IMF lowers estimate of US economic growth in 2014

WASHINGTON — The International Monetary Fund foresees the U.S. economy growing a modest 2 percent this year, below its previous estimate of 2.7 percent.

That would be nearly identical to the economy's 1.9 percent growth in 2013.

A brutal winter and a slowing housing recovery caused the economy to shrink during the first three months of 2014, the IMF noted in a report released Monday.

"Extreme weather occurrences have a serious effect on the economy," Christine Lagarde, the IMF's managing director, said at a news conference.

Lagarde added:

"Extreme weather occurrences have repeated much more frequently in the past 20 years than the previous century. That's a reason to wonder about climate change and how to deal with it."

Recent figures suggest that a "meaningful rebound" will propel U.S. economic growth for the rest of 2014, the IMF said. Still, that will only partly offset what many analysts think was a contraction of up to 2 percent last quarter.

The unemployment rate has tumbled to 6.3 percent from 7.5 percent in 12 months. But the IMF warns that U.S. wages remain stagnant and the rate of long-term unemployment high. As a result, it urged lawmakers to lift the minimum wage and increase the Earned Income Tax Credit for those with low wages.

The IMF also highlighted the challenge for the Federal Reserve to properly time the unwinding of its policies to spur borrowing, investment and spending. Investors appear to be acting with a sense of certainty about Fed policies, even though central banks must respond to uncertainties about the economy, Lagarde said.

Lagarde also suggested that Fed Chair Janet Yellen should increase the number of news conferences she holds to up to six a year from the current four. Yellen is scheduled to hold one of her quarterly news conferences on Wednesday.

The Fed has kept short-term interest rates near zero to bolster the economy. It has also bought U.S. Treasury and mortgage bonds to keep longer-term rates low, a program the Fed has been unwinding since the start of the year.

The IMF projects that the United States won't reach a level of employment that would meaningfully lift wages until 2017 and that inflation pressures will stay muted until then. It thinks the Fed might consider keeping rates near historic lows longer than some market analysts expect.

Raising rates too fast could "constrict the recovery momentum that we have observed," Lagarde said. She added that that would have spillover effects around the world and hurt growth in emerging economies.

Lagarde declined to take a stance on the dispute over payments for natural gas that Ukraine owes Russia. The two countries, embroiled in a broader territorial struggle, missed a Monday deadline to reach an agreement on payments. As a result, the Russian company Gazprom has cut off gas supplies to Ukraine.

"We don't intervene in commercial transactions," Lagarde said. "We certainly hope for the stability of that part of the world and for the stability of the supply of gas that the situation can be addressed promptly and satisfactorily."

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World stock market subdued as investors await Fed

HONG KONG — World stock markets were subdued on Monday as the turmoil in Iraq dampened sentiment and investors held back ahead of the Federal Reserve's monthly policy meeting later in the week.

Oil prices hovered at a nine-month high as fears grew that the violence in Iraq could escalate into a broader regional conflict, unsettling global financial markets.

Iraq's prime minister vowed on Sunday to "liberate every inch" of territory captured by the Islamic militants who posted photos that appeared to show their gunmen massacring scores of captured Iraqi soldiers.

"Reports that Iraq has entered a full blown sectarian conflict is ensuring a thread of anxiety is running through markets," analysts at Rabobank wrote in a research note.

Adding to uncertainty was Russia's decision to halt gas supplies to Ukraine after the sides were unable to agree on a new price for deliveries. Though the move does not affect supplies to the rest of Europe and Ukraine has reserves to last months, it raises the stakes in the countries' standoff.

In Europe, France's CAC 40 was down 0.3 percent to 4,531.20 while Germany's DAX edged up 0.1 percent to 9,923.47. The FTSE 100 index of leading British companies slipped almost 0.1 percent to 6,777.44.

Wall Street fared better, with the Dow up 0.1 percent to 16,787.59 and the S&P 500 up 0.2 percent to 1,939.45.

Investors were also preparing for the regular meeting of the Federal Reserve Board's policy setting Open Market Committee, scheduled for midweek. While policymakers are widely expected to announce that the Fed will cut its bond-purchase program by another $10 billion, investors will be examining their comments on the outlook for raising interest rates, economic growth and inflation.

"The FOMC statement in the early hours of Thursday morning is undoubtedly the primary focus for all global markets this week," said Niall King, a sales trader at CMC Markets in Sydney.

In Asia, most benchmarks were lackluster but stocks in the region's two biggest economies moved strongly — in opposite directions.

Japan's benchmark Nikkei 225 sank 1.1 percent to close at 14,933.29 as the yen strengthened 0.1 percent to 101.93 against the dollar. A stronger yen means the cars and electronics produced by Japan's export giants are more costly when sold overseas.

In mainland China, the Shanghai Composite Index rose 0.7 percent to end at 2,085.98 after Chinese Premier Li Keqiang, writing in The Times newspaper ahead of a visit to Britain, said that he expects the world's No. 2 economy to grow "around 7.5 percent this year," in line with the government's target.

Hinting that the government is prepared to roll out more mini-stimulus measures, Li said, "Despite considerable downward pressure, China's economy is moving on a steady course. We will continue to make anticipatory and moderate adjustments when necessary."

South Korea's Kospi edged 0.1 percent higher while Hong Kong's Hang Seng slipped less than 0.1 percent and Australia's S&P/ASX 200 rose 0.1 percent.

In energy trading, benchmark crude oil for July delivery rose 12 cents to $107.03 in electronic trading on the New York Mercantile Exchange. The contract rose 38 cents on Friday.

The euro rose 0.2 percent to $1.3568.

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Egypt: Verdict in Al-Jazeera trial June 23

CAIRO — The trial in Egypt of three Al-Jazeera English journalists and 17 others was adjourned Monday until next week, when the judge will deliver the verdict five months after the trial opened, Egypt's state news agency said.

The case is the first prosecution of journalists on terrorism-related charges in Egypt. Authorities have accused them of providing a platform for the Muslim Brotherhood, which Egypt has declared a terrorist organization. The trial has sparked an outcry among journalists and rights groups, who say the reporters were only doing their job.

Canadian-Egyptian Mohammed Fahmy, Australian Peter Greste and Egyptian Baher Mohammed have been in detention since Dec. 29. Six journalists, including three foreigners, were tried in absentia. Prosecutors have shown footage of pro-Brotherhood protests and videos of life in Egypt as evidence.

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‘Kids to college’ savings programs take root

Like many busy mothers of young kids, Sylvia Suarez never thought too much about college for her two boys, much less saving for it. College simply seemed a long way off.

Until this school year. Under a pilot program at Tahoe Elementary School in Sacramento, Calif., Suarez got the motivation — and free cash — to get started. "It was a wake-up … that we need to save for them to go to college," said Suarez, whose sons are 6 and 11.

She is one of 82 parents or guardians participating in a small but growing "Kids to College" savings program created by SAFE Credit Union and Sacramento City Councilman Kevin McCarty.

Launched in the 2011-12 school year, it's a simple concept: Parents who take two one-hour financial literacy classes can receive up to $200 — free — in a college savings account for their kindergartner. The accounts are theirs to keep — and hopefully add to — until the child turns 18, when they can be used for college expenses.

"A lot of these families don't have college savings. They don't have a ton of financial information at their disposal. … This is a fabulous bridge to bring those together," said McCarty, who patterned the "K2C" program after similar programs in other cities.

College savings accounts for kids aren't a new concept. Other countries, like Singapore and South Korea, have endorsed or launched so-called universal children's savings accounts, some set up at birth or when kids reach school age. In the U.S., Congress has explored the idea of universal $500 accounts for newborns, but it has never made it into law. In 2007, state Senate President Pro Tem Darrell Steinberg, D-Sacramento, introduced legislation to create a similar program of $500 savings accounts for every California newborn, but it never got out of policy committee.

Of course, plenty of parents do their own saving-for-college accounts through state-sponsored 529 plans, Coverdell or other investments.

In Sacramento, the fledgling "K2C" program is now operating in five public elementary schools in McCarty's City Council district. It was inspired by a similar, but far more ambitious, K2C plan in San Francisco.

There, the city's Office of Financial Empowerment runs what it calls the country's first publicly funded, universal college savings plan. The $50 savings accounts are given to every kindergartener enrolled at more than 70 elementary schools in the San Francisco Unified School District.

In the nearly four years since the program started, the city has opened 13,693 of the $50 accounts. (Those qualifying for federal free-lunch programs receive an additional $50 in their accounts, plus there are matching contributions for a child's first $100 deposit and for consistent savings.) All accounts are held at Citibank and cannot be accessed until high school graduation. If the money isn't used for college by the time the child turns 25, it can be spent on other things.

"It's still very early in the program, but we're very encouraged by the high rate of savings among families, lower-income families in particular," said Greg Kato, a spokesman with the San Francisco Treasurer's Office. He said the city has invested $850,000 into the accounts, including some matching contributions for savers coming from nonprofit partners.

The program's goals are multifold: encourage more children to pursue a college education, motivate more families to save for college, instill more financial literacy into the classroom curriculum, and help reach the city's "unbanked" population.

In Sacramento, McCarty's program is more modest, with funding provided by SAFE, the Sacramento Community Region Foundation, the Nehemiah Foundation and private donations. A parent receives $75 for each of two classes, plus a $50 bonus if they complete both sessions.

The program is now in its third year. In that time, about 50 families have completed the required classes for their kids' savings accounts, which are set up as California Uniform Transfer to Minors Accounts, or CUMTA. The accounts can be used for education purposes starting when the child reaches adulthood.

To qualify for the full $200, a parent or guardian must complete two one-hour sessions on budget basics and money management, including details on how to track income/expenses, set up a budget, access a free credit report, repair a tattered credit history and protect against identity theft.

"Some families have never budgeted. Some come from another country and have no credit history at all. … This gives them a starting point and empowers them to do this on their own," said Shannon Heaps, financial literacy expert with SAFE Credit Union.

Each school chooses the class times that work best for their parents' schedules: some are held before school at 8 a.m., some are after work; others during the lunch hour.

Heather Haight, a Tahoe Elementary mother, has two boys, ages 3 and 5. When her kindergarten son brought home a flier about the program, she figured it was worth a couple hours to sit in on the free money-management classes.

Haight, who works summers for a nonprofit, attended the required two sessions, which were held at her son's school at 5 p.m. to accommodate working parents. Only a couple other parents showed up.

"It was surprising to me the class was so empty because it was free money," said Haight, who earned $200 for her kindergartener's account. Haight, whose husband is an engineer for a medical device company, said she learned some "really helpful information" on financial topics. "It's a great program. I hope they keep offering it."

McCarty, who has twin girls about to enter kindergarten this fall, said he and his wife started 529 savings plan accounts for their daughters before they were born. But for many families, he said, that's not financially feasible.

"This is a community-changing effort to get people to really think about long-term savings, saving for the future. … Starting in kindergarten, college seems so far away. But if you start saving early, it can really make a difference."

For Suarez, a stay-at-home mom whose husband is a UPS truck driver, the class has been empowering. "I'm doing this for my kids — and for me," said Suarez, who teaches Zumba lessons for extra income. After her earning a $200 free account for her 6-year-old kindergartner, Gabriel, she opened two additional savings accounts — one for her family and a separate college account for her older son, 11-year-old Christian, who starts sixth grade in September.

Using the budgeting tips she learned in the financial literacy classes, Suarez said she's managed to set aside $200 a month for each of her boys' college funds. "It's motivating my kids to go on to (college). … And for me, I've learned so much really good information. I'm so proud of myself that I took this opportunity."

———

STARTING YOUNG: CHILDREN'S COLLEGE SAVINGS ACCOUNTS

—What they are: Incentive programs to encourage parents to start saving early for their children's college educations or other "lifelong" goals. Some programs are known as K2C, or Kids-to-College accounts.

—History: In the 1990s, research into savings accounts for children cited numerous benefits, ranging from increased math skills to a greater likelihood of attending college. Singapore has adopted universal savings plans for school-age children, and other countries have explored the idea.

—United States: Federal legislation introduced in 2003 called for universal savings accounts of $500 for every newborn, plus additional deposits and matches for those from low-income families. When a child turned 18, he or she could use the money for tax-free withdrawals for college, first-time home buying or retirement savings. Although the ASPIRE Act garnered bipartisan support, it was shelved during the recession.

—California: Under Sacramento's pilot program, parents of kindergartners at five public elementary schools must complete two financial literacy classes, held at their child's school, to receive up to $200 in a college savings account. The accounts, held at SAFE Credit Union, can be used after high school graduation for college tuition and other expenses.

In San Francisco city and county, every kindergartener at more than 70 public elementary schools receives $50 in a Citibank savings account, with an additional $50 for those qualifying for the federal free-lunch program. In addition, there are "bonus funds" of matching contributions for the first $100 deposit and for consistent savings.

———

©2014 The Sacramento Bee (Sacramento, Calif.)

Visit The Sacramento Bee (Sacramento, Calif.) at www.sacbee.com

Distributed by MCT Information Services

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US stocks edge lower in morning trading

Major stock indexes inched lower in morning trading Monday as investors watched developments in Iraq. A batch of corporate merger news drove up shares in medical device maker Covidien and natural gas producer Williams Cos. Traders also bid up U.S. homebuilder shares following a report showing a sharp improvement in builders' confidence in the housing market.

KEEPING SCORE: The Standard & Poor's 500 index slipped two points, or 0.1 percent, to 1,920 as of 11:19 a.m. Eastern Time. The Dow Jones industrial average fell 28 points, or 0.2 percent, to 16,746. The Nasdaq composite dipped five points, or 0.1 percent, to 4,305.

ACQUISITION PRESCRIPTION: Covidien soared 21 percent after the Ireland-based medical device manufacturer agreed to be bought by U.S. competitor Medtronic. The deal is the latest in a series of acquisitions by medical-device manufacturers. Covidien rose $15.44 to $87.50. Medtronic fell 27 cents, or 0.4 percent, to $60.44.

ENERGY MARRIAGE: Williams Companies rose $11.50, or 21.4 percent, to $58.68 after announcing a deal to expand its stake in Access Midstream Partners.

ROSIER OUTLOOK: The National Association of Home Builders/Wells Fargo builder sentiment index rose to highest level since January. The latest report suggests homebuilders' confidence in the housing market is improving and lifted homebuilder stocks. UCP Inc. led the pack, adding 34 cents, or 2.5 percent, to $13.85.

WAIT AND SEE: Traders watched developments in Iraq with an eye on the Obama administration's next move as Sunni militants extended their violent advance. Secretary of State John Kerry said Monday that the Obama administration is open to discussions with Iran over the crisis and is considering airstrikes to slow the insurgency.

OIL: The price of crude continued to climb as Iraq's widening insurgency raised concerns that exports from OPEC's No. 2 oil producer could be affected. Oil rose 5 cents to $106.93 a barrel. Oil has risen 4 percent this month.

SECTOR SPOTLIGHT: Seven of the 10 sectors in the S&P 500 index rose, led by energy stocks. Industrial, financial and materials stocks fell.

BOND WATCH: In U.S. government bond trading, the yield on the 10-year note held steady at 2.60 percent.

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Starbucks clears college degree path for employees

NEW YORK — Starbucks is giving its baristas a bargain on an online college degree.

The company is partnering with Arizona State University to make an undergraduate education available at a steep discount to 135,000 U.S. employees who work at least 20 hours a week. Workers will be able to choose from 40 educational programs, and they won't be required to stay at Starbucks after earning the degree.

For freshman and sophomore years, students would pay a greatly reduced tuition after factoring in a scholarship from Starbucks, ASU and financial aid, such as Pell grants. For the junior and senior years, Starbucks would reimburse any money that workers pay out of pocket.

That means employees who already have two years of college under their belts would be able to finish school at no cost.

CEO Howard Schultz plans to make the announcement Monday at the Times Center in New York City, where Education Secretary Arne Duncan will be in attendance, along with 340 Starbucks employees and their families.

Tuition reimbursement is a rare benefit for low-wage workers in the retail industry. In 2010, Wal-Mart Stores Inc. started offering partial tuition grants for workers at American Public University, a for-profit, online school.

Starbucks already has program that reimburses workers for up to $1,000 a year at City University of Seattle or at Strayer University. Starbucks says that will be phased out by 2015 in favor of the new program, which is far more generous.

The Seattle company doesn't know how many of its workers will apply, and it isn't saying how much the program might cost it. Tuition for an online degree at ASU is about $10,000 a year, although it can vary depending on the program. Many Starbucks workers would likely qualify for a Pell grant, which can be worth as much as $5,730.

Michael Bojorquez Echeverria, a 23-year-old Starbucks worker from Los Angeles, was flown to New York City by the company for the event Monday. He said that he works 60 to 75 hours a week, including a second job, and also attends community college.

He hopes the program will allow him to reduce those hours and focus on school, where he does not pay tuition because of wavers. But he is applying for the Arizona State University program because he feels there will be greater certainty about financial assistance.

He says he will miss the socialization that occurs on campus.

"But hey, if they're going to be paying my fees, I can manage," he said.

Cliff Burrows, head of the Americas for Starbucks, said he hopes the program will encourage other companies to offer similar benefits. He added that Starbucks plans to look at expanding the educational perks to workers overseas.

The financial terms of Starbucks' agreement with Arizona State are not being disclosed.

Starbucks workers would have to meet the same admission standards as other students at ASU. Only workers at Starbucks' 8,200 company-operated stores would be eligible. Another 4,500 Starbucks locations are operated by franchisees.

The program is also available to Starbucks' other chains, including Teavana tea shops and Seattle's Best.

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Giti Tire expected to bring 1,700 jobs to SC

COLUMBIA, S.C. — A Singapore-based tire manufacturer plans to spend $560 million on a plant in South Carolina that is expected to create 1,700 new jobs over the next decade.

State officials said Monday that Giti Tire is building its first North American manufacturing facility in Richburg. The 1.8-million-square-foot manufacturing and distribution facility will be built off Interstate 77.

The Chester County plant will make passenger and light truck tires.

The plant's initial capacity is expected to be 5 million tires annually. Officials hope demand will require increased capacity.

Commerce Secretary Bobby Hitt says the announcement bolsters the state's reputation as the nation's tire capital. Michelin, Bridgestone, and Continental also have announced new or expanded facilities in the past few years.

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Gossip site wins appeal of cheerleader's lawsuit

CINCINNATI — An appeals court has found that an Arizona-based gossip website is immune from being sued by a former Cincinnati Bengals cheerleader over online posts that said she was promiscuous and had sexually transmitted diseases.

The decision from the Cincinnati-based 6th U.S. Circuit Court of Appeals reverses a Kentucky federal judge's decision allowing the lawsuit to proceed.

Former Bengals cheerleader Sarah Jones sued thedirty.com owner Nik Richie in 2012 over anonymously submitted posts about her.

A jury found the posts were substantially false and that Richie had acted with malice or reckless disregard by allowing them to be published. Jones was awarded $338,000.

Jones' attorney says he'll likely appeal.

Internet giants like Google and Facebook have watched the case closely, saying the result had the potential to chill online speech.

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New version of Boeing 787 gets regulatory OK

EVERETT, Wash. — Boeing says that U.S. and European regulators have approved its newest and larger version of the 787 passenger jet for commercial flying.

The company says that the first Boeing 787-9 Dreamliner is undergoing final preparation before being delivered to Air New Zealand.

The new plane is 20 feet longer and able to carry more passengers than the original 787-8. Boeing says the planes use 20 percent less fuel and produce 20 percent less emissions than other planes of the same size.

Boeing says 26 customers around the world have ordered 413 787-9 jets.

Dreamliners were grounded worldwide last year after batteries on two of the planes overheated. The planes were allowed to fly again after regulators approved a fix by Boeing.

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Target: Glitch caused delays at checkout registers

MINNEAPOLIS — Target Corp. said a glitch in its system caused delays at checkout registers at some of its U.S. stores but it wasn't due to a data security issue or a hacker.

Customers across the country took to social media to report long check-out lines Sunday night due to registers not working.

The Star Tribune newspaper reported that Target employees tried to placate waiting shoppers by handing out $3 coupons in some stores that bore an apology for the delays. At a store in downtown Minneapolis, a security guard warned entering shoppers that some of the registers were down. Employees handed out free cookies and bottled water along with the coupons to customers as they waited.

The Minneapolis-based discount retailer did not elaborate on the nature of the problem, and it wasn't immediately clear how many stores were affected.

"Target has identified an issue impacting checkout at some of our U.S. stores," the company said in a statement Sunday night. "The glitch is causing delays at some checkouts, but is not in any way related to a security issue. We apologize to anyone impacted, and we are working with guests in stores where the issue has not yet been resolved to accommodate their needs."

In an update later Sunday night, the company said it had been able "able to restore our check-out process."

Target is still trying to regain customers' and investors' trust following a data theft late last year that led to the breach of millions of debit and credit card accounts, as well as a botched expansion into Canada. Shareholders at the company's annual meeting last week elected all 10 nominees to the company's board, but a rise in dissenting votes against several key directors showed that Target still has a lot of work ahead to shore up confidence in the investor community. Target is overhauling its security and technology departments and systems.

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