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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 […]

Posted On : Published By : Tom Whipple
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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 […]

Posted On : Published By : Tom Whipple
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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, […]

Posted On : Published By : Tom Whipple
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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, […]

Posted On : Published By : Tom Whipple
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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 […]

Posted On : Published By : Tom Whipple
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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 […]

Posted On : Published By : Tom Whipple
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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 […]

Posted On : Published By : Tom Whipple
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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 […]

Posted On : Published By : Tom Whipple
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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 […]

Posted On : Published By : Tom Whipple
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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 […]

Posted On : Published By : Tom Whipple