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US growth slows to 2.6% in fourth quarter

Personal spending rose to the highest level since 2006 in the first quarter America’s growth lost momentum at the end of 2014 as weak exports highlighted the risks the US recovery faces from sagging overseas demand. Gross domestic product rose by an annualised 2.6 per cent in the fourth quarter — sharply below Wall Street expectations for an increase of at least 3 per cent and a marked slowdown from the 5 per cent pace set in the third quarter. More On this story On this topic IN US Economy While consumer spending — the main driver of America’s economy — surged at its fastest pace since 2006, overall growth was dragged down by poor trade numbers and falling government spending. Stocks slipped on Wall Street in response and bond traders pushed back expectations of interest-rate increases by the Federal Reserve’s Federal Open Market Committee. Separate data showed US […]

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Falling oil prices prompt central bankers to reconsider

World Bank expects global inflation to fall 0.4-0.9 percentage points this year The Federal Reserve O nly a few months ago, the 2015 outlook for monetary policy could be summarised in two words: “great divergence”. This was the year in which the US Federal Reserve and the Bank of England would finally raise rates after years of ultra-low borrowing costs, while the Bank of Japan and the European Central Bank would continue to loosen monetary policy. More On this topic Global Insight Fast forward to the start of this year and the picture is completely different: from India and Turkey to Canada , monetary policy makers are all busy slashing borrowing costs. Brazil, where the central bank raised rates last week, is the one big exception to the rule. But its move pales against the ECB’s decision last Thursday to launch a massive €1.1tn programme of quantitative easing. And […]

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Fossil Fuel Subsidies Fall in Gain for Renewables

(Bloomberg) — Countries from Mexico to Germany and Malaysia are increasingly taking advantage of cheap oil by trimming fossil-fuel subsidies, easing the way for renewable power that can help the environment, according to the chief economist of the International Energy Agency. With the global cost of crude cut by more than half, Fatih Birol said the IEA has scrapped a forecast that had subsidies reaching $660 billion by 2020. In the group’s latest report, fossil fuel producers were paid $548 billion in 2013, a $26.5 billion decline that was the first drop in four years. At least 27 nations are decreasing or ending the subsidies that hold down costs for fuels used to generate electricity, including coal and natural gas, the IEA reported in November. That’s adding momentum to global efforts to limit greenhouse gases by increasing the use of clean energy. “In the absence of subsidies, all of […]

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Euro’s Big Drop Puts U.S. Economy, Federal Reserve to the Test

European Central Bank President Mario Draghi. ENLARGE Photo: Associated Press The European Central Bank’s launch of an aggressive program this week to buy more than €1 trillion in bonds poses important tests for the U.S. economy and the Federal Reserve. Europe’s new program of money printing—and the resulting fall in the euro—means the U.S. economy must deal with a rapidly strengthening dollar that will make American goods more expensive abroad. The stronger dollar could slow both U.S. growth and inflation, giving the Fed some incentive to hold off on its plan to raise short-term interest rates later this year from near zero. U.S. officials have been playing down that scenario, and, more broadly, resisting talk of a global currency war—competitive devaluations by countries eager to keep their currencies as low as possible to protect exports. The U.S. dollar has already soared in the wake of the ECB announcement Thursday […]

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IMF Cuts Global Economic-Growth Outlook

ENLARGE Olivier Blanchard speaks in Mexico City in July. The IMF’s chief economist called the price of oil a shot in the arm, but said that ‘there is clearly a state of weakness in the world economy and this shot is not enough.’ Susana Gonzalez/Bloomberg News Sliding oil prices will give global growth a brief jolt, but the benefits won’t be strong enough to keep the world economy out of a deepening long-term rut, the International Monetary Fund said. In new forecasts, the IMF downgraded its outlook for more than a dozen of the world’s largest economies, including markedly slower growth in China. The fund said global growth would be 0.3 percentage point lower this year and next than it had previously expected. It now expects the world economy to expand 3.5% this year and 3.7% in 2016. “The price of oil is a shot in the arm,” IMF […]

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IMF cuts forecasts for global economic growth

Christine Lagarde, the IMF managing director, says the outlook is ‘too low, too brittle and too lopsided’ Low oil prices will not provide a sufficient updraught to dispel the clouds hanging over the global economy, the International Monetary Fund said on Tuesday. In a sign of its increasing gloom about the medium-term economic outlook, the IMF cut its global economic growth forecasts by 0.3 percentage points for both 2015 and 2016 despite believing cheaper oil represents a “shot in the arm”. Its 2015 forecast for the UK was unchanged at 2.7 per cent and cut by 0.1 percentage point for next year to 2.4 per cent compared with its previous forecast in its World Economic Outlook last October. Its outlook for the UK is broadly favourable despite uncertainty about the general election, with the faltering eurozone economy likely to prove the biggest brake on growth. Last year the IMF described […]

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Fed’s Beige Book: Continued Growth, but Some Slowing in Oil-Producing Areas

ENLARGE The U.S. Federal Reserve, housed in Washington’s Federal Reserve Board building, Wednesday released its ‘beige book’ report on regional economic conditions. Gary Cameron/Reuters Energy-rich regions of the U.S. are seeing signs of slower growth due to the plunge in oil prices, though the national economy continued to expand in late 2014, the Federal Reserve said in its latest survey of regional economic conditions. The Fed found “modest” or “moderate” growth across most of its 12 districts in mid-November through late December, according to the “beige book” report released Wednesday. Payrolls “expanded moderately” across “a variety of sectors,” the report said, though pay remained stagnant for most workers. “Significant wage pressures were largely limited to workers with specialized technical skills,” it said. In areas where energy production has boomed in recent years, the sharp decline in oil prices since mid-2014 is generating worries about a slowdown. The Dallas district […]

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Earnings Pessimism Jumps as Oil Threatens S&P 500 Growth

While stock investors wait for the benefits of cheaper oil to seep into the economy, all they can see lately is downside. Forecasts for first-quarter profits in the Standard & Poor’s 500 Index have fallen by 6.4 percentage points from three months ago, the biggest decrease since 2009, according to more than 6,000 analyst estimates compiled by Bloomberg. Reductions spread across nine of 10 industry groups and energy companies saw the biggest cut . Earnings pessimism is growing just as the best three-year rally since the technology boom pushed equity valuations to the highest level since 2010. At the same time, volatility has surged in the American stock market as oil’s 55 percent drop since June to below $49 a barrel raises speculation that companies will cancel investment and credit markets and banks will suffer from debt defaults. “Either there is nothing to worry about and crude is going […]

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Oil to Put Chill on U.S. Earnings Season

As fourth-quarter earnings season gets under way, investors are bracing for the softest U.S. profit growth in years, pinched by collapsing oil prices and a strong dollar. That double whammy, coupled with the highest valuations for stocks since the financial crisis, will test the market’s ability to prolong its extended bull run and will likely make for continued bumpy trading in the weeks ahead. Over the past few months, the Dow Jones Industrial Average and S&P 500 have carved out new record highs, while suffering frequent setbacks. Both indexes hit fresh peaks in the final sessions of last year but have since experienced two straight weeks of declines. Some prominent hedge funds are cutting back their exposure to stocks and reducing their use of borrowed money to amplify their bets, according to fund managers and a confidential memo Morgan Stanley sent to clients last week that was viewed by […]

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Oil-Price Drop Takes Shine Off Steel Town

ENLARGE Lorain, Ohio, is starting to feel pressure from the sharp drop in oil prices. Above, Republic Steel’s plant along Black River in Lorain supplies metal used to make oil pipes and tubing. Steve Manheim/The Chronicle-Telegram LORAIN, Ohio—The collapse of oil prices in the last six months is threatening to end a recent industrial revival in manufacturing centers like this town of 64,000 on the banks of Lake Erie. The U.S. shale drilling boom lifted Midwest manufacturing economies, enriched property owners with mineral rights and even brought back the fat blue-collar paychecks that once were harder to find. But as drilling and exploration for new oil and gas slow with the drop in energy prices, cutbacks at heavy-industry companies are cropping up. The U.S. Steel Corp. plant here, which depends heavily on oil and gas companies to buy its steel pipe and tubes, warned on Monday it might have […]

Posted On : Published By : Tom Whipple