NEWS,30.01.2013

US economy shrinks in fourth quarter

The US economy contracted at a rate of 0.1% in the fourth quarter, according to the government's first estimate on Wednesday.But the economy expanded overall a modest 2.2% for the full year in 2012, a gain from 1.8% in 2013, the Commerce Department said.The fourth quarter estimate was lower than forecast, but came after a strong 3.1% pace in the third quarter."The downturn in real GDP in the fourth quarter primarily reflected downturns in private inventory investment, in federal government spending, in exports, and in state and local government spending," the department said.It stressed that the first estimate of GDP growth is based on incomplete data and is often revised.

US adds more jobs than expected

US private-sector employers added 192 000 jobs in January, more than economists were expecting, a sign of growth in the labor market, a report by a payrolls processor showed on Wednesday.Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 165 000 jobs. December's private payrolls were revised down to an increase of 185 000 from the previously reported 215 000.The report is jointly developed with Moody's Analytics.Small businesses with less than 50 employees did the most hiring this month, adding 115 000 jobs. But large businesses of more than 500 workers cut 2 000 jobs."The job market is slowly, but steadily, improving," Mark Zandi, chief economist of Moody's Analytics, said in a statement.By industry,professional and business services firms led gains with 40 000 jobs while the manufacturing sector fared the worst, cutting 3 000 positions.

    

Europe's economic gloom lifts

Business leaders and consumers in the eurozone sent signals in January that the clouds of economic gloom are lifting slightly, marking the third month running of firming optimism, data from the European Commission showed on Wednesday.Confidence indicators are important pointers to how the economy will perform, and the latest figures suggested that optimism is gaining ground in the eurozone, pulled by Germany in particular and overall also by the construction sector.The Commission's eurozone confidence index rose by 1.4 points from the December level to 89.2 points against a background of easing tensions over the debt crisis.And the index for all 27 members of the European Union also rose by 1.4 points to 90.6 points.In the eurozone, the sector of activity where confidence rose most was the construction industry for which the indicator gained 4.6 points. This reflected orders taken and expectations concerning the need for labour.The reading for confidence expressed by consumers also rose by 2.4 points in January.Confidence in the services sector rose by 1.0 point.However, for industry and the retail sector, the indicators were flat.Sentiment about the outlook for employment was less pessimistic in all sectors of activity than has been the case, both in the eurozone and in the European Union.In the eurozone, confidence rose the most in Germany by 2.5 points, in the Netherlands by 1.0 point, and in Spain by 0.5 points.In Italy it was steady and in France it slipped by 0.3 points.US stock index futures showed little reaction to the ADP report, though futures extended declines later in the morning following data that showed the economy unexpectedly contracted in the fourth quarter.The ADP figures come ahead of the government's much more comprehensive labor market report on Friday, which includes both public and private sector employment."The data suggests that jobs growth is accelerating and bodes well for Friday's payrolls report," said Omer Esiner, analyst at Commonwealth Foreign Exchange in Washington.The government release is expected to show hiring held steady in January with 160 000 jobs created.Economists often refer to the ADP report to fine-tune their expectations for the payrolls numbers, though it is not always accurate in predicting the outcome.

Obama's popularity highest in 4 years

US President Barack Obama's popularity has hit 60%, the highest level since he first took office four years ago, according to a poll released on Wednesday.The survey by ABC television and The Washington Post was made public just a little more than a week after the president's formal swearing-in was witnessed by an estimated one million people in Washington and millions more across the nation.The pollsters credited public approval of the president's inauguration address for his soaring poll numbers.In that address, Obama embraced a liberal agenda that vowed action during his second term on gun reform, gay rights and the environment, among other issues.But while the poll showed he has broad public support, it also found that his popularity is slightly less than that enjoyed by two other re-elected presidents - Bill Clinton and Ronald Reagan - at the start of their second terms.Obama's favourability rating at the start of this second term is higher, however, than that of his predecessor George W Bush at the same point during his tenure.The 60% popularity represents a 10-point increase since last summer, during the heat of the contentious presidential race against Republican challenger Mitt Romney.Obama has a way to go until he matches his all-time highest popularity numbers 79% achieved just days before he took office in January 2009, the pollsters said.The telephone survey of 1 022 adults was taken between 23 to 27 January and had a 3.5% margin of error.

Israel releases frozen Palestinian funds

Israel said on Wednesday it had released $100m of the tariffs and tax money it collects on behalf of the Palestinian Authority, which were frozen last year as punishment for the UN bid. But an Israeli official said it was a one-off measure to ease the financial crisis faced by the Palestinians and was not a sign that the transfers would be renewed."This decision was taken by Prime Minister Benjamin Netanyahu because of the Palestinian Authority's very difficult financial situation," an official at the premier's office told AFP."But this transfer is temporary and affects only funds owed for one month," he added, speaking on condition of anonymity."The prime minister did not commit to continue these transfers."The Palestinians said Israel's decision to transfer money on a one-time basis was effectively "extortion”."Israel's announcement that it will transfer 400m shekels [$107.31m] of our money on a one-time basis means they will continue to carry out extortion on this issue," Palestinian negotiator Saeb Erakat told AFP."Israel is using our money, which it collects, as a sword hanging over our heads," he said."Israel should pay us our money immediately and the international community should condemn this Israeli piracy and stop it immediately," he added."The transfer of the funds on a one-time basis means the financial and political siege is continuing and that nothing has changed in Israeli politics and Netanyahu's approach."Israel in early December announced it would not transfer tax and tariff funds it collects for the Palestinians in response to their successful bid for upgraded UN membership, a move the Jewish state had fiercely opposed.Every month, Israel transfers tens of millions of dollars in customs duties that are levied on goods destined for Palestinian markets that transit through Israeli ports, and which constitute a large percentage of the Palestinian budget.The transfers are governed by the 1994 Paris Protocols that governs economic agreements between Israel and the Palestinians.But Israel often freezes the transfer of funds as a punitive measure in response to diplomatic or political developments viewed as harmful.The measure has deepened an already dire financial crisis faced by the Palestinian Authority, which has frequently been unable to make payroll for its employees over the last year.In response to Israel's freezing of the funds, the Palestinians have urged Arab nations to activate a promised "safety net" of $100m a month to make up the shortfall.But despite pledging to deliver the money, funds have yet to materialise, leaving the Palestinian Authority unable to pay its thousands of government employees, who are still owed half their salaries from November and all their salaries from December.

NEWS,30.07.2012

Draghi under pressure to deliver euro pledge

European Central Bank (ECB) President Mario Draghi must back up his pledge to do what it takes to protect the euro when the bank's policymakers meet on Thursday or else face deep disappointment from investors hungry for, and expecting, immediate action. In his boldest comments to date, Draghi said last week that, within its mandate, the ECB was ready to do whatever it takes to preserve the euro, fuelling expectation it could revive its bond purchase programme as it did a year ago when it started buying the government debt of Spain and Italy.But that is far from certain. The ECB might instead explore new policy tools such as outright asset purchases, or quantitative easing, something its peers in Britain, the United States and Japan are already using to stimulate growth.There have also been recent suggestions that it could empower national central banks to broaden their asset buying abilities.The ECB is under intense pressure from within and outside the euro zone to intervene and bring those governments' soaring borrowing costs under control as the debt crisis deepens and increasingly poses a risk to the global economy. Reflecting the increased tension, U.S. Treasury Secretary Timothy Geithner is travelling to Germany, the euro zone's biggest economy and key to any euro rescue plan, on Monday to meet Germany's finance minister and Draghi. The ECB chief will also meet Bundesbank President Jens Weidmann, a strong opponent of the ECB's mothballed government bond purchase programme, ahead of Thursday's ECB meeting, a central bank source said. Italian and Spanish bond markets rallied after Draghi's comments last week, but fresh turmoil is on the cards if Draghi fails to persuade investors on Thursday that the ECB stands behind its pledge. "With expectations running high, the scope for disappointment at Thursday's ECB policy meeting has increased considerably," said Nicholas Spiro at Spiro Sovereign Strategy.The August meeting usually draws little attention and in fact the ECB used to skip the summer month's meeting until 2006 - the last year in which it took policy action in August.The ECB could well break with tradition this year.Huw Pill, economist at Goldman Sachs and a former senior ECB official, said the ECB could decide on Thursday to buy unsecured debt of bank or firms via the national central banks to spare its own balance sheet. "We forecast the announcement of measures to permit national central banks to purchase private-sector assets under their own risk to implement 'credit easing', within a general framework approved by the Governing Council," Pill said. Another cut in interest rates seems less likely as the ECB assesses the impact of its July rate cut to a new record low at 0.75%. At that meeting, the bank also decided to stop paying banks interest on their overnight deposits with it.A poll showed 44 out of 69 economists expect the ECB to cut rates again by the end of the year, with seven saying the bank would cut already in August. Draghi's remarks last Thursday left many in the market wondering whether his message had been intended and if so how far the ECB would be prepared to go before it reaches the limits of its mandate."If you had just landed from planet Mars, and this was the first time that you had heard the ECB speak on this issue, you might think that it was about to fire a big bazooka at sovereign bond markets," said David Mackie, economist at J.P. Morgan."But, having listened carefully to the central bank over the last two and a half years, we don't think that is about to happen," he added. Germany's Bundesbank doused hopes for renewed bond purchases on Friday, saying it still opposed the programme. Instead the ECB would rather see Europe's permanent ESM bailout fund start buying the bonds of euro zone strugglers, but the fund's limited fire power could make its intervention less effective. One solution would be to give the ESM access to ECB funding and Austrian policymaker Ewald Nowotny last week broke ranks with his colleagues, saying such a step had merits. Draghi's candid remarks took some of his fellow Governing Council members by surprise, having not agreed with them before hand on the message he would send. This has prompted concerns Draghi may have raised false hopes in the market."Nothing new has been discussed (on action ECB could take), but Draghi is not a man to make comments lightly and at the end of the day he is the one calling the shots," said a euro zone central bank source. "There was always going to be a time when Draghi decided he had to act," the source said. Draghi did not have a pre-written speech when he spoke in front of an investment conference in London on Thursday and only much later that day did the ECB publish the transcript online.Another source said Draghi was not flagging an imminent move, and any action would likely come only in September or October, in conjunction with euro zone governments, and with a request from Spain for a bailout programme, which Madrid was still trying to avoid.

Spanish economy shrinks faster

Spain slid deeper into recession in the second quarter as a tough new round of austerity to head off the budget crisis that threatens the euro took effect both on overall demand and the price consumers have to pay for goods. The first official numbers on gross domestic product showed the economy shrank 0.4% from the previous quarter after contracting 0.3% in the first three months of the year. The economy was 1.0% smaller than a year earlier. Consumer prices according to both Spanish and EU methodology rose 2.2% year-on-year, with the EU-harmonised increase above forecasts being due to medicine price hikes put in place by the government to save money and deflate the deficit. Economists warned price hikes, and especially a 3-point rise in value-added tax due to come into effect in September, would distort consumer prices while the deepening recession reflected slower domestic demand. That will further weaken the government’s efforts to get the economy growing again - vital if it is to meet targets on reducing its budget shortfall and halting a market-inspired crisis in how it finances its debt. “To properly follow Spain's economic reality, I would look at domestic service inflation, which is where we’ll see stagnation and even deflationary pressures. Consumption remains very weak,” economist at Madrid-based broker Intermoney Jose Carlos Diez said. Spain slipped into the second recession since 2009 in the first quarter and is expected to continue to shrink until well into 2013 as consumers and businesses rein in spending and the eurozone debt crisis saps investor confidence. Fears over the health of Spain’s economy as it fights to reduce its public deficit has lifted funding costs to euro-era highs in recent weeks leading many to think an application for a full-bailout could soon become inevitable. A full breakdown of the growth data will be published August 28, while the final price data will be available August 14.