Archive for the ‘US Consumers’ Category

Sharp drop in new claims for unemployment: Dropped 29,000 last week …

Stock edge higher after unemployment claims fall
May 19, 2011, 10:25 a.m. EDT
Associated Press

Journal By Calvin Lee Ledsome Sr.,

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NEW YORK (AP) — Stocks opened slightly higher Thursday, extending Wednesday’s gains, after a government report showed a sharp drop in new claims for unemployment benefits. Weaker reports on home sales and economic expectations kept the gains in check.

Shares of social-networking company LinkedIn Corp. jumped 81 percent to $81.76 on their first day of trading. It is the largest U.S. Internet IPO since Google Inc.

The Dow Jones industrial average rose 26 points, or 0.2 percent, at 12,586 in early trading. The Standard & Poor’s 500 index gained 2, or 0.2 percent, to 1,343. The Nasdaq composite index added 4, or 0.1 percent, to 2,819.

The Department of Labor reported that applications for unemployment dropped 29,000 last week, more than expected, to 409,000.

Two other reports raised doubts about the strength of the housing recovery and the overall direction of U.S. growth.

The National Association of Realtors said fewer people purchased previously occupied homes in April. The number of homes sold in foreclosure also declined.

The Conference Board reported that expectations for future economic activity decreased, based on its index of leading indicators. The private research group said the index fell 0.3 percent in April, the first decline since June 2010.

In a sign that the U.S. consumer recovery remains uneven, Big Lots Inc. fell 9 percent to $34.31 after news reports that it decided not to sell itself. The Wall Street Journal said late Wednesday that the company received bids from two private-equity groups that were lower than it had hoped.

Sears Holding Corp. reported softer sales at its Kmart and Sears stores, causing a first-quarter loss of $1.58 per share, worse than analysts expected. The stock fell 3.2 percent to $73.31.


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Forecast-busting economic growth in Germany and a surprise rebound in Greece helped the 17-nation eurozone start …

Germany powers eurozone economic surge in Q1
May 13, 2011, 8:56 a.m. EDT
Associated Press

Journal By Calvin Lee Ledsome Sr.,

Owner and Founder of:

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LONDON (AP) — Forecast-busting economic growth in Germany and a surprise rebound in Greece helped the 17-nation eurozone start the new year with a bang, with the region growing twice as fast as the U.S. despite constant fears about debt.

The eurozone’s economy expanded by a quarterly rate of 0.8 percent in the first three months of the year, according to Eurostat, the EU’s statistics office on Friday.

That was more than double the 0.3 percent growth posted in the previous three-month period, ahead of analysts’ expectations for a 0.6 percent increase and twice U.S. growth.

“The eurozone is therefore significantly outperforming all other major developed economies at the moment,” said Chris Williamson, chief economist at Markit.

The figures have cemented expectations that the European Central Bank, which has to look at the whole eurozone as it seeks to tame inflation, will follow up April’s interest rate increase — the first in nearly three years — with another, possibly in July, despite some countries’ debt troubles.

In year-on-year terms, the eurozone economy grew 2.5 percent, roughly in line with what many say should be its long-term average.

Unsurprisingly, given its sheer size, Germany was the main reason the eurozone grew so fast. Its 1.5 percent growth during the quarter means the EU’s largest economy has now made up all the output lost during the recession. It was driven by a healthy balance of exports and household spending.

“Germany is the engine of growth among industrial countries — and not just in Europe,” German Economy Minister Philipp Roesler said.

France’s economy, the eurozone’s second-biggest, expanded by a robust 1 percent on higher consumer spending and business investment. Northern economies like the Netherlands grew strongly, while Italy and Spain lagged behind.

Perhaps more surprisingly, given the debt quagmire it is in, Greece posted solid growth of 0.8 percent, its first economic expansion since the fourth quarter of 2009. However, the increase is unlikely a sign of a sustained rebound as the previous quarter’s contraction was doubled to a colossal 2.8 percent.

Manos Chatzidakis, head of investment strategy at Pegasus Securities, said the Greek figures were disappointing because of the revision.

“The economy still has a considerable way to go before recovery,” said Chatzidakis. “We remain in a very unfavorable situation.”

Portugal, another bailout recipient, returned to recession. Its 0.7 percent quarterly decline follows the 0.6 percent drop recorded in the previous three-month period — a recession is classified as two consecutive quarters of negative growth.

Portugal is the third eurozone country to agree to a bailout, following Greece and Ireland.

Those countries’ problems are likely to be protracted as they struggle to reduce their mountains of debt.

The European Commission, the EU’s executive, on Friday raised its debt forecasts for all three of them.

That will likely spice up discussions among eurozone governments on whether Greece will need a second bailout.

It will also fuel calls from many economists who say Greece needs to restructure its debts — to delay or lower its bond repayments.

Eurozone ministers will start discussing how to help Greece at a meeting on Monday.

The Commission said it expects the eurozone economy to grow 1.6 percent in 2011, while the wider 27-country EU, which includes non-euro members like Britain and Poland, is anticipated to grow by 1.8 percent for the second year running.

Germany is expected to grow 2.6 percent this year but Greece is anticipated to shrink another 3.5 percent.

Olli Rehn, the commissioner in charge of monetary and economic affairs, said the EU will surpass the pre-crisis (pre-2008) growth levels next year.

That’s far sooner than most predicted in 2008,when the global economy sank into its deepest and longest recession after the collapse of U.S. investment bank Lehman Brothers brought the financial system to its knees.

“The main message in our forecast is that the economic recovery in Europe is solid and continues, despite recent external turbulence and tensions in the sovereign debt market,” Rehn said.

The series of figures helped the euro, which had lost about 8 cents to the dollar this week as investors scaled back expectations of interest rate increases in Europe and worried about Greece’s debt troubles.

By mid afternoon London time, the euro was up 0.2 percent at $1.4262, having traded as high as $1.4338 earlier. Last week, it was near 18-month highs above $1.49.

“The solid growth performance of the EU’s core economies puts the European Central Bank in an increasingly uncomfortable situation,” said Tim Ohlenburg, senior economist at the Centre for Economic and Business Research.

“Higher interest rates would make sense for the large, central eurozone countries in which unemployment has fallen and output is making a comeback, but this would further undermine weaker economies faced with high debt levels and fragile banking sectors,” Ohlenburg added.


Gabriele Steinhauser in Brussels, Geir Moulson in Berlin and Nicholas Paphitis in Athens contributed to this story.


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Rising oil prices beginning to hurt US economy

Rising oil prices beginning to hurt US economy
Posted by Calvin Lee Ledsome Sr.,Owner and Founder of: and

WASHINGTON (AP) — Just when companies have finally stepped up hiring, rising oil prices are threatening to halt the U.S. economy’s gains.

Some economists are scaling back their estimates for growth this year, in part because flat wages have left households struggling to pay higher gasoline prices.

Oil has topped $108 a barrel, the highest price since 2008. Regular unleaded gasoline now goes for an average $3.69 a gallon, according to AAA’s daily fuel gauge survey, up 86 cents from a year ago.

The higher costs have been driven by unrest in Libya and other oil-producing Middle East countries, along with rising energy demand from a strengthening U.S. economy.

Airlines, shipping companies and other U.S. businesses have been squeezed. The rising prices are further straining an economy struggling with high unemployment and a depressed housing market.

“The surge in oil prices since the end of last year is already doing significant damage to the economy,” says Mark Zandi, chief economist at Moody’s Analytics.

Unlike other kinds of consumer spending, gasoline purchases provide less benefit for the U.S. economy. About half the revenue flows to oil exporting countries like Saudi Arabia and Canada, though U.S. oil companies and gasoline retailers also benefit.

For consumers, more expensive energy siphons away money that would otherwise be used for household purchases, from cars and furniture to clothing and vacations.

High energy prices are “putting a drain on consumer budgets,” says James Hamilton at the University of California, San Diego. “To the extent they’re having to spend more on gasoline, they have to make cutbacks elsewhere.”

Two-thirds of Americans say they expect rising gasoline prices to cause hardship for them or their families in the next six months, according to a new Associated Press-GfK Poll. The telephone poll conducted March 24-28 had a sampling error margin of plus or minus 4.2 percentage points.

Seventy-one percent say they’re cutting back on other expenses to make up for higher pump prices. Sixty-four percent say they’re driving less. And 53 percent say they’re changing vacation plans to stay closer to home.

“I try to leave the car parked at home all day Saturday,” says Curt Lindsay, who commutes an hour each way to his job as a computer systems administrator outside Washington, D.C. “I’d rather not spend the money on gasoline.”

Since gasoline prices topped $3 a gallon, Lindsay has also been trying to drive more slowly to conserve fuel.

His co-worker Albert Zaza canceled family trips to New York and Boston after the cost of filling up his Honda CRV surged from $35 to $47. Zaza spends four to five hours in traffic each day and has to fill up every other day.

Rising fuel prices are pinching businesses too.

In Tipton, Iowa, Grasshopper Lawn Care is tacking 5 percent onto customers’ bills to compensate for higher fuel costs. The company has to buy more than 8,000 gallons of gasoline a year. It plans to keep the surcharge until gasoline prices dip back below $3 a gallon, owner Dan Kessler says.

The oil shock and global instability are diluting the benefits of an improving job market. The unemployment rate, though still high, is at a two-year low. And the economy has just produced the strongest two months of hiring since before the recession began.

Bernard Baumohl, chief economist at the Economic Outlook Group, has slashed his estimate for growth this year to 2.8 percent from 3.5 percent. In 20010, the economy grew 2.9 percent.

Consumer spending accounts for about 70 percent of the economy. After adjusting for inflation and for seasonal factors, consumers spent 0.3 percent more in February than in January.

But that’s unlikely to last. Gasoline prices are surging just as inflation-adjusted incomes are falling. More expensive gas is draining much of the cash Americans are receiving from a cut in Social Security taxes this year.

Zandi estimates that higher oil prices shaved 0.5 percentage point from growth in the January-March quarter. He predicts the economy grew 2.6 percent during the quarter.

If oil prices average $100 a barrel for the year, Zandi says, growth will be 0.3 percentage point lower than if prices had stayed at last year’s level — an average of less than $80 a barrel. A few months of $125-a-barrel oil would slash economic growth by a full percentage point, Zandi says. And a few months at $150 a barrel could push the economy back into recession.

Surging oil prices don’t hurt everybody in the United States. Oil companies, for example, stand to gain. In 2008, Exxon Mobil Corp. earned $45 billion — a record for a U.S. company — after oil prices hit a record $150 a barrel.

Oil services companies such as Halliburton Co., Schlumberger Ltd. and Baker Hughes Inc. also benefit as the oil industry rushes to find and produce more oil. And the products of biodiesel and other alternative energy companies become more competitive the higher oil prices go.

In a speech last week, Sandra Pianalto, president of the Federal Reserve Bank of Cleveland, offered hope that higher oil prices won’t persist long enough to do much damage.

“Large increases in food or energy prices tend to be temporary,” Pianalto said. “History shows that they are often followed by sharp declines.”

But Mark Pawlak, a market strategist at Keefe, Bruyette & Woods, says he worries about a repeat of what happened to the economy last year: It built momentum at the start of 2010, only to stall in the face of a European debt crisis and a run-up in oil prices from February to April.


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