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Strong jobs, weak inflation data muddy Fed rate debate: minutes

U.S. Federal Reserve officials widely agreed last month the economy was nearing the point where interest rates should move higher, but worried lagging inflation and a weak global economy posed too big a risk to commit to "liftoff." Only one Fed policymaker was ready to vote for a rate hike at the central bank’s July 28-29 policy meeting, while some others "viewed the economic conditions for beginning to increase the target range for the federal funds rate as having been met or were confident that they would be met shortly," according to minutes from the meeting released on Wednesday. "Most judged that the conditions for policy firming had not yet been achieved, but they noted that conditions were approaching that point," the minutes said. That sentiment, combined with a broader recognition among "many members" that full employment was close, led the Fed to say in its post-meeting statement that […]

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Approaching A Global Deflationary Crisis?

Anyone with any sense for global economic trends ought to be worried. The signs are everywhere of a serious deflationary crisis. It is obvious that Chinese growth is falling. The prices for energy and the raw materials that feed the growth economy keep falling. The demand for Chinese exports is down too. Stock Markets in Asia are falling, despite attempts to prop them up. Countries are being tempted to export their problems abroad – for example by competitive devaluation. In Europe its obvious that a “solution” is being cobbled together for the Euro and Greek crisis even though no one at all believes that it will work. At the same time the policy response of “quantitative easing” which has kept interest rates down very low has reached the end of the road. With interest rates at or near to zero the scope for addressing the crisis through monetary policy […]

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India, Russia And Thailand Prepare For Currency War

When China sneezes, the world catches a cold. Alternatively, when China devalues, the rest of the (exporting) world scrambles to not be the last (exporting) nation standing, and to do so next, before everyone else does. Case in point, at least three major emerging market nations announced they are bracing for currency war. First India, where NDTV ask rhetorically “ How China’s Devaluation of Renminbi Impacts India ” and answers: 1) The Indian rupee slipped to a two-month low of 64.26 against the US dollar on Tuesday tracking the devaluation of the renminbi . Other currencies such as the Australian dollar and the South Korean won also lost ground. 2) The over 0.5 per cent fall in the rupee weighed on traders’ sentiments, resulting in a drop in equity markets. Both the BSE Sensex and the Nifty traded with 0.4 per cent losses. 3) According to SV Prasad of […]

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Europe Stocks Fall Third Day as Energy Drop Outweighs Tech Gain

European stocks declined for a third day as sliding energy shares outweighed a rebound in tech companies. The Stoxx Europe 600 Index dropped 0.4 percent to 395.63 at 10:25 a.m. in London. Tumbling media companies pulled European stocks down on Friday, while U.S.-payrolls data fueled bets the Federal Reserve will raise rates this year. Stocks gained 0.2 percent last week. Greece’s ASE Index extended its rebound to three days today, advancing 0.8 percent for the best performance among western-European markets. “While the fall in commodity prices, especially oil, could help European markets in the medium term, on a first look it’s a bad sign for a cyclical upturn,” said Christian Zogg, a fund manager who helps oversee about $10 billion at LLB Asset Management in Vaduz, Liechtenstein. “The nearer we get to the first Fed move, the more nervous the market gets, but best guess is it will stay […]

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July job gains may favor September interest rate rise

A job seeker holds literature while waiting to speak with a representative of the Golden Gate National Parks Conservancy at a career fair in San Francisco, California July 14, 2015. The number of U.S. jobs probably rose at a healthy pace in July and wages likely rebounded in data due on Friday, providing further signs of an improving economy that could allow the Federal Reserve to raise interest rates in September. A Reuters survey of economists forecast U.S. nonfarm payrolls increased by 223,000 last month, matching June’s job gains, a number which would be slightly above the monthly average for the first half of the year. Though the pace of hiring has slowed from last year, it remains double the rate needed to keep up with population growth. The Labor Department will release its closely watched employment report on Friday at 8:30 a.m. (1230 GMT) "We expect this report […]

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July job gains may favor September interest rate rise

A job seeker holds literature while waiting to speak with a representative of the Golden Gate National Parks Conservancy at a career fair in San Francisco, California July 14, 2015. The number of U.S. jobs probably rose at a healthy pace in July and wages likely rebounded in data due on Friday, providing further signs of an improving economy that could allow the Federal Reserve to raise interest rates in September. A Reuters survey of economists forecast U.S. nonfarm payrolls increased by 223,000 last month, matching June’s job gains, a number which would be slightly above the monthly average for the first half of the year. Though the pace of hiring has slowed from last year, it remains double the rate needed to keep up with population growth. The Labor Department will release its closely watched employment report on Friday at 8:30 a.m. (1230 GMT) "We expect this report […]

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U.S. Bankruptcy Filings Jump 77% in July, Paced by Energy Sector

Newly released numbers bear out the feeling that a long-awaited bump in bankruptcy filings has arrived this summer, as submissions under chapter 11 rose 77% in July. There were 637 filings under chapter 11 of the bankruptcy code last month across the U.S., according to statistics from Epiq Systems, compared with 359 at the same time last year. It is the most monthly new chapter 11 filings in nearly three years. That excludes April 2014, an outlier month during a very slow restructuring year, when a spike was driven by Energy Future Holdings Corp.’s massive 71-petition filing. But the summer pickup in filings might not be a permanent return to the time before low-interest rates and high filing costs kept many away from the bankruptcy courts. Shaunna Jones, bankruptcy lawyer at Willkie Farr & Gallagher LLP described this summer as one that has “pockets of business but still feels […]

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July job gains may favor September interest rate rise

A job seeker holds literature while waiting to speak with a representative of the Golden Gate National Parks Conservancy at a career fair in San Francisco, California July 14, 2015. The number of U.S. jobs probably rose at a healthy pace in July and wages likely rebounded in data due on Friday, providing further signs of an improving economy that could allow the Federal Reserve to raise interest rates in September. A Reuters survey of economists forecast U.S. nonfarm payrolls increased by 223,000 last month, matching June’s job gains, a number which would be slightly above the monthly average for the first half of the year. Though the pace of hiring has slowed from last year, it remains double the rate needed to keep up with population growth. The Labor Department will release its closely watched employment report on Friday at 8:30 a.m. (1230 GMT) "We expect this report […]

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U.S. Economy Grew at 2.3% Rate in 2nd Quarter

Photo A Ford Motor worker at the company’s Chicago assembly plant. Many automakers reported higher sales in their latest earnings reports. Credit M. Spencer Green/Associated Press In a common pattern of the last few years, the American economy, after a dismal start to 2015, regained its footing in the spring and looked set to continue a modest advance for the rest of the year. But the lackluster data last quarter and a slight downward revision of the estimated growth rate over the last three years underscored the challenges that still lie ahead for an economy that doesn’t seem to be able to move ahead at more than a slow jog. The rebound in April, May and June was largely expected, but the 2.3 percent annualized rate, adjusted for inflation, the Commerce Department reported on Thursday in its initial estimate was a bit below what economists on Wall Street predicted […]

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Dollar Slightly Stronger After Fed Meeting

The dollar rose against the euro and the yen on Wednesday after the Federal Reserve signaled that U.S. short-term interest rates could rise in the coming months. The Federal Open Market Committee painted a strong picture of the U.S. labor market at the conclusion of its two-day policy-setting meeting. The Fed said job gains have been solid, noted how unemployment had declined and upgraded its assessment of the slack in the job market. Consequently, the dollar increased versus the common currency, as one euro bought $1.1029, from $1.1044 ahead of the Fed’s statement, leaving the buck 0.3% higher for the session. The dollar edged higher against the yen to ¥123.78 from ¥123.75 beforehand, now trading 0.2% up on the day. Even though the Fed did not send a clear signal for timing on a rate increase, keeping a September timeline open for the Fed’s first interest-rate increase in more […]

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Gain in U.S. Equipment Orders Points to Investment Rebound

American factories received more orders for capital goods such as machinery and fabricated metals in June, a sign business investment is poised to recover from an early-year malaise. Bookings for non-military equipment excluding planes climbed 0.9 percent, just the second gain this year, after decreasing 0.4 percent in May, data from the Commerce Department showed Monday in Washington. Orders for all durable goods — items meant to last at least three years — increased 3.4 percent, led by a rebound in commercial aircraft demand. The worst of the weakness for manufacturers may be over after the energy industry promptly adjusted to lower oil prices and other U.S. companies look to expand. Resilient consumer spending, particularly on automobiles, is helping make up for weaker overseas demand as a stronger dollar makes American-built goods more expensive. “We’re seeing domestic activity continue to push through, despite the headwinds of sluggish global growth […]

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Cheap Oil Is Bad for the Economy (at Least, So Far)

It’s been about a year since oil prices started their historic drop, falling from above $100 a barrel to a bottom of about $45 in March. After creeping back to around $60, prices are shaky again amid news of a nuclear deal with Iran and record Saudi production. And low oil prices are good for growth, right? Cheap oil means cheap gasoline, and the assumption throughout the oil price rout has been that for the U.S. economy, built on consumer spending, cheap gas is all good. In theory, yes. In practice, it’s been tough to find the benefits in the economic data this year. Goldman Sachs estimates that a decline in energy-related investment such as new drilling equipment, caused by low oil prices, subtracted about half a percentage point from economic growth during the first half. That’s a pretty hefty bite out of a growth number that probably won’t […]

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U.S. companies expected to report worst sales fall in nearly six years

A trader waits for news while working on the floor of the New York Stock Exchange following a halt in trading in New York, July 8, 2015. U.S. companies are expected to report their worst sales decline in nearly six years when they post second-quarter results, giving investors reason to worry about future profits. Companies have managed to drive 2015 earnings by cutting costs, a practice they turned to during the financial crisis. They have also used share buybacks to lift earnings per share. But it is hard to make a case for sustained earnings growth given forecasts for a second-straight quarter of revenue decline at S&P 500 companies, which begin reporting financial results in earnest this week. Though analysts expect corporate America to show a decline in second-quarter profits, according to Thomson Reuters data, some strategists expect them to defy those forecasts and eke out a gain, just […]

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Greek, Chinese and Puerto Rican Crises All Fall Short of Going Global

After economic turmoil erupted on three continents in recent weeks, a familiar consequence of past crises is notably absent: panic. In Europe, Greece veered dangerously close to exiting the euro. In China, a historic stock bubble appears to be deflating. In North America, Puerto Rico threatens one of the biggest government defaults in U.S. history. But there has been little of the global contagion that followed the deepening U.S. mortgage crisis in the fall of 2008 and previous Greek debt crises. On Friday, the Dow Jones Industrial Average, responding to signs that Greece may yet strike a deal to stay in the euro, climbed to within 3% of its all-time high. VIX, the stock market’s “fear gauge,” is below levels reached as recently as last December. Yields on bonds issued by Europe’s weaker countries have edged up, but by far less than Greece’s. Federal Reserve Chairwoman Janet Yellen , […]

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U.S. jobless claims rise to highest level since February

Job seekers listen to prospective employers during a job hiring event for marketing, sales and retail positions in San Francisco, California, in this file photo taken June 4, 2015. New applications for U.S. unemployment insurance benefits rose last week to their highest level since February, suggesting some slowdown in the labor market recovery. Initial claims for state unemployment benefits rose 15,000 to a seasonally adjusted 297,000 for the week that ended July 4, the U.S. Department of Labor said on Thursday. Even with the rise in claims, the latest report marks the 18th consecutive week of new filings below 300,000, which is considered consistent with a firming labor market. The previous week’s claims were revised to 282,000, showing that 1,000 more people filed than initially reported. Economists polled by Reuters had expected new applications to fall to 275,000 last week. The four-week moving average of claims, which smoothes out […]

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U.S. industrial output hurt by weakness in manufacturing, mining

WASHINGTON U.S. industrial production unexpectedly fell in May as manufacturing and mining activity remained weak, a sign that a strong dollar and spending cuts in the energy sector continued to constrain economic growth. The softness in the production side of the economy contrasts starkly with recent upbeat data on retail sales, employment, consumer and small business confidence, which have pointed to a growth pickup after a sluggish start to the second quarter. "Signs of spring remain largely absent in the industrial sector. The challenges of the stronger dollar and drop in energy prices linger," said Tim Quinlan, an economist at Wells Fargo Securities in Charlotte, North Carolina. Industrial output slipped 0.2 percent last month after declining 0.5 percent in April, the Federal Reserve said on Monday. Industrial production has been weak since December, and economists had expected output to rise 0.2 percent last month. The data was likely to […]

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Energy job losses mount, but sector recovering

Federal data show the extractive industries suffering in weak crude oil market, though career firm Challenger, Grey & Christmas finds silver lining. UPI/Maryam Rahmanian WASHINGTON, June 5 (UPI) — The number of people seeking unemployment assistance in May in the U.S. extractive industries was up by nearly 5 percentage points year-on-year, federal data show. The Bureau of Labor Statistics reported an unemployment rate of 7.2 percent in May for the mining, quarrying, and oil and gas extraction sectors. That’s up from the 2.6 percent reported in May 2014. Of all non-farm sectors surveyed by the bureau, the extractive industries were the lone standout in terms of job losses year-on-year. "Total non-farm payroll employment increased by 280,000 in May, and the unemployment rate was essentially unchanged at 5.5 percent," Friday’s report read. A report from this week from career transition firm Challenger, Grey & Christmas finds the employment climate in […]

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Sluggish factory growth in Europe and Asia puts central bank stimulus in spotlight

LONDON/SYDNEY Manufacturing activity showed scant sign of picking up across Europe and Asia in May as demand stayed stubbornly weak, highlighting the need for central banks to continue supporting growth. The gloomy business surveys come a little less than three months after the European Central Bank embarked on a 1 trillion-euro stimulus program and will likely fuel expectations its counterpart in Beijing will have to roll out more aggressive policy measures. Euro zone factory growth was weaker than previously thought last month while Chinese factory activity barely accelerated and South Korean exports sank. "Across the euro zone as a whole it is plodding along. We can probably do with a little bit more strength out of Germany and France," said Peter Dixon at Commerzbank. "We are going to have to live with rather slower growth in China. We have seen some modest monetary easing and I expect that will […]

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U.S. GDP Swings to Contraction in First Quarter

WASHINGTON—The U.S. economy contracted early this year as harsh weather and a strong dollar sapped demand for American goods, underscoring the choppiness of an expansion that has struggled to lift off. Gross domestic product, the broadest sum of goods and services produced across the economy, shrank at a 0.7% seasonally adjusted annual rate in the first quarter, the Commerce Department said Friday. The agency previously estimated output grew 0.2% from January through March. The revision, near economists’ expectation of a 1% contraction, showed how the world’s largest economy remains vulnerable to shocks as it struggles to regain its vigor. The dip, expected to be short-lived, marked the third quarterly contraction since the economy emerged from recession in mid-2009. “When you’re this weak, little things can knock you off course, whether it’s the Arab spring, the earthquake or ‘Snowmageddon,’ ” economist Dan Greenhaus of brokerage firm BTIG said. “We have […]

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U.S. economy likely shrank in first quarter, but fundamentals strong

WASHINGTON The U.S. economy likely contracted in the first quarter as it buckled under the weight of unusually heavy snowfalls and a resurgent dollar, but activity since has rebounded modestly. The government is expected to report on Friday that gross domestic product shrank at a 0.8 percent annual rate instead of growing at the 0.2 percent pace it estimated last month, according to a Reuters survey of economists. A larger trade deficit and a smaller accumulation of inventories by businesses than previously thought will probably account for much of the expected downward revision. With growth estimates so far for the second quarter around 2 percent, the economy appears poised for its worst first half performance since 2011. Economists, however, caution against reading too much into the expected slump in output. They argue the GDP figure for the first quarter was held down by a confluence of temporary factors, including […]

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U.S. labor numbers drag on oil

U.S. Labor Department reports uptick in weekly unemployment claims, sending crude oil prices into negative territory. File photo by Brian Kersey/UPI NEW YORK, May 28 (UPI) — A poor showing for the U.S. labor market sent oil prices lower in early Thursday trading, with key indices off about a half percent from the previous session. The U.S. Labor Department reported seasonally adjusted claims for unemployment at 282,000 for the week ending May 23, an increase of 7,000 from the previous week. The four-week moving average rose by 5,000 and, for the week ending May 16, the insured unemployment rate of 1.7 percent represented a 0.1 percent increase from the previous week. Weak overall demand in a market with a surplus of oil pushed crude oil markets into bearish territory, dropping below the $50 per barrel mark at times in early 2015. Markets have since recovered somewhat, though economic growth […]

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Volatile Oil Market May Hurt Global Economy

ENLARGE Wind turbine blades are assembled on the ground before being placed on top of a tower at a wind farm in Uruguay. A new report Tuesday warns oil price volatility threatens the global economy and urges policy makers to support renewable energy. Photo: Bloomberg News LONDON—The dramatic fall in oil prices since last summer has been a boon for global consumers taking advantage of cheaper fuel and lower utility bills. But the price rout has increased the volatility of the crude market, which could end up hurting the global economy, a new report warns. Volatile energy prices can lead to delays in business investment and slower job growth, according to the report co-authored by Nicholas Stern, former U.K. Treasury official and a prominent climate economist. The “Oil Prices and the New Climate Economy” report will be published later Tuesday by the Global Commission on the Economy and Climate, […]

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U.S. data suggest economy picking up steam after weak first quarter

WASHINGTON (Reuters) – The number of Americans filing new claims for jobless benefits tumbled to a 15-year low last week and consumer spending rose in March, signs the economy was regaining momentum after stumbling badly in the first quarter. The economic outlook was brightened further by another report on Thursday showing a solid increase in wages in the first quarter, which should keep the Federal Reserve on track to raise interest rates this year. "This morning’s reports all point to an economy that is doing a lot better than the near-stagnation in first-quarter GDP suggests," said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto. Initial claims for state unemployment benefits fell 34,000 to a seasonally adjusted 262,000 for the week ended April 25, the lowest reading since April 2000, the Labor Department said. Though the decline, which far exceeded Wall Street’s expectations for a drop to 290,000, […]

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US economic growth slows to 0.2%

Growth in consumer spending slowed to 1.9% The US economy "all but stagnated" in the first three months of the year, growing at an annual rate of just 0.2%, official figures show. The growth figure was far lower than expectations. Analysts had forecast growth would be about 1%. Harsh winter weather for a second year dampened consumer spending, while energy companies struggling with low oil prices cut investment. The strength of the dollar also hurt exports, which fell by 7.2%. A strike by dock workers at normally busy West Coast ports also hindered growth. But the US Commerce Department said there were signs that activity was picking up in the second quarter. The US growth figure much lower than the previous three months, when the economy expanded at an annualised pace of 2.2%. Analysis: Linda Yueh, BBC chief business correspondent The dollar has risen on the back of expected […]

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Fed points to softer U.S. labor market, weak economic growth

WASHINGTON (Reuters) – The Federal Reserve pointed to weakness in the U.S. labor market and economy on Wednesday in a policy statement that came just hours after data showing tepid economic growth, suggesting the central bank may have to wait until the third quarter to begin raising interest rates. The Fed’s statement leaves it dependent on fresh economic data, in a meeting-by-meeting approach, as it seeks to decide on the timing of its first rate hike since June 2006. The central bank, however, acknowledged weakness in some sectors of the economy, making it more likely that it will not be ready to raise until at least September. "The committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective […]

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U.S. economy stumbles in first-quarter as weather, low energy prices weigh

WASHINGTON (Reuters) – U.S. economic growth nearly stalled in the first quarter as harsh weather dampened consumer spending and energy companies struggling with low prices slashed spending. Gross domestic product expanded at an only 0.2 percent annual rate, the Commerce Department said on Wednesday. That was a big step down from the fourth quarter’s 2.2 percent pace and marked the weakest reading in a year. A strong dollar and a now-resolved labor dispute at normally busy West Coast ports also slammed growth, the government said. While there are signs the economy is pulling out of the soft patch, the lack of a vigorous growth rebound has convinced investors the U.S. Federal Reserve will wait until late this year to start hiking interest rates. The recovery is the slowest on record and the economy has yet to experience annual growth in excess of 2.5 percent. "The U.S. economy has yet […]

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Glut of Capital and Labor Challenge Policy Makers

A coal shoot loads barges with coal outside Pittsburgh. ENLARGE Photo: Bloomberg News The global economy is awash as never before in commodities like oil, cotton and iron ore, but also with capital and labor—a glut that presents several challenges as policy makers struggle to stoke demand. “What we’re looking at is a low-growth, low-inflation, low-rate environment,” said Megan Greene, chief economist of John Hancock Asset Management, who added that the global economy could spend the next decade “working this off.” The current state of plenty is confounding on many fronts. The surfeit of commodities depresses prices and stokes concerns of deflation. Global wealth—estimated by Credit Suisse at around $263 trillion, more than double the $117 trillion in 2000—represents a vast supply of savings and capital, helping to hold down interest rates, undermining the power of monetary policy. And the surplus of workers depresses wages. Meanwhile, public indebtedness in […]

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US still too weak for rate rises, says Fed official

Eric Rosengren, president of the Federal Reserve Bank of Boston, speaks at the Journal of Money, Credit, and Banking Conference on Financial Markets and Monetary Policy in Washington, D.C., U.S., on Friday, June 5, 2009 The US economy is still too weak for the Federal Reserve to raise interest rates, a senior official has warned, as he mounted a staunch defence of the central bank against a campaign in Congress to limit its independence . Eric Rosengren, president of the Federal Reserve Bank of Boston , struck a dovish tone, warning that conditions in the US economy had deteriorated since March and that inflationary pressures were still subdued for the Fed to begin tightening monetary policy. The warning comes only days after minutes from the March meeting of the Federal Open Market Committee showed policy makers were split over the right moment to start tightening monetary policy. “Several” members […]

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Putting the Real Story of Energy and the Economy Together

What is the real story of energy and the economy? We hear two predominant energy stories. One is the story economists tell: The economy can grow forever; energy shortages will have no impact on the economy. We can simply substitute other forms of energy, or do without. Another version of the energy and the economy story is the view of many who believe in the “Peak Oil” theory. According to this view, oil supply can decrease with only a minor impact on the economy. The economy will continue along as before, except with higher prices. These higher prices encourage the production of alternatives, such wind and solar. At this point, it is not just peak oilers who endorse this view, but many others as well. In my view, the real story of energy and the economy is much less favorable than either of these views. It is a story […]

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Oil Exporters Are Dumping US Assets At A Record Pace

 Back in November we chronicled the (quiet) death of the Petrodollar, the system that has buttressed USD hegemony for decades by ensuring that oil producers recycled their dollar proceeds into still more USD assets creating a very convenient (if your printing press mints dollars) self-fulfilling prophecy that has effectively underwritten the dollar’s reserve status in the post WWII era. Here’s what we said last year: Two years ago, in hushed tones at first, then ever louder, the financial world began discussing that which shall never be discussed in polite company – the end of the system that according to many has framed and facilitated the US Dollar’s reserve currency status: the Petrodollar, or the world in which oil export countries would recycle the dollars they received in exchange for their oil exports, by purchasing more USD-denominated assets, boosting the financial strength of the reserve currency, leading to even higher […]

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Global recovery at risk of stalling

International Monetary Fund chief Christine Lagarde speaks during an discussion panel at the Reserve Bank of India (RBI) head office in Mumbai on March 17, 2015. Emerging markets must prepare for the impact of US interest rate rises, whose timing could surprise markets, International Monetary Fund chief Christine Lagarde warned in India on March 17. Speaking alongside India’s central bank governor Raghuram Rajan, Lagarde said the so-called "taper tantrum" that hit emerging economies hard in 2013 could be repeated. AFP PHOTO / PUNIT PARANJPEPUNIT PARANJPE/AFP/Getty Images The global economy is mired in a “stop and go” recovery “at risk of stalling again”, according to the latest Brookings Institution-Financial Times tracking index. The index, released ahead of the International Monetary Fund’s twice-yearly forecasts this week, highlights how the modestly improved growth outlook in advanced economies has been offset by weakness in emerging markets . “A modest reversal of fortunes between […]

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Free fall in oil prices could fuel recession

At $10 a barrel of oil, your gas would be cheap, but your job could be gone. Oil producers would cease operations because they would not be able to turn a profit, which translates to a loss of jobs and a hit to the economy. After all, oil production is a driver of income growth, gross domestic product and economic recovery. “Ten dollars is possible but not for a sustained period of time,” said Patrick DeHaan, a senior petroleum analyst at Gasbuddy.com. Although gasoline would be about $1 a gallon, DeHaan said it’s a “short-lived win for motorists at the pump.” “It could lead to a recession,” he said, adding that the oil and gas industry would affect all sectors of the economy. Anything is possible, but both analysts and economists consider the possibility of $10-a-barrel oil laughable — even though the cost for a barrel over the past […]

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Central Banks at Zero Failing to Turbocharge Effect of Cheap Oil

Central bankers unable to cut interest rates are failing to turbocharge the effect of declining oil prices. Economists at Oxford Economics Ltd., a U.K.-based research group, say policy makers may be damping hopes that last year’s near-halving of crude prices would spark worldwide demand. “With rates this low, even good news has a sting in the tail,” John Bulford and Gabriel Sterne, economists at Oxford, said in a report to clients last week. “The expansionary impact of the oil-price shock is dampened to some extent because of the limited capacity of central banks to loosen monetary policy.” Oxford’s economic modelling shows the lower crude prices would historically be enough for 26 of the 29 major central banks it monitors to have cut rates by the end of this year. Instead, just half have done so, including the Bank of Canada, which reduced its key rate to 0.75 percent in […]

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Sluggish Productivity Hampers Wage Gains

A Ford Truck assembly line in Dearborn, Mich., in November. ENLARGE Photo: Getty Images Based on the jobs data alone , the American economy is doing fabulously. Monthly payroll growth this year, averaging 267,000, already is ahead of last year’s impressive tally, which in turn handily beat the prior year. The unemployment rate, at 5.5%, is now in the range some economists consider “full employment.” But overall economic growth has been less impressive. That’s because productivity—the amount of goods and services each worker produces—is growing at a tepid rate. Since the economic expansion began in 2009, annual productivity growth has averaged just 1.3%, if the farm and government sectors are excluded. That is the weakest growth of any expansion since the 1970s. On Thursday, the day before the encouraging February jobs data were released, the Labor Department reported that productivity in last year’s fourth quarter didn’t grow at all […]

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US jobs surge sends dollar soaring

The Marriner S. Eccles Federal Reserve building stands at sunrise in Washington, D.C., U.S., on Tuesday, Oct. 28, 2014. The Federal Open Market Committee meets today and tomorrow after six weeks of volatility in global financial markets. Since the FOMC met in mid-September, oil prices have tumbled 14 percent, and the Standard & Poor’s 500 Index of stocks dropped as much as 7.4 percent from a record close. Photographer: Andrew Harrer/Bloomberg The dollar soared and bond yields spiked as hiring by US employers smashed Wall Street expectations and sparked heightened speculation that the Federal Reserve is nearing its first interest-rate rise in nearly a decade. Employers added 295,000 jobs in February in defiance of bad weather and the unemployment rate fell to 5.5 per cent, the lowest level since 2008. The US has now seen its longest streak of monthly jobs gains above the 200,000 mark in 20 years. […]

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U.S. factory orders fall for sixth straight month

WASHINGTON (Reuters) – New orders for U.S. factory goods unexpectedly fell in January, posting their sixth straight monthly decline, a sign of weakness in the manufacturing sector. The Commerce Department said on Thursday new orders for manufactured goods slipped 0.2 percent after a revised 3.5 percent decline in December. Economists polled by Reuters had expected factory orders to gain 0.2 percent in January after a previously reported 3.4 percent tumble in December. The department also said orders for non-defense capital goods excluding aircraft – seen as a measure of business confidence and spending plans – rose 0.5 percent instead of the 0.6 percent advance reported last month. Manufacturing has been hurt by softening demand in Europe and Asia as well as a strong dollar and lower crude oil prices, which have caused some energy companies to either delay or cut back on capital expenditure projects. A labor dispute at […]

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Financial collapse leads to war

Financial collapse leads to war thumbnail Scanning the headlines in the western mainstream press, and then peering behind the one-way mirror to compare that to the actual goings-on, one can’t but get the impression that America’s propagandists, and all those who follow in their wake, are struggling with all their might to concoct rationales for military action of one sort or another, be it supplying weapons to the largely defunct Ukrainian military, or staging parades of US military hardware and troops in the almost completely Russian town of Narva, in Estonia, a few hundred meters away from the Russian border, or putting US “advisers” in harm’s way in parts of Iraq mostly controlled by Islamic militants. The strenuous efforts to whip up Cold War-like hysteria in the face of an otherwise preoccupied and essentially passive Russia seems out of all proportion to the actual military threat Russia poses. (Yes, […]

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U.S. Growth Poised to Pick Up

ENLARGE The U.S. economy returned to its sluggish trajectory late last year, though underlying signs of strength suggest growth will pick up in 2015. Gross domestic product, the broadest measure of goods and services produced across the economy, expanded at a 2.2% annual rate in the fourth quarter, the Commerce Department said Friday, weaker than an earlier 2.6% estimate.The latest figures show the 5% pace in the third quarter and 4.6% in the second quarter were unsustainable. For 2014 as a whole, GDP expanded 2.4%, slightly better than the average 2.2% growth of 2010-13. By comparison, the economy grew an average 3.4% a year during the 1990s. Still, Friday’s report showed that consumer spending, which accounts for about two-thirds of output in the U.S., matched its fastest pace since early 2006 during the fourth quarter. Personal consumption expenditures advanced 4.2%. Consumers have been the brightest spot in recent months. […]

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U.S. economy slows in fourth quarter, but growth outlook still favorable

WASHINGTON (Reuters) – U.S. economic growth braked more sharply than initially thought in the fourth quarter amid a slow pace of stock accumulation by businesses and a wider trade deficit, but the underlying fundamentals remained solid. Gross domestic product expanded at a 2.2 percent annual pace, revised down from the 2.6 percent pace estimated last month, the Commerce Department said on Friday. The economy grew at a 5 percent rate in the third quarter. With consumer spending accelerating at its quickest pace since the first quarter of 2006 and sturdy gains in other measures of domestic demand, the slowdown in growth is likely to be temporary. Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, was revised down by one-tenth of a percentage point to a 4.2 percent pace in the fourth quarter, still the fastest since the first quarter of 2006. A tightening […]

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Major Firms Are Saying the Stage Is Set for Another Crisis in the Bond Market

An accident could be on its way. Silver coins are melted in order to be re-used again at the Mexican Mint, or Casa de Moneda, in San Luis Potosi, Mexico, on Thursday, Feb. 5, 2015. Companies in Mexico are on pace to sell the most peso-denominated debt in 14 years as they capitalize on a tumble in benchmark borrowing costs. (Bloomberg) — The stage is set for another financial crisis to unravel years of relative calm in debt markets. At least that’s how firms from UBS Group AG to Invesco Ltd. see it. Here’s why: Prices in the world’s biggest bond market are swinging and the plunge in oil is sinking the economies of nations from Venezuela to Nigeria. To top all that off, the fundamental structure of the bond market has changed in a way that makes it difficult for regulators to gauge exactly where risks are building. […]

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Growth in Slow Start as U.S. Factories Curb Output: Economy

(Bloomberg) — Factory production rose less than forecast in January and home construction fell, showing the U.S. economy is off to a slow start in 2015. Output at factories climbed 0.2 percent and figures for the previous three months were revised lower, data from the Federal Reserve showed Wednesday in Washington. Total industrial production, which also includes mining and utilities, climbed less than projected as oil-well drilling slumped. Housing starts dropped 2 percent, according to the Commerce Department. “It’s not weak, but it’s not great either,” said Thomas Costerg, an economist at Standard Chartered Bank in New York, who correctly estimated the gain in factory output. “There are some downside risks, clearly.” The data bolster Fed concern that struggling economies from Europe to Asia, a stronger dollar and the sluggish recovery in housing pose obstacles that warrant keeping interest rates low for longer. Additionally, while consumers benefit from an […]

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U.S. retail sales weak, consumer spending gauge barely rises

WASHINGTON (Reuters) – U.S. consumer spending barely rose in January as households cut back on purchases of a range of goods, suggesting the economy started the first quarter on a softer note. The Commerce Department said on Thursday retail sales excluding automobiles, gasoline, building materials and food services edged up 0.1 percent last month after a 0.3 percent drop in December. The so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. "Overall, the tone of this report was disappointing as it points to a weak start to spending activity this year, despite the significant boost to disposable income from lower gasoline prices," said Millan Mulraine, deputy chief economist at TD Securities in New York. Wall Street had expected core retail sales to increase 0.4 percent last month. The soft reading could see economists trim their forecasts for first-quarter GDP growth. The economy […]

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Here’s a $9 Trillion Question

(Bloomberg) — When Group of 20 finance ministers this week urged the Federal Reserve to “minimize negative spillovers” from potential interest-rate increases, they omitted a key figure: $9 trillion. That’s the amount owed in dollars by non-bank borrowers outside the U.S., up 50 percent since the financial crisis, according to the Bank for International Settlements. Should the Fed raise interest rates as anticipated this year for the first time since 2006, higher borrowing costs for companies and governments, along with a stronger greenback, may add risks to an already-weak global recovery. The dollar debt is just one example of how the Fed’s tightening would ripple through the world economy. From the housing markets in Canada and Hong Kong to capital flows into and out of China and Turkey, the question isn’t whether there will be spillovers — it’s how big they will be, and where they will hit the […]

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Kemp: US Businesses Brace For Oil Investment Downturn

John Kemp is a Reuters market analyst. The views expressed are his own LONDON, Feb 10 (Reuters) – Oil and gas production is fundamental to the U.S. economy. The sharp downturn in prices will have a negative impact on business investment in the short term before the positive impact on consumer spending takes over further down the line. Oil and gas producers accounted for almost $1 in every $8 of new business investment in the U.S. economy in 2013, according to new data published by the Census Bureau. Businesses engaged in oil and gas extraction invested $159 billion in wells, structures and equipment in 2013, according to the Annual Capital Expenditures Survey, the latest edition of which was published on Feb. 5 ( http://link.reuters.com/dur93w ). Companies engaged in oil and gas production support activities invested a further $20 billion, taking the oil and gas sector’s share of economy-wide new […]

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Charts showing the long-term GDP-energy tie

In Part 1 of this series , I talked about why cheap fuels act to create economic growth. In this post, we will look at some supporting data showing how this connection works. The data is over a very long time period–some of it going back to the Year 1 C. E. We know that there is a close connection between energy use (and in fact oil use) and economic growth in recent years. Figure 1. Comparison of three-year average growth in world real GDP (based on USDA values in 2005$), oil supply and energy supply. Oil and energy supply are from BP Statistical Review of World Energy, 2014. In this post, we will see how close the connection has been, going back to the Year 1 CE. We will also see that economies that can leverage their human energy with inexpensive supplemental energy gain an advantage over other […]

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US jobs growth beats expectations

The US labour market recovery gathered momentum in January as employers added more jobs than expected and wages rebounded, raising the odds of an interest-rate hike in the middle of the year. The dollar jumped against the euro after official figures showed US employers added more than a million jobs in the past three months alone, the most since 1997. More On this story On this topic IN US Economy The data were coupled with improved earnings figures that reversed surprisingly weak wage numbers for December. “The US economy is looking better and better,” said Torsten Sløk, chief international economist at Deutsche Bank. US Treasury Secretary Jack Lew told Congress this week that the American economy was in a “self-sustaining” recovery. The latest figures support that verdict, and sharpen the contrast between the robust US recovery and gloomier prospects in many economies overseas. The US has now seen eleven […]

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U.S. factory orders fall sharply, order books shrinking

WASHINGTON (Reuters) – New orders for U.S. factory goods fell for a fifth straight month in December, but a smaller-than-previously reported drop in business spending plans supported views of a rebound in the months ahead. Other data on Tuesday showing fairly brisk sales in January by the country’s leading automobile manufactures also offered a silver lining for a sector that has taken a hit from weak global demand and falling crude oil prices. "It suggests that activity will pick up in coming months," said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. The Commerce Department said new orders for manufactured goods declined 3.4 percent as demand fell across a broad sector of industries. That followed a 1.7 percent decrease in November and exceeded economists expectations for a 2.2 percent drop. The department also said orders for non-defense capital goods excluding aircraft – seen as a measure […]

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Commodities crash: Bad news for the world economy, but is anyone listening?

Depression: Unemployed;destitute man leaning against vacant store:photo by Dorothea Lange http://commons.wikimedia.org/wiki/File:Depression,_Unemployed,destitute_man_leaning_against_vacant_store-photo_by_Dorothea_Lange_-_NARA_-_195825.tif Reading the general run of financial headlines might lead one to believe that price declines in those commodities which are highly sensitive to economic conditions such as  iron ore ,  copper ,  oil ,  natural gas ,  coal , and  lumber  are good on their face. Obviously, the declines aren’t good for those who  sell  these commodities. But, those of us who  buy  these commodities in the form of cars, houses, utility bills and other products and services ought to be helping the world economy as we buy more stuff with the freed up income. As true as that may be, these commodity price declines also signal something else: exceptional weakness in the world economy. It is no secret that economic growth in Europe has been stalled for some time and is now receding. The European Union’s confrontation […]

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American CEOs Most Bearish on Earnings Since 2008 Crisis

Drilling for oil in the Bakken shale formation on July 23, 2013 outside Watford City, North Dakota. (Bloomberg) — U.S. chief executive officers are more pessimistic about corporate earnings than any time since the financial crisis, according to research from Bespoke Investment Group LLC. The percentage of companies cutting profit forecasts during this earnings season has outpaced those with upward revisions by 8.6 percentage points, the widest margin in six years, according to data compiled by Bespoke. Consumer companies and drugmakers are the most bearish among 10 major industries, with at least 18 percent of each group providing lower guidance, the data show. Plunging oil and a strengthening dollar are wreaking havoc on earnings this month as Procter & Gamble Co. to Caterpillar Inc. and Pfizer Inc. joined an increased number for companies to announce disappointing forecasts. While the reduction in projections sets a lower bar for companies to […]

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