NEWS,27.10.2012

Economic report not all bad for Obama

Republican challenger Mitt Romney used a government report showing tepid economic growth to hammer President Barack Obama less than two weeks before Election Day, but the report also had some good news for the president.With the Commerce Department reporting a modest 2% growth rate unlikely to make a big dent in unemployment, Romney said Obama inherited a bad situation when he took office and "made the problem worse." He criticised Obama for failing to reduce borrowing and spending, protect entitlement programs or reach deals with Republicans.The report also provided ammunition for Obama: It showed the economy grew for the 13th straight quarter at a rate that - though modest - beat expectations. Obama claims progress during his term on fixing the economy, though conceding it hasn't been fast enough, and says Romney's policies would only make matters worse.The economy remains the race's dominant issue. But voters who are still undecided aren't likely to be swayed by Friday's mixed report from the Commerce Department, experts said.Growth in the July-September quarter climbed slightly but was still too weak to stir significantly more hiring. The pace of expansion increased to a 2% annual rate from 1.3% in the April-June quarter, led by more consumer and government spending. This year's third-quarter growth is slightly below the 2.2% average pace since the recession ended in June 2009."For the average American, I don't think changes in quarterly GDP" make a big difference in their perception of the economy, said Andrew Kohut, president of the Pew Research Centre. "It's certainly good for the president that the number is not bad because that would resonate."With 11 days until the election, the economy is being kept afloat by revitalised consumer spending and the early stages of a housing recovery. But more than three years after the Great Recession ended, the US continues to struggle because businesses are reluctant to invest, and slower global growth has cut demand for American exports. The recovery is still the slowest since World War II.The latest report did exceed expectations in GDP growth and showed some progress in consumer spending, which drives 70% of economic activity.Obama took office during the worst downturn since the Great Depression and says his policies stabilised the economy later that year. He argues that his massive stimulus package and auto bailout helped it grow in 2010.

 

US economic growth accelerating

US economic growth accelerated in the third quarter as a last minute spurt in consumer spending and a surprise turnaround in government outlays offset the first cutback in business investment in more than a year.Even so, the stronger pace of expansion fell short of what is needed to make much of a dent in unemployment, and it offered little cheer for the White House ahead of the closely contested Nov. 6 presidential election.Gross domestic product grew at a 2% annual rate, the Commerce Department said on Friday in its first estimate of the third quarter, a pick-up from the second quarter's 1.3% pace. But to make substantial headway cutting the jobless rate, the economy needs to grow by more than a 2.5% pace over several quarters.The growth was a bit better than economists had expected, in part because of a surge in government defence spending, which was not expected to last. defence spending rose at its fastest pace in three years, and combined with the rise in household consumption and a jump in home building to strengthen domestic demand."The economy still has only weak forward momentum," said Nigel Gault, chief US economist at IHS Global Insight in Lexington Massachusetts. "Some underlying fundamentals are improving, but uncertainty at home and abroad is holding back the business sector."US stocks ended the day little changed, with corporate earnings holding greater sway over market sentiment, while Treasury debt prices rose. The dollar was flat against a basket of currencies.Since climbing out of recession, the US economy has faced a series of headwinds ranging from high gasoline prices to the debt turmoil in Europe and, lately, fears of US government austerity. The economy has struggled to exceed a 2% growth pace and remains about 4.5 million jobs short of where it stood when the downturn started.White House adviser Alan Krueger said the GDP report underscored the need to extend tax cuts for the middle class and small businesses, as President Barack Obama has proposed. Obama's Republican challenger, Mitt Romney, described it as evidence of the president's failed policies.In the third quarter, consumers shrugged off the impending sharp cuts in government spending and higher taxes that are due early next year and went on a bit of a shopping spree, buying automobiles and snapping up Apple Inc's iPhone 5.Consumer spending, which accounts for about 70% of US economic activity, grew at a 2% rate after increasing 1.5% in the second quarter.A separate private-sector report showed consumer sentiment rose this month to its highest point in five years, another sign households are little worried by the looming fiscal cliff at year end that will raise income taxes and is estimated to drain about $US600 billion from the economy next year unless Congress acts.High stock prices and firming home values have made households a bit more willing to take on new debt, supporting consumer spending even in the face of higher gasoline prices.An inflation gauge in the government's GDP report rose at a 1.8% rate, up from the second quarter's 0.7% pace. But a core measure that strips out food and energy costs slowed to a 1.3% rate, suggesting the rise in overall inflation will be temporary.Even so, with about 23 million Americans either out of work or underemployed, consumers might have to cut back, especially if they get slapped with a higher tax bill in 2013.Incomes were squeezed in the third quarter rising just 0.8% after accounting for inflation and taxes and households slowed their saving to ramp up their spending.Government spending, which snapped eight straight quarters of declines, accounted for 0.7%age point of GDP growth. defence outlays jumped at a 13% annual rate, the most since the second quarter of 2009, after dropping for three consecutive quarters. The surge was mainly in defence services installation, and support for both weapons and personnel.Fears of the fiscal cliff hammered business spending, which dropped at a 1.3% pace, the first decrease since the first quarter of 2011."We are being really cautious about (the) kinds of investments we make and the kinds of risks we are taking in this environment," the chief executive of consumer products maker Newell Rubbermaid Inc, Mike Polk, told on Friday.Worries over slower global growth have weighed on the corporate sector, which has issued a series of disappointing third-quarter earnings reports. According to Thomson Reuters data, 63% of companies have posted revenues below analysts' expectations; several have also announced job cuts.Slowing global demand, particularly weakness in Europe and China, caused US exports to contract for the first time since the first quarter of 2009. Exports declined by 1.6%, outstripping a 0.2% decline in imports, marking the first drop in imports for three years.Another spot of weakness in the GDP report were inventories, which were squeezed by a drought in the US Midwest. Farm inventories cut 0.42%age point from GDP growth and could remain a drag in the fourth quarter.Home building, which has been a weak spot in the economic recovery, surged at a 14.4% rate, thanks in large part to the Federal Reserve's ultra-accommodative monetary policy stance, which has driven mortgage rates to record lows.Economists say housing  the epicentre of the last recession  will contribute to growth this year for the first time since 2005.

Rightwing 'Big Bang' hits Israeli politics

The rightwing alliance between Israeli Prime Minister Benjamin Netanyahu and his foreign minister has polarised political forces in Israel ahead of next January's parliamentary election.Netanyahu and Avigdor Lieberman's surprise announcement late on Thursday that their respective Likud and Yisrael Beitenu parties would run on a joint ticket was dubbed "the rightwing Big Bang" by the Israeli press.Alongside the ultra-nationalist Yisrael Beitenu, the premier's right-wing Likud - already predicted to win the vote would be able to form a broad nationalist bloc leaning strongly to the right.Such a move would also allow Netanyahu to overcome, to some degree, the chronic instability of past coalition governments in the country."Israel needs a strong coalition government based on a political list based on genuine cooperation," Netanyahu said on Thursday evening."We ask the people to support strengthening the state, and I want a clear mandate so I can take care of the basic" issues.Israeli media quoted a survey by an adviser to Lieberman, according to which the joint list would receive 51 seats in the 120-seat Knesset, or parliament, when the votes are cast on January 22.Other polls, however, predict an outcome of less than 42 seats, the current combined number of Likud (27) and Yisrael Beitenu (15), the third largest political force in the Knesset."We are not worried about the polls, what interests us is the construction of a broad nationalist camp," Lieberman said at a news conference on Friday."Israel must move away from a reality of many parties to a system of larger parties. We will probably never reach two, like in the United States, but must achieve a system of four or five parties to ensure governmental stability," he added.Assuming his expected victory takes place, Netanyahu is certain to remain premier.But the Likud has vehemently denied a report of a premiership rotation deal with Lieberman, a populist authoritarian certain to receive a key position in the future cabinet.The leaders of the political centre and left denounced the "nationalist" and even "racist" Likud.Lieberman, a settler who was chief of Netanyahu's staff during his first term as prime minister in the late 1990s, is famous for his anti-Arab and nationalistic statements."The demon is out of its nationalistic closet. Netanyahu has removed his mask," the leader of the centre-right Kadima party Shaul Mofaz told public radio, calling on the centre to unify. "Bibi" Netanyahu and Lieberman's together might "encourage the centre-right parties to announce close cooperation in a national salvation front," wrote Yossi Sarid, former Knesset member for the left-wing Meretz party in a column in left-leaning daily Haaretz.Such a front would have "but a single mission: no to 'Biberman'."Speaking on public radio, Labour chief Shelly Yachimovich called for the creation of a "centre-left bloc, consisting of the centrist parties and moderate members of the Likud."In recent weeks media have noted the ambitions of potential candidates, such as former prime minister Ehud Olmert and former foreign minister Tzipi Livni, to head a centrist bloc to compete with Netanyahu.The Likud-Yisrael Beitenu alliance also threatens the orthodox parties, which could lose the pivotal role they have wielded in past coalitions, and they could even be excluded from the next one.According to commentators, Netanyahu's pact with Lieberman implies the adoption of at least some of Yisrael Beitenu's platform.Its policies include military conscription of rabbinic seminary (yeshivot) students and reducing the power of the Chief Rabbinate on matters such as conversions.The Israeli parliament decided earlier this month that the election would be held on January 22, 2013, nine months before its scheduled date.

EU lawmakers cancel Iran visit

A planned visit to Iran by five Euro MPs was called off on Saturday after Tehran refused to let them meet with a jailed activist lawyer and a filmmaker, just a day after the two were awarded a prestigious European human rights prize."The five MEPs were about to leave for Tehran when delegation chair (Tarja) Cronberg received a phone call from the Iranian ambassador to the EU, saying they would not be allowed to meet with the two Sakharov Prize winners," jailed lawyer Nasrin Sotoudeh and filmmaker Jafar Panahi, a European Parliament source said.Sotoudeh, 47, who is serving an 11-year jail sentence for conspiring against state security, and Panahi, 52, who is under house arrest and has been banned from making films for 20 years, were awarded the 2012 Sakharov Prize on Friday."The Islamic Republic of Iran categorically rejected any pre-conditions. Therefore this visit has been cancelled," the Young Journalists Club, an affiliate of the state broadcaster, reported on its website.The Isna news agency quoted Hossein Sheikholeslam, international affairs advisor to the speaker of parliament, as saying that Iran had "rejected a pre-condition set by the European parliamentary delegation to meet with two prisoners".EU sanctions"If the delegation agrees to visit Iran under the initially agreed conditions and agenda, then there is no objection to the visit... But we cannot accept the current pre-condition."Iran has cracked down on both since its disputed June 2009 presidential election.Sotoudeh is a leading human rights campaigner known for her work as a lawyer representing opposition activists, while Panahi has been acclaimed at international festivals for his gritty, socially critical movies.The human rights and democracy prize "is a message of solidarity and recognition to a woman and a man who have not been bowed by fear and intimidation and who have decided to put the fate of their country before their own", Parliament President Martin Schulz said on Friday.Schulz had also warned that the visit would be cancelled if the delegation was unable to meet Sotoudeh and Panahi.The rights award comes on the heels of tough new EU sanctions against Iran aimed at forcing a breakthrough in talks between global powers and Tehran on its disputed nuclear programme.After a biting oil embargo took effect in July, EU foreign ministers last week tightened the economic noose by targeting dealings with Iran's banks, shipping and gas imports.The last visit by a European parliamentary delegation to Iran was in 2007.