Weak spending, inflation data point to soft U.S. economy

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Recovering UK economy shows broader, faster growth

1 of 2. A shopper leaves a Marks & Spencer store in Leicester, central England March 18, 2013.

Credit: Reuters/Darren Staples

By Olesya Dmitracova and Kate Holton

LONDON | Fri Aug 23, 2013 6:53am EDT

LONDON (Reuters) - Britain's economy grew faster than expected in the second quarter, benefiting from a broad-based pick-up in activity that looked to have put the country's burgeoning recovery on a firmer footing.

Gross domestic product expanded 0.7 percent from the previous quarter, data from the Office for National Statistics showed on Friday, beating its initial estimate and economists' forecasts and putting Britain's growth rate on a par with European powerhouse Germany.

"It does look like the recovery is becoming more self-sustaining," said Philip Shaw, economist at Investec.

Stocks gained after the data, which also showed output rose by a surprisingly strong 1.5 percent from a year ago.

The pound and government bond yields rose, highlighting expectations that the revival could force Britain's central bank to raise interest rates earlier than it has indicated.

British exports rose at the fastest pace since late 2011 and business investment grew faster than household spending, suggesting a shift towards more balanced growth in an economy that has been driven mainly by domestic consumption and imports.

RATES CONUNDRUM

In an effort to encourage spending and investment, the Bank of England said earlier this month it would not raise borrowing costs while unemployment remained above 7 percent, a level it did not expect to be breached for at least three years.

But the threshold may be crossed sooner if Britain's recovery maintains momentum, and since the bank gave its forward guidance, the news on the economy has been predominantly upbeat.

Factories' order books looked in their best shape for two years in August, consumer confidence and retail sales soared in July, and surveys found robust growth across manufacturing, construction and services at the start of the third quarter.

"The Bank of England is therefore facing a growing challenge of how to convince the markets and households that interest rates will not need to rise over the next three years," said Chris Williamson, economist at financial data company Markit.

In a speech next week, BoE governor Mark Carney is tipped to try to talk down expectations of an earlier rise in the base rate, which have caused conditions to tighten on money markets.

Friday's data showed that most key output components of GDP expanded more than originally thought.

Britain's service sector - which makes up more than three quarters of GDP - grew 0.6 percent compared with the first quarter, as estimated earlier.

But manufacturing output growth was heavily revised up to 0.7 percent and the volatile construction sector posted a 1.4 percent rise, also much better than found a month ago.

The increase in building activity is running in parallel with an upturn in the property market, fuelled in part by a state-backed mortgage scheme that critics fear could lead to a new price bubble.

Britain's economy is still 3.2 percent smaller than at its peak in the first quarter of 2008.

(Editing by John Stonestreet)

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U.S. labor market, factory data show economy firming

A job-seeker completes an application at a career fair held by civil rights organization National Urban League as part of its annual conference, in Philadelphia July 25, 2013.

Credit: Reuters/Mark Makela

By Jason Lange

WASHINGTON | Thu Aug 22, 2013 10:55am EDT

WASHINGTON (Reuters) - The number of Americans filing new claims for jobless benefits last week held near a six-year low and U.S. manufacturing activity rose this month, suggesting the economy is starting to find firmer footing.

Initial claims for state unemployment benefits climbed 13,000 to 336,000, just above the level expected by economists in a Reuters poll, Labor Department data showed on Thursday.

Despite the increase, the four-week moving average for claims, which smooths out weekly volatility, fell to its lowest level since November 2007. That backed the widely-held view that U.S. economic growth will accelerate in the second half of the year, and hinted at a stronger pace of hiring in August.

"The trend in the data has been signaling some recent improvement in the labor market," said Daniel Silver, an economist at JPMorgan in New York.

Separately, financial data firm Markit said its preliminary index on factory activity rose in August to 53.9, its best showing since March. A reading above 50 indicates expansion.

"Hopefully the faster growth of new orders seen during August will translate into increasingly strong production gains," said Markit chief economist Chris Williamson.

The U.S. economy has grown at a lackluster pace in recent months, hurt in part by the impact of federal budget cuts.

An index of leading economic indicators published on Thursday by the Conference Board rose 0.6 percent in July, supporting the expectations that growth would accelerate in the remainder of the year.

The generally upbeat data fueled small gains in U.S. stock prices. Yields on U.S. government debt were little changed.

The Federal Reserve is closely monitoring the labor market as it mulls plans to draw down a major economic stimulus program in which it buys long term bonds to keep borrowing costs low.

Fed Chairman Ben Bernanke said last month that the central bank plans to start scaling back on the program this year, and many economists expect it will begin reducing monthly bond purchases in September.

The claims data was collected during the same week the Labor Department surveys employers for its monthly employment report, and the trend hinted that hiring may pick up during August.

At 330,500, the four-week average was about 5 percent lower than it was during the employment report's survey week in July, when employers added a lackluster 162,000 jobs to payrolls.

Still, economists are wary of the claims report's predictive power for hiring. Employers now appear to be laying off workers at roughly pre-recession levels, yet the pace of hiring has appeared to slow since the spring.

"The pace of layoffs may continue to ease, but there is little indication that firms have become more inclined to hire," economists at RBS said in a note to clients.

The claims report showed the number of people still receiving benefits under regular state programs after an initial week of aid rose 29,000 to about 3 million in the week ended Aug 10.

(Additional reporting by Margaret Chadbourn in Washington and by Steven C. Johnson and Richard Leong in New York; Editing by Paul Simao)

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US Economy Adds Fewer Jobs Than Expected

The US added 162,000 jobs in July - the fewest since March - but the gains cut the unemployment rate to a four-and-a-half year low.

The Labour Department said the rate fell from 7.6% in June to 7.4% in July - the lowest level since December 2008.

But that was one of the few good signs in an otherwise lacklustre report.

The economy added 26,000 fewer jobs in May and June than previously estimated while Americans worked fewer hours and their pay dipped.

The figures suggest weak economic growth may be making businesses cautious about hiring.

Reaction to the jobs report on financial markets was slightly negative. Stock index futures gave up early gains and were little changed shortly after the report came out.

The Federal Reserve will pay particularly close attention to the employment data as it decides whether to scale back its $85bn monthly bond purchases later this year. 

The job gains were mostly in lower-paying industries, such as retail, hotels and restaurants.

But some positions were added in better-paying areas. Manufacturing added 6,000 jobs driven by strong gains at auto-plants - the first jobs at factories since February. 

Professional services such as finance, accounting and information technology also increased.

Economic growth remains sluggish. The economy grew at a subpar 1.7% rate in the quarter between April and June, the government said.

While that was an improvement over the previous two quarters, it's still far too weak to rapidly lower unemployment.

Recent data suggest that the economy could strengthen in the second half of the year.

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US Economy Adds Fewer Jobs Than Expected

The US added 162,000 jobs in July - the fewest since March - but the gains cut the unemployment rate to a four-and-a-half year low.

The Labour Department said the rate fell from 7.6% in June to 7.4% in July - the lowest level since December 2008.

But that was one of the few good signs in an otherwise lacklustre report.

The economy added 26,000 fewer jobs in May and June than previously estimated while Americans worked fewer hours and their pay dipped.

The figures suggest weak economic growth may be making businesses cautious about hiring.

Reaction to the jobs report on financial markets was slightly negative. Stock index futures gave up early gains and were little changed shortly after the report came out.

The Federal Reserve will pay particularly close attention to the employment data as it decides whether to scale back its $85bn monthly bond purchases later this year. 

The job gains were mostly in lower-paying industries, such as retail, hotels and restaurants.

But some positions were added in better-paying areas. Manufacturing added 6,000 jobs driven by strong gains at auto-plants - the first jobs at factories since February. 

Professional services such as finance, accounting and information technology also increased.

Economic growth remains sluggish. The economy grew at a subpar 1.7% rate in the quarter between April and June, the government said.

While that was an improvement over the previous two quarters, it's still far too weak to rapidly lower unemployment.

Recent data suggest that the economy could strengthen in the second half of the year.

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View the original article here

US Economy Adds Fewer Jobs Than Expected

The US added 162,000 jobs in July - the fewest since March - but the gains cut the unemployment rate to a four-and-a-half year low.

The Labour Department said the rate fell from 7.6% in June to 7.4% in July - the lowest level since December 2008.

But that was one of the few good signs in an otherwise lacklustre report.

The economy added 26,000 fewer jobs in May and June than previously estimated while Americans worked fewer hours and their pay dipped.

The figures suggest weak economic growth may be making businesses cautious about hiring.

Reaction to the jobs report on financial markets was slightly negative. Stock index futures gave up early gains and were little changed shortly after the report came out.

The Federal Reserve will pay particularly close attention to the employment data as it decides whether to scale back its $85bn monthly bond purchases later this year. 

The job gains were mostly in lower-paying industries, such as retail, hotels and restaurants.

But some positions were added in better-paying areas. Manufacturing added 6,000 jobs driven by strong gains at auto-plants - the first jobs at factories since February. 

Professional services such as finance, accounting and information technology also increased.

Economic growth remains sluggish. The economy grew at a subpar 1.7% rate in the quarter between April and June, the government said.

While that was an improvement over the previous two quarters, it's still far too weak to rapidly lower unemployment.

Recent data suggest that the economy could strengthen in the second half of the year.

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Obama says choices now will govern future economy

WASHINGTON (AP) — President Barack Obama says Washington's top priority must be to reverse trends like economic inequality, weakened middle-class security and global competition. He says Washington has lost focus on the economy.

In his weekly Internet and radio address, Obama is pressing economic ideas he's been promoting in an ongoing series of speeches. He wants better access to education, home ownership, health care and secure retirement.

He says that he'll listen to good ideas from either party but that Republicans are threatening to take the nation in the wrong direction.

In the Republican address, House Majority Leader Eric Cantor of Virginia says Republicans will focus this week on government abuse, such as intrusive regulations and red tape that he says threaten Americans' paychecks and civil liberties.

___

Online:

Obama address: www.whitehouse.gov

GOP address: www.gop.gov

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Greece: Wealthy Shipowners To Bail Out Economy

The owners of Greece's wealthy shipping industry, under fire over low tax bills amid recession and austerity, have agreed to help out the struggling economy.

The government says the agreement with the Hellenic Shipowners Association will bring in about 140m euros (£120m) a year.

According to an official statement, 441 shipping companies with 2,769 ships will make voluntary payments over a three-year period.

Prime Minister Antonis Samaras said: "The agreement for your voluntary participation in the state budget with 90% of the fleet sailing under a Greek flag, and 65% of the fleet sailing under a foreign flag, is truly moving."

The government estimates it will be worth about 75m euros (£64m) for the rest of 2013 and up to 140m euros in a full year.

The Merchant Marine Ministry said in a statement: "The signing of the agreement confirms the willingness of the shipping community to voluntarily contribute, for three years, to the national efforts in stabilising the country's economy."

Greek shipowners are leaders in their sector internationally, controlling about 15% of the world's merchant fleet, but only about a third of their vessels sail under the Greek flag.

Greece is going through its sixth consecutive year of recession amid brutal austerity cuts and pressure for more jobs to be slashed in the public sector.

This has increased resentment against the shipowners because vessels registered under foreign flags generate profits in low-tax regimes, and in Greece the shipping sector benefits from special tax advantages.

Earlier this year, the shipowners were forced to accept a tax imposed on vessels sailing under foreign flags.

Greece's merchant marine sector accounts for more than 48% of the country's balance of payments, topping the list between 2009 and 2011, followed by tourism.

The announcement of the voluntary payments comes after the Greek parliament approved a package of further reforms putting thousands of public sector jobs at risk.

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Economy Figures Set To Show 'Positive Growth'

By Tadhg Enright, Business Reporter

Economists are predicting good news when the first estimate of economic growth during April, May and June is revealed next week.

Analysts expect the Office for National Statistics to say that the economy grew by around 0.5% when it reveals its preliminary estimate for Q2 GDP on Thursday.

They point to several important economic indicators which have been positive in recent months.

Consumer confidence was at a 25 months high in June. Business confidence in Q2 was at its highest since 2007.

Retail sales volumes rose by 0.9% between Q1 and Q2. New car sales were 13.4% higher in June compared with the same month last year. 

Economist Vicky Pryce says consumers are more confident in spending money

Former government economic advisor Vicky Pryce told Sky News: "I think what's going on right now is that the consumer is very keen on spending. The consumer has reduced his savings ratio very substantially from about 7% a year ago to about 4% now so they are spending their way out of this recession. 

"It's not because they're earning an awful lot more because of course average earnings have not really moved very much and there all sorts of restrictions in terms of public sector wages so they are suffering a little bit from that. But they are feeling a lot more confident so they're out there spending."

Even the International Monetary Fund, which recently encouraged the Government to ease public spending cuts, has revised upwards its forecast for UK economic growth in 2013 from 0.7% to 0.9%.

However, some of the economy's biggest problems remain with more Government cutbacks still on the horizon, banks still reluctant to lend and consumer prices rising at a faster rate than average wages.

There are also signs of a resurgence in the property market

Howard Archer, chief UK & European economist at IHS Global Insight, said: "There are still significant headwinds to growth which suggest that the upside for growth will be limited for some time to come and that the economy will likely remain prone to periodic losses of momentum.

"While we are encouraged by the recent extended and diverse good news on the UK economy, we currently remain cautious in markedly raising our GDP growth forecasts - especially given the many false dawns that there have been in recent times and the fact that events in the eurozone still pose a significant threat."

There is also mounting evidence of a resurgence in the property market with house prices rising in June and mortgage approvals at a 41 month high in May.

However critics of the Government's homebuying incentives such as Help to Buy have warned that it risks fuelling a property bubble.

Brunel University professor Moorad Choudhry told Sky News: "I'd like to ask why is the Government subsidising house purchases? That is something we got out of years back when we unwound tax relief on mortgages' interest.

"If I inject cheap money into the stock market and it rises, that's not genuine growth. It's conceptually similar to subsidising anything and it's a false growth."

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