineers, recruiters said. They expect to hire in the Middle East, Latin America and Europe.

Gorgon is the largest of more than a dozen LNG ventures in Australia targeting Asian demand for cleaner-burning fuels. It will compete for staff with Woodside Petroleum Ltd., which said Nov. 20 the cost of its $12 billion Pluto LNG project may surge by as much as $1 billion, partly because of labor expenses.

“This doesn’t bode well for Australia’s mega projects,” Woodside Chief Executive Officer Don Voelte said in a Nov. 25 interview at the Perth headquarters of the country’s second- largest oil and gas producer. “It’s going to be a stretch when more than one company is trying to build these things.”

The Chevron and Woodside investments are among more than $90 billion of resources projects expected to generate about 40,000 construction jobs in Western Australia alone, a state government report shows. Voelte wants the federal government to relax immigration regulations for overseas workers and has started an equity incentive plan to retain staff.

Labor ‘Race’

“For Woodside we believe it is a race to capture or not lose the workforce to Chevron, a significant risk for Woodside’s growth plans,” JPMorgan Chase & Co. analyst Mark Greenwood wrote in a Nov. 25 report.

About 80 natural resource ventures to be built in the next decade may increase demand for skilled workers by as much as 70 percent, Energy Minister Martin Ferguson said in a Nov. 30 speech in Perth to mark the start of construction of Gorgon on Barrow Island, a nature reserve about 50 kilometers (31 miles) off the northwestern coast.

Prime Minister Kevin Rudd has tasked a group of government, immigration and industry officials to help companies such as Chevron and BHP Billiton Ltd. find 70,000 workers in the next decade, making Gorgon its top priority.

“A series of cost overruns could discourage future investments,” Gary Gray, chairman of the Rudd-appointed group and Parliamentary Secretary for Western and Northern Australia, said by phone. “The urgency is to ensure as best as we can the adequacy of labor to deliver projects on time and on budget.”

Wage ‘Premium’

About 80 percent of oil and gas industry employers in Australia said in a survey they intend to increase salaries in the next 12 months, Matt Underhill, managing director at recruiting firm Hays, said from Sydney. Professionals in the pipeline industry currently earn $191,000 annually on average in Australia, he said.

“The expertise is specialized, so there’s going to be a premium paid for that type of labor,” said John Hirjee, an analyst at Deutsche Bank AG in Melbourne same day payday loans. Labor may account for 10 to 20 percent of costs at Australian LNG projects, he said.

Contractors may offer workers as much as 40 percent more than they could earn in Sydney to entice them to Barrow Island, said John Downing of Downing Teal Pty. The company and other recruiting firms hiring for ventures including Gorgon will extend their search to the Middle East and Latin America, he said.

Serbian Sparks

Leighton Holdings Ltd., whose units have won A$1.3 billion of Gorgon work, has in the past hired electricians in Serbia and welders in South Korea, said spokesman Justin Grogan.

Officials with Western Australia’s Department of Training and Workforce Development have met with Chevron to discuss labor needs, Simon Walker, an executive director at the department, said in e-mailed comments.

The department is working on a proposal to tackle the looming shortage and “strategic immigration will be a key consideration factored into the plan,” he wrote.

“Capacity constraints can lead to escalating labor costs, increasing prices and ultimately, they can threaten the viability of enterprises, which negatively affects economic growth and the well-being of the population,” Walker said.

A Chevron advertising campaign to tout Gorgon includes a television commercial with the line “creating thousands of jobs and providing opportunities for generations to come.”

‘Sexy’ Gorgon

It’s a “sexy project” that should have an advantage in securing labor, Colin Beckett, the venture’s general manager, said on Barrow Island in October. A thousand applicants have chased 30 or 40 positions in some cases, he said. Welders and instrument technicians will prove harder to find.

Conditions for those living on Barrow Island, where average temperatures reach as high as 34 degrees Celsius (93 Fahrenheit), will be improved by access to the Internet, cable television, gyms, swimming pools and a golf driving range.

“We think Barrow Island will be attractive to a lot of people,” Beckett said.

One Gorgon contractor is offering A$300,000 ($280,000) for a manager to assess risk and as much as A$135,000 for a contracts administrator, according to advertisements placed by Downing Teal. Engineers will earn “well into six figures,” John Downing said.

A labor shortage that confronted Australian mining and energy during a previous boom is set to return BHP Chief Executive Officer Marius Kloppers said last month. “Just two short years ago there was a massive talent gap in the resources industry,” he said in a Nov. 18 speech. “I believe this gap will return along with demand.”

Gas project developers have built the risk of rising labor bills into their plans and are having LNG processing units built in lower-cost Asian countries and reassembled in Australia to cut expenses, Deutsche Bank’s Hirjee said.

“That’s not to say these cost blow-outs may not happen,” he said. “They could.”

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The number of signed sales contracts to buy homes rose in September for the eighth straight month, according to a real estate industry report released Monday.

The September Pending Home Sales Index from the National Association of Realtors (NAR) spiked 6.1% to 110.1, consolidating a 6.4% gain in August. It was the index’s highest level since December 2006, when it stood at 112.8.

The leap was far better than expected. A panel of analysts surveyed by Briefing.com had forecast a 1.2% rise.

Analysts, including Lawrence Yun, NAR’s chief economist, have traced much of the improvement to the government’s first-time homebuyer tax credit program, which gives an up to $8,000 tax break to new homebuyers. It’s estimated that between 200,000 and 400,000 additional sales will have been made because of the credit.

"What we’re witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month," said Yun.

The credit lapses after Nov. 30, and the housing industry is bracing for a major turndown in sales if Congress fails to pass some kind of extension.

"Clearly, buyers were eager to get business done before the credit’s November expiration," said Mike Larson, a real estate analyst for Weiss Research. "So I wouldn’t be surprised to see some give back in pending sales over the next month or two."

Favorable long-term prospects

Any fall-off should only be temporary, however, according to Yun. Market conditions are just so favorable for buyers right now that sales should rebound quickly should they suffer through a hangover following the tax credit demise.

With home prices well off their highs and mortgage rates still extremely low, the cost of homeownership is well within the range for many Americans who are not homeowners today. There are, Yun estimates, about 3 million renters who are now financially well-qualified to buy a median-priced home.

"As long as buyers do not overstretch and stay well within their budget, a sizable pent-up demand can be tapped among financially qualified potential buyers," he said.

That will not translate into a new boom, however, according to Larson. "No explosion of pent-up demand will send markets to new heights," he said. "The economy is still not in fantastic shape."

Housing markets certainly do not seem to be out of the woods, but this latest release added to a modest winning streak of positive recent reports. Prices appear to have stabilized, with the S&P/Case-Shiller Home Price index up four months in a row and completed sales of existing homes at their highest level in two years.

Foreclosures, however, continue to plague many markets, adding to supplies on homes for sale, according to Yun.

"An excess of homes remains on the market despite recent improvements," he said. "Although current inventory is getting closer to price equilibrium, foreclosures will continue to enter the pipeline."

Increased pending sales are a forward-looking indicator since contract signings precede actual closings; they typically take place two to three months later. Although some contract signings fall through, a jump in signings in September usually means NAR statistics on December existing home sales will improve. 

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Bank of France Governor Christian Noyer was appointed to a second term by President Nicolas Sarkozy, extending his tenure on the Governing Council of the European Central Bank.

The six-year appointment was confirmed by Luc Chatel, Sarkozy’s spokesman, following a meeting of the French Cabinet today. The mandate begins on Nov. 1 and cannot be renewed again.

Noyer, 59, helped the French government craft its response to the economic crisis, including the bailout of Franco-Belgian lender Dexia SA and financial support for banks including BNP Paribas SA and Societe Generale SA. Now he will have a hand in steering the French and European exits from recessions, while overseeing the implementation of new rules for French banks.

“Changing governors now in such a turbulent period would have been a bad sign,” said Pierre-Olivier Beffy, an economist at Exane BNP Paribas in Paris. “Noyer is a very prudent voice who has highlighted the continuing fragility of the financial system. He’ll ensure the stimulus exit isn’t too hasty.”

Banks must keep up reforms and strengthen their balance sheets, Noyer said earlier this week savings account payday advance. Referring to “impressive quarterly profits” reported by some institutions this month, he advised restraint on dividend payouts and executive compensation.

“It is striking that these performances were achieved only a few months after some of those same institutions came very close to failure,” Noyer said in an Oct. 26 speech in Singapore. “This might give the impression that the financial sector has recovered its balance and that no further reforms are necessary. Nothing could be further from the truth.”

Noyer is a career government official and a graduate of l’Ecole Nationale d’Administration, France’s elite school for civil servants. He rose through the Finance Ministry and was director of the French Treasury from 1993 to 1995.

Noyer was vice president of the ECB from 1998 to 2002 under Wim Duisenberg before replacing Jean-Claude Trichet at the Bank of France in 2003. Trichet is currently the ECB President.

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European Central Bank President Jean-Claude Trichet, Jean-Claude Juncker, who heads the group of euro-area finance ministers, and European Union Monetary Affairs Commissioner Joaquin Almunia will travel to China before year end to discuss the yuan’s exchange rate, Juncker said.

“I will go with Mr. Trichet and Mr. Almunia to China before the end of the year,” Juncker told a press conference today in Luxembourg, where he serves as premier and Treasury minister. “This is an initiative I started two years ago.”

Trichet, Almunia and Juncker went to Beijing in November 2007 to push Chinese leaders for a faster “pace of appreciation” of the yuan, a plea that was rebuffed at the time by Premier Wen Jiabao.

China halted the yuan’s gains against the dollar in July 2008 after allowing it to appreciate 21 percent over the previous three years. That left the euro 10.6 percent higher versus the yuan over the previous 12 months as the European currency appreciated against the dollar.

The euro has depreciated 5.4 percent against the yuan since November 2007. That decline is smaller than those of the dollar and the British pound, which fell 8.4 percent and 28 percent versus the yuan, respectively, during the period.

European and U.S. policy makers have started pressing China and other emerging nations to shoulder more of the burden as exchange rates adjust to a rebalancing of the global economy.

‘Lack of Flexibility’

The U.S. Treasury Department yesterday criticized China for the “lack of flexibility” in the yuan and a buildup of foreign-exchange reserves, which “risk unwinding some of the progress made in reducing imbalances.”

Trichet said on Oct. 5 that some emerging economies must allow their currencies to strengthen against the euro and the dollar and said yesterday that excess foreign-exchange volatility is “an enemy” of global economic stability.

While two years ago the trio’s pleas were rebuffed by Chinese officials who said the yuan would enjoy greater flexibility only over time, this time their efforts may be more fruitful. China’s yuan forwards had the biggest weekly gain in more than six months on speculation the central bank will allow appreciation as exports and inflation pick up.

China’s foreign-exchange reserves, the world’s largest, surged to a record $2.27 trillion at the end of September.

Trichet also has had to grapple with an 18 percent surge of the euro against the dollar since March, which threatens to damp euro-area exports and curb the nascent recovery in the economy of the 16 nations using the euro. European exports fell 5.8 percent in August, the most in seven months, data showed today.

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Inventories at U.S. wholesalers dropped in August for a 12th consecutive month, clearing the way for a pickup in orders as sales improve.

The 1.3 percent decrease in stockpiles was larger than anticipated and followed a revised 1.6 percent drop in July, figures from the Commerce Department showed today in Washington. Wholesale inventories have had the longest series of declines since records began in 1992. Sales climbed 1 percent, the biggest gain since June 2008.

Distributors will likely increase bookings after companies drew down inventories at a record pace in the first half of the year. The gains may give the world’s largest economy a boost in the early stages of a recovery as American factories rev up assembly lines to prevent stockpiles from dwindling even more.

“The degree of decline has been extreme and will likely slow in coming months,” said Guy LeBas, chief economist and fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “But, we’re not looking for a sharp uptick.”

Economists forecast inventories would drop at a 1 percent annual rate after a 1.4 percent decline in July, according to the median of 38 projections in a Bloomberg News survey. Estimates ranged from declines of 1.8 percent to 0.5 percent.

Another report showed the number of Americans filling for jobless benefits last week dropped to the lowest level in 10 months, indicating the labor market is deteriorating at a slower pace as the economy emerges from the recession.

Fewer Claims

Unemployment claims dropped to 521,000 in the week ended Oct. 3, less than the median estimate of economists surveyed by Bloomberg News, from 554,000 the prior week, figures from the Labor Department showed.

Stocks rose, buoyed by the drop in jobless claims and by an unexpected profit at Alcoa Inc. to start the third-quarter earnings season. The Standard & Poor’s 500 Index was up 0.5 percent to 1,062.63 at 10:06 a.m. in New York.

The value of goods on hand at distributors stood at $381.2 billion in August, the lowest level since July 2006.

At the current sales pace, it would take 1.2 months for wholesalers to deplete the amount of goods on hand, the lowest level since September 2008. The reading was as low as 1.1 months in June 2008. A reduction in months’ supply leaves more room for companies to buy more goods, helping to support production cash advances pay day loan.

Consumer spending climbed 1.3 percent in August, the most in almost eight years, the government reported last week. The increase was helped by a surge in auto demand because of the government’s “cash-for-clunkers” trade-in program, which expired Aug. 24.

Auto Stockpiles

Today’s report showed auto inventories dropped 2.3 percent as sales jumped 7.7 percent, the biggest gain since 1999. That pushed the industry’s inventory-to-sales ratio for August down to 1.57 months, the lowest level since May 2008.

Even with the expiration of the government’s auto program, total consumer spending may rise the rest of this year, though at a slower rate, according to economists surveyed last month by Bloomberg.

Today’s report showed stockpiles of durable goods, or those meant to last at least three years, decreased 1.6 percent in August, and sales increased 1.2 percent.

Stockpiles of professional equipment, such as computers, fell 1.1 percent. That brought the industry’s inventory-to-sales ration down to 1.01 months, matching July’s record low.

Inventories of non-durable goods including fuels and food fell 0.9 percent, while sales increased 0.9 percent.

Fuel Costs

Higher energy costs may have boosted the value of non- durable inventories in August. Crude oil traded on the New York Mercantile Exchange averaged $71.14 a barrel in August, compared with $64.33 a barrel in July.

Wholesalers make up about 25 percent of all business stockpiles. Factory inventories, which account for about a third of the total, fell 0.8 percent in August, the smallest drop in three months, the Commerce Department said Oct. 2. Retail stockpiles make up the rest and will be included in the Oct. 14 business inventories report.

Online shoe and apparel retailer Zappos.com Inc. is boosting inventory of its best-selling brands as it expects sales to pick up in the year-end holiday season, Fred Mossler, who oversees merchandising at the Henderson, Nevada-based company said Sept. 28 in an interview.

“We think the customer is going to come back and we want to be there to service them,” Mossler said. “We’re making some bets about some of our best products and brands.”

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Australian retail sales unexpectedly fell in June for the first time in four months as households spent less on clothing and at department stores.

Sales dropped 1.4 percent from May, when they increased 1 percent, the Bureau of Statistics said in Sydney today. The median forecast of 19 economists surveyed by Bloomberg was for a 0.5 percent gain.

Today’s report suggests the impact from A$12 billion ($10 billion) in government cash handouts to households is waning after consumer spending helped Australia avoid a recession in the first quarter. Still, the economy may expand in the second quarter after retail sales rose 2 percent in the three months through June. Economists forecast a 1.3 percent gain.

“We still have retail sales at a very strong levels,” said Ben Dinte, an economist at Macquarie Group Ltd. in Sydney. “With the strengthening consumer sentiment, we should see retail sales hold up.”

The quarterly retail sales figure accounts for as much as 25 percent of Australia’s gross domestic product, Dinte added.

Household spending helped Australia’s economy avoid a recession after GDP rose 0.4 percent in the first quarter from the previous three months, when it shrank 0.6 percent. Second- quarter growth figures will be released on Sept. 2.

A separate report today showed house prices jumped 4.2 percent in the three months through June, the first gain in five quarters, as the lowest borrowing costs in half a century and government grants spurred demand among first-time buyers.

Currency Rises

The Australian dollar jumped to a 10-month high after today’s reports, reaching 84.71 U.S. cents, and trading at 84.51 as of 12:08 p.m. in Sydney. The two-year government bond yield rose 3 basis points to 4.43 percent. A basis point is 0.01 percentage point.

Spending at department stores fell 8 business cards online.8 percent and clothing sales declined 7.4 percent in June, today’s report showed. Consumers spent 2.9 percent more on household goods.

Central bank Governor Glenn Stevens will probably leave the benchmark interest rate unchanged at 3 percent today for a fourth month to spur domestic demand, according to all 19 economists surveyed by Bloomberg. The decision will be announced at 2:30 p.m. in Sydney.

While sales fell in June, some retailers are reporting growth in earnings. Gerry Harvey, chairman of Australia’s biggest electronics seller, Harvey Norman Holdings Ltd., said last month the worst of the economic slump in Australia had passed as consumer confidence returned amid government stimulus.

Consumer Confidence

“Six or nine months ago it was like Armageddon,” Harvey said in an interview on ABC’s Inside Business program on July 26. “Now, consumers are just more positive.”

Consumer confidence jumped in July to the highest level in 19 months, according to a Westpac Banking Corp. survey.

“It’s becoming more common for Australians to see the glass as half full than as half empty,” Governor Stevens said on July 28.

Signs of a rebound in Australia’s economy may prompt the central bank to revise its forecast for gross domestic product on Aug. 7.

In May, the bank predicted GDP would contract 1 percent this year before expanding 2 percent in 2010.

The central bank cut its benchmark interest rate by a record 4.25 percentage points between September and April.

Investors predict the rate will be 154 basis points higher in a year, a Credit Suisse Group AG index based on swaps trading showed at 12:10 p.m. in Sydney.

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The Bank of Israel said there is a “limited” risk of inflation during the coming 12 months and its forecasting model doesn’t predict an increase to the benchmark interest rate before the second quarter of 2010.

Inflation will slow from 3.6 percent in June to within the government’s target range by the third quarter, helped by a low level of demand, and remain there for the next 12 months, the bank said today in its quarterly inflation report.

“Our assessment at this stage is that the risk of inflation in the next 12 months is low as there are still forces acting to moderate price increases,” the bank said. These include demand that is below production capacity and low interest rates, the report said.

The Bank of Israel has cut the key interest rate by 3.75 percentage points since October to a record low of 0.5 percent as it seeks to revive an economy that shrank an annualized 3.7 percent in the first quarter and as unemployment rose to 8.4 percent in May. Higher-than-expected inflation in June together with an improvement in key macroeconomic indicators, has increased pressure on the bank to rein in its monetary expansion.

The consumer price index is expected to rise 1.6 percent in the coming year, double the previous estimate, according to the bank’s model. The figures were also based on the bank’s model. The bank will “soak up” liquidity when necessary, to keep inflation within the 1 to 3 percent annual target, it said.

Key Rate

Ori Greenfeld, chief economist at Clal Finance Investment Management Ltd. in Tel Aviv, said in a telephone interview that he expects the bank to boost the key rate in the first quarter of next year.

“Econometric models are limited in their forecasting ability due to their lack of flexibility compared with the economy,” he said, when asked about the bank’s forecasting model cash advance no faxing.

The central bank reiterated its forecast of a 1.5 percent contraction in gross domestic product in 2009 and 1 percent growth in 2010.

Tevfik Aksoy, an economist with Morgan Stanley & Co. said in a July 31 report that he expects the Israeli economy to shrink 0.8 percent in 2009. Wietse Nijenhuis, a strategist at HSBC Holding Plc, said in a e-mailed report dated July 29 that the economy will probably contract 0.6 percent this year, and the central bank will likely raise rates by half a percentage point by the end of the year.

Monetary Expansion

The current account is expected to show a surplus of $3.2 billion in 2009, double that of 2008, the bank said. The surplus is expected to create pressure on the shekel to appreciate, it said. The monetary expansion in the U.S. will weaken the dollar against the shekel, the bank said.

“The purchases of foreign currency by the Bank of Israel, if they continue, will contribute to offsetting the pressure toward appreciation,” it said.

The government has been buying foreign currency since March 2008 to help weaken the shekel and government bonds since Feb. 17 in an effort to push down yields. The bank announced last week that it was ending its program of purchasing government bonds, a step it said had helped the markets to recover.

Inflation is likely to slow to 2.8 percent in the next 12 months, according to a survey of economists by the central bank released on July 27. It peaked at 5.5 percent in October.

The Bank of Israel’s inflation report is submitted to the government as part of the process of monitoring the inflation rate, it said.

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Singapore’s government raised its economic forecast for 2009 as gains in construction and pharmaceutical output lifted the nation from its deepest recession since independence in 1965.

Gross domestic product will shrink 4 percent to 6 percent this year, less than an earlier forecast for a contraction of as much as 9 percent, the trade ministry said in a statement today. The economy expanded an annualized 20.4 percent last quarter from the previous three months, the first growth in a year.

“The Singapore economy is back, and back with a vengeance,” said Robert Prior-Wandesforde, a senior economist at HSBC Holdings Plc in Singapore. “We think other drivers of growth will come through as the year progresses, ensuring that, although bumpy, the recovery is likely to be sustained.”

Singapore stocks advanced after the report, led by the country’s biggest developer, Capitaland Ltd., on optimism a combination of tax cuts and record government spending will support the recovery. South Korea and Japan have said their economic outlook is improving and the International Monetary Fund raised its growth forecast for emerging Asia last week.

The Singapore dollar rose 0.4 percent to S$1.4605 against the U.S. currency as at 11:04 a.m. local time. The benchmark stock index climbed 1.3 percent.

“Across Asia, things are not going to be as bad as what everyone thought at the beginning of the year,” said Song Seng- Wun, regional economist at CIMB-GK Securities Pte in Singapore. “For export-oriented Asian economies, the drag from the manufacturing sector is going to be less than forecast.”

Stimulus Plans

Governments worldwide have pledged about $2 trillion in stimulus to counter the global recession, helping stabilize sales by Asian companies including Japan’s Nissan Motor Co. and Singapore’s Frasers Centrepoint Homes.

South Korea last month raised its GDP estimate for 2009 and 2010, saying fiscal stimulus and interest-rate cuts stoked consumer confidence. Goldman Sachs Group Inc., Morgan Stanley and the World Bank have raised forecasts for China in the past month. China will release GDP data on July 16.

The revised 2009 GDP prediction “reflects the less severe contraction in the first half of the year, while the underlying economic conditions remain weak,” Singapore’s trade ministry said. The expansion last quarter was better than the median estimate for a 13.4 percent gain in a Bloomberg survey.

Singapore’s $161 billion economy contracted 3.7 percent last quarter from a year earlier, better than the median estimate for a 5.4 percent decline in a Bloomberg survey.

Bouncing Back

Manufacturing, which accounts for a quarter of the economy, fell 1 cash advance no faxing.5 percent from a year earlier, after sliding a revised 24.3 percent in the three months ended March.

“Asia is bouncing back in a V-shaped fashion,” said David Carbon, head of economic and currency research at DBS Group Holdings Ltd. in Singapore. “Industrial production is 65 percent back to pre-crisis levels and exports have recovered about one-third of their lost territory.”

India’s industrial production increased at the fastest pace in eight months in May, while Malaysia’s declined the least in six months.

The Japanese government said yesterday the economy is “picking up,” and upgraded its view of exports and consumer spending. Australia’s business sentiment turned positive in June for the first time since December 2007.

‘Peter Out’

The better growth forecast for emerging Asia “owes to improved prospects in China and India, in part reflecting substantial macroeconomic stimulus and a faster-than-expected turnaround in capital flows,” the IMF said July 8. “However, the recent acceleration in growth is likely to peter out unless there is a recovery in advanced economies.”

The “volatile” pharmaceutical industry and electronics inventory restocking led to the improvement in Singapore’s manufacturing output, the trade ministry said. That may not be sustained as rising unemployment and reduced household spending in the U.S. and Europe suggest there isn’t evidence yet of a “decisive improvement” in demand, it said.

Singapore’s services industry declined 5.1 percent last quarter, after shrinking by a similar pace in the first three months of the year. The construction industry gained 18.3 percent last quarter as Las Vegas Sands Corp. and other developers worked to complete hotels and office towers.

Declines in Singapore’s home prices have slowed and companies such as Frasers Centrepoint Homes plan to start selling homes from new developments in the next six months. The unit of Fraser & Neave Ltd. said it sold 90 percent of a 330- unit condominium project in central Singapore within three days of starting sales on June 20.

“Singapore’s recovery will be more pronounced than others in the region because pharmaceuticals swung the industrial production numbers a lot more than it did in other countries,” said Vishnu Varathan, a regional economist at Forecast Singapore Pte. “We’ll really be getting ahead of ourselves to say the recession is in the rear-view mirror.”

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