The U.S. probably lost jobs in July for a seventh consecutive month and the unemployment rate rose, increasing the risk the economic slowdown will worsen, economists said before a government report today.
Payrolls fell by 75,000 after a 62,000 decline in June, according to the median estimate of 80 economists surveyed by Bloomberg News. The jobless rate probably rose to 5.6 percent, the highest level in four years, according to the survey median.
Fewer jobs, combined with decreasing property values, stricter lending rules and near-record energy prices, would further undermine the ability of Americans to spend. Cutbacks at UAL Corp. and Starbucks Corp. signal firings are spreading beyond builders and manufacturers as the cost of raw materials soars.
“We'll see accelerated declines in payrolls,'' said Lindsey Piegza, an economic analyst at FTN Financial in New York. “That will really compound the pressure on the consumer.''
The Labor Department's employment report is due at 8:30 a.m. in Washington. Payroll estimates in the Bloomberg survey ranged from a decline of 150,000 to no change. The jobless rate is forecast to rise from 5.5 percent in June.
A private report today may show manufacturing shrank in July for the sixth time in eight months. The Institute for Supply Management's factory index fell to 49 from 50.2 in June, according to the Bloomberg survey median. A reading of 50 divides growth from contraction.
The payrolls report is projected to show a 40,000 decline in factory jobs.
Recession Signal
The employment figures may reinforce concern that the economy is in a recession. The July cuts would bring the total drop in payrolls so far this year to more than half a million.
The National Bureau of Economic Research, the official arbiter of U.S how to get a free credit report easy payday loans. contractions, tracks payrolls, sales, incomes, production and gross domestic product in making the recession call. The group defines downturns as a “significant'' decrease in activity over a sustained period of time, and usually takes six to 18 months to make a determination.
The economy shrank at the end of 2007 and grew less than forecast in this year's second quarter, figures from the Commerce Department showed yesterday. Some economists said this indicated the U.S. slipped into a recession late last year. Investors pared bets the Federal Reserve will raise interest rates this year.
More Americans filed initial claims for unemployment benefits last week than at any time in more than five years, Labor reported yesterday. Consumer confidence surveys have indicated that Americans, growing more pessimistic about job prospects, may trim spending.
More Firings
Starbucks, the world's largest chain of coffee shops, this week said it'll cut another 1,000 jobs as sales slump. The Seattle-based company on July 1 announced plans to eliminate as many as 12,000 positions worldwide.
Automakers and airlines continue to shed jobs. General Motors Corp. may cut about 5,000 U.S. jobs by year-end, people familiar with the plan said this week. July announcements at carriers included 7,000 cuts at UAL's United Airlines, and 6,840 at American Airlines parent AMR Corp.
Sealed Air Corp., the maker of Bubble Wrap packaging, said this week it plans to eliminate 900 to 1,000 jobs globally after second-quarter profit fell because of rising costs to make plastics.
Alaska Airlines is making changes to its mileage plan program beginning in November — changes that have irked frequent fliers.
The changes will make it harder to earn a free ticket on the Seattle-based airline, a subsidiary of Alaska Air Group Inc. (NYSE: ALK). For example, the number of miles required for a free round trip is increasing from 20,000 miles to 25,000 on Nov. 1.
Alaska officials say the changes reflect the "current state of the industry" and increasing costs for fuel.
"When Alaska Airlines introduced its popular 20,000 mile ‘Saver’ award 13 years ago, we were paying less than $20 a barrel for crude oil. Last week oil touched $145 a barrel," said Steve Jarvis, Alaska Airlines vice president of marketing, sales and customer service, in a statement.
Alaska is also going to charge mileage plan members $25 for each award ticket booked on one of its partner airlines and it won’t provide any frequent flier miles for travelers using its "AS50" program, where a combination of miles and cash obtains a ticket easy payday loans low fees payday loan.
Alaska Airlines flies to Oahu, Maui and Kauai. Flights to Kona on the Big Island will begin in November.
Puget Sound Business Journal (Seattle)
For Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, chocolate isn't as sweet as it used to be: The cost of almost every ingredient has gone up.
“Commodities across the board have pressured us,'' said Bryan Merryman, the chief financial officer of Rocky Mountain Chocolate Factory Inc., as he led Hoenig on a two-hour tour of the company's Durango, Colorado, factory this week. “There are a lot of pressures in our system that we haven't seen before.''
Nestled on the western slope of the Rocky Mountains about 400 miles (643.6 kilometers) southwest of Denver, the 53,000- square-foot (4,770-square-meter) factory offers a glimpse of how Fed policy makers gather anecdotes that shape their views on the economy. Hoenig, one of 12 regional Fed presidents, said he takes road trips two or three times a year. The factory visit supports his worries about inflation, he said.
“When you see a business like this one, where everything it uses has been accelerating in price, you see what it does to a business person,'' Hoenig, 61, said. The July 15 visit “reinforced the way I think, because I'm on record as being concerned about inflation,'' he said.
A day after the trip, the Labor Department reported a 5 percent increase in consumer prices for the 12 months ended in June, the most in 17 years. Fed policy makers are trying to fight inflation and economic weakening. Growth for the six months ended in March was the slowest in five years.
Rocky Mountain's sales began to slow in September, Merryman said. Now, “our business is certainly in a recession. I don't know what the catalyst is going to be for a turnaround.''
Rising Costs
Cocoa prices have risen 10 percent annually for five or six years, and fuel and corn syrup are climbing at annual rates of 30 percent or more, Merryman said.
The central bank is facing the biggest U.S. financial crisis since the Great Depression, according to the International Monetary Fund, amid collapsing home values and lack of credit for many borrowers. Fed Chairman Ben S. Bernanke told the Senate Banking Committee in Washington on July 15 that risks have increased for U.S. growth and inflation.
Durango, best known for whitewater rafting, kayaking, and access to five major ski areas, has largely been shielded from the “peaks and valleys'' of the real-estate market because of economic diversity, said Gary Derck, chief executive and president of the company that manages the Durango Mountain Resort.
The Old West city of about 15,000 people has a college and a medical center and acts as a center for the oil and gas industry in the U.S. Southwest.
Donning Hair Nets
Hoenig and the Kansas City Fed's Denver branch directors donned hair nets and peppered Merryman with questions on the tour as they watched workers make Rocky Pop caramel corn and raisin clusters pay day loan fast cash payday loan.
Rocky Mountain's revenue for the fiscal first quarter ended May 31 dropped to $7.1 million from $7.3 million a year earlier as fewer customers visited its more than 300 stores. Rocky Mountain shares have dropped 45 percent this year to $8.72 yesterday on the Nasdaq Stock Market.
With chocolates priced at $19 a pound, Rocky Mountain positions itself between Godiva Chocolatier Inc., owned by Yildiz Holding AS of Turkey, and See's Candies Inc., owned by Berkshire Hathaway Inc.
While states such as California, Florida and Nevada were hit by falling real-estate values during the past year, the Kansas City Fed's district has been insulated by surging farm incomes and farmland values. The district includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming and parts of New Mexico and Missouri.
`Modest' Growth
Economic growth in the seven-state area has been “modest,'' with higher gasoline and food prices limiting spending at malls in April and May, according to the Fed's most recent summary of current economic conditions in the region.
Anecdotes like the ones gathered at the Rocky Mountain factory make their way into the Fed's so-called Beige Book report and are a part of a give-and-take process of gathering and sharing information, Hoenig said.
“The Fed is not just a Washington-centric institution,'' he said. “It's an institution that has 12 regional banks reaching out for information and sharing information with citizens.''
Hoenig, who makes 50 to 60 mostly private speeches a year, said he plans to make trips to Oklahoma City and Scottsbluff, Nebraska, later this year.
“What the reserve banks hear from their contacts can provide the Fed with an early warning of changes that may not show up in the published statistics for several weeks or even months,'' said Al Broaddus, former president of the Richmond Fed.
`Emotional Recession'
While Durango Mountain Resort is expecting a 20 percent year-over-year rise in lodging rates and volume from June to September, some families aren't staying extra nights or buying vacation homes, Derck said.
“We think we have an emotional recession that's preventing even folks whose personal situations are better off than a year ago from investing, spending and enjoying life,'' he said before meeting with Hoenig at the French restaurant Chez Grand-Mere. “People who are affluent and well-off have a brain, too, and have the same psychology: They don't know what the next shoe is to drop.''
Employers trimmed jobs from their payrolls in June for the sixth straight month, as the government’s closely watched report Thursday showed continued weakness in the labor market.
The Labor Department reported a net loss of 62,000 jobs in the month. That matched the job loss figure for May, which was revised higher from 49,000. Economists surveyed by Briefing.com had forecast a loss of 60,000 jobs.
The June number brought to 438,000 the number of jobs lost by the U.S. economy so far this year.
The unemployment rate stayed at 5.5%. Economists had forecast the rate would come in at 5.4% in the latest reading.
In a separate report, the department said initial claims for unemployment insurance rose 16,000 to 404,000 in the latest week. Economist Robert Brusca of FAO Economics said the reading over 400,000 is a "classic recession signal."
And the even more closely watched four-week moving average for initial claims neared that worrisome 400,000 benchmark, reaching 390,500 - the highest level since the four weeks after 2005’s Hurricane Katrina.
The four-week average hasn’t been at or above the 400,000 mark since 2003.
The job losses in the monthly report were concentrated in manufacturing and construction, two sectors that have been badly battered in the current economic downturn.
Manufacturing lost 33,000 jobs, even as the troubled auto and auto parts makers posted a modest gain. Construction lost 43,000, with about half of that coming from contractors and subcontractors in the home building segment of the market.
But the job losses were not limited to those areas. Retailers trimmed 7,500 jobs, while business and professional services cutting 51,000 jobs.
Mitigating the decline were government employers, who added 29,000 jobs, education and health services, which also added 29,000, and leisure and hospitality, which saw a 24,000-job increase.
Still the report showed a worrisome spreading of economic weakness, according to Lakshman Achuthan, managing director of the Economic Cycle Research Institute. He said this report is further proof that the nation has fallen into a recession.
"This is pretty much as expected, but expected isn’t good news these days," he said fast cash advance quick payday loans. "What it boils down to is a drip, drip, drip of ominous information."
The seasonally adjusted average hourly wage edged up 6 cents to $18.01, which was in line with forecasts, while the average hourly work week stayed unchanged.
Wages are not keeping pace with inflation, as the average wage is now up 3.4% over the last 12 months, less than the 4.5% rise in prices over the 12 months ended in May as reported by the government.
The presidential campaigns of John McCain and Barack Obama both issued statements saying that the current problems in the labor market justified immediate action from Congress, with each arguing he had the right solution for the economy.
"The American people cannot afford an economic agenda that will take our country in the wrong direction and cost jobs," said the statement from McCain, the presumptive Republican candidate. "At a time when our small businesses need support from Washington, we cannot raise taxes, increase regulation and isolate ourselves from foreign markets."
But Obama said McCain was endorsing economic policies of the Bush administration that had led to the current problems.
"The American people are paying the price for the failed economic policies of the past eight years, and we can’t afford four more years of more of the same," said his statement.
Neither candidate gave much in the way of specifics about the immediate action they are proposing.
McCain called for immediate tax relief for families, a plan to help those facing foreclosure, lower health care costs, investment in innovation, a move toward energy independence and opening more foreign markets to U.S. exports.
Obama proposed immediate relief with energy rebates for working families this summer, a fund to help families avoid foreclosure, extended benefits for the long-term jobless, and assistance to states that have been hard-hit by the economic downturn.
Inflation in Europe accelerated more than economists forecast, eroding consumers' spending power and adding to pressure on the European Central Bank to increase borrowing costs even as economic growth cools.
The inflation rate in the euro area rose to 4 percent this month, the highest in more than 16 years, from 3.7 percent in May, the European Union statistics office in Luxembourg said today. Economists had forecast a 3.9 percent rate for June, according to the median of 38 estimates in a Bloomberg survey.
Inflation-linked bonds fell on the data, signaling investors expect faster price increases over the long term even after ECB President Jean-Claude Trichet last week indicated his support for the so-called hawks on the governing council who argue rising inflation risks require higher interest rates. The price gains stemming from record oil and commodities are clouding the outlook for economic growth in the 15 nations that use the euro.
“It's a bad figure,'' EU Economic and Monetary Affairs Commissioner Joaquin Almunia said in Brussels today. “I wouldn't be surprised if the inflation figure for 2008 turns out to be above our forecast'' of 3.2 percent.
Europe's inflation rate has crossed “a psychological threshold,'' said Gilles Moec, an economist at Bank of America in London. “This will make it easier for the hawks to argue a rate increase is needed.''
Breakeven Rate
Investors' expectations of future inflation, as gauged by the breakeven rate on five-year inflation-linked French government bonds, rose to a record 2.67 percent following today's report, up from 2.57 percent yesterday.
“A change in long-term expectations is bad news for the ECB,'' Moec said. “That's what they are really looking at.''
Crude-oil prices have doubled in the last 12 months and passed $143 a barrel for the first time today. Food commodities have also surged in the past year, boosting how much consumers are paying for staples such as bread and milk.
Inflation in Italy, the euro region's No. 3 economy, also accelerated more than economists expected in June to 4 percent, the fastest in over 11 years cashadvance pay day loans.
“The surge in inflation is the reason why we've seen the economy lurching downwards,'' said Ken Wattret, senior economist at BNP Paribas in London. “The pipeline pressures are increasing and the news on the wage front has been very alarming.''
European retail sales plunged in June with the Bloomberg purchasing managers index falling to 44 from 53.1 in May. Consumer confidence is at record lows in France and Spain, while Germany and Italy also saw sentiment decline.
Energy Costs
Ludwigshafen, Germany-based chemical maker BASF SE is raising prices by as much as 20 percent and Dow Chemical Co., the largest U.S. chemical maker, by up to 25 percent to make up for surging energy costs. Rio Tinto Group said last week it agreed to increase iron-ore contract prices with Baosteel Steel Corp., China's largest steelmaker, by 80 percent to 97 percent.
Workers are demanding higher wages to compensate for the rise in the cost of living, a phenomenon central bankers refer to as “second-round effects,'' which risks setting off an inflationary spiral. Ground staff at Cologne-based Deutsche Lufthansa AG are calling for a 9.8 percent pay increase.
“The projections we have under our eyes are making the working assumption that we don't have broad-based second-round effects,'' Trichet said June 5. At the same time, policy makers “noted that risks to price stability over the medium term have increased further.''
The ECB this month raised its forecast for euro-area inflation next year to around 2.4 percent from around 2.1 percent. Inflation has exceeded the central bank's 2 percent limit the past 10 months.
The pace of price increases “is of deep concern,'' the EU's Almunia said. “We have to take care to avoid creating an inflationary spiral.''
The figures published today are an estimate. The statistics office will publish a detailed breakdown of the data and the core rate on July 16.
Italian consumer confidence in May unexpectedly rose to its highest this year as Prime Minister Silvio Berlusconi formed a new government that announced tax cuts and relief for homeowners facing higher mortgage payments.
The Rome-based Isae Institute's index, calculated from a survey of 2,000 families, rose to 103.2 from a revised 99.9 last month. Economists had expected a decline to 99.4, according to the median forecast of 16 predictions. The increase was the second gain since the index fell to a four-year low in March.
“The change of guard and the fiscal pledges will provide a short-term boost, even though the scenario in the long run remains bleak,'' said Marco Valli, an economist at UniCredit Group in Milan.
Berlusconi's first legislative act yesterday was to scrap the country's main residential property tax and reduce levies that workers are charged on overtime pay. The government also announced an agreement with banks to allow homeowners to freeze mortgage payments at 2006 rates, a measure that could affect 1.25 million families. More than 70 percent of Italians back the measures, a survey by polling company IPR Marketing showed today.
Consumer optimism about their short-term prospects surged to 101.7 from 95.6, while confidence about the economic situation rose to 84.9 from 79.6, Isae said today in its report.
Berlusconi won the April elections with a bigger-than- expected majority in parliament.
Tax Pledges
“The end of the political uncertainty with the victory of the center right and the promises to adopt measures to help wage earnings, could have had a positive effect,'' Chiara Corsa, an economist at UniCredit Group, said in an interview with Bloomberg television.
Still, “today's positive number doesn't change expectations that there won't be any dynamic change in consumption,'' she said payday loans americashadvance.
The government is trying to combat the effects of higher food costs and oil prices above $135 a barrel, which are stifling consumer spending. Household consumption accounts for two-thirds of the $2 trillion economy and the drop in spending is leaving Italy on track to be the 15-member euro region's worst- performing economy this year.
No `Easy Fixes'
So far, Italians are pleased with the direction of economic policy-making. Eighty-seven percent of Italians support the removal of ICI, a tax property tax homeowners pay to local authorities, IPR said. The pollster surveyed 1,000 Italians yesterday, after Berlusconi held his first policy making cabinet meeting and confirmed the abolition of the tax. No margin of error was given.
Still, finance minister Giulio Tremonti said this week Europe's fourth-biggest economy will stall this year and that there are no “easy fixes.'' Families have been on tight budgets and Italian retail sales have been tumbling for the past 14 months, a monthly Bloomberg survey showed.
The government's outlook is even gloomier than the European Commission's forecast of 0.5 percent growth, which would probably make Italy the slowest-growing economy in the euro region in 2008. The Italian economy may have already slipped into recession in the first quarter, some economists say, and has suffered three recessions between 2001 and 2005.
The national statistics office, Istat, tomorrow releases growth figures for the fourth quarter and first quarter of 2008 at 11 a.m. Rome time. The April consumer confidence number was revised from 99.8.
The Isae survey was conducted between May 2 and May 19.
Cablevision Systems Corp. says it is buying the Sundance Channel for about $500 million.
The New York-area cable TV provider already owns several other cable networks including the IFC movie channel and AMC, which won acclaim last year for its original series "Mad Men."
Cablevision (CVC, Fortune 500) said Wednesday that it plans to keep the Sundance Channel operating separately.
The Sundance Channel is owned by General Electric Co.’s (GE, Fortune 500) NBC, CBS Corp payday loan payday loan. (CBS, Fortune 500) and actor-director Robert Redford.
Manufacturing in the U.S. contracted for a third consecutive month in April, as sales slowed and investment faltered, economists said before a report today.
The Institute for Supply Management's manufacturing index probably fell to 48 from 48.6 in March, according to the median estimate of economists surveyed by Bloomberg News. A reading of 50 is the dividing line between contraction and expansion.
Manufacturers, which account for 12 percent of the economy, are cutting back as surging fuel and food costs and a loss of jobs cause consumers and businesses to retrench. Only gains in exports are preventing factories from stumbling even more as growth almost stalls.
Manufacturing “hasn't collapsed, but it certainly has weakened,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. “The manufacturing number is going to be weaker rather than stronger in the next few months.''
Forecasts of the 78 economists surveyed ranged from 45.5 to 50. The Tempe, Arizona-based ISM will release the report at 10 a.m. New York time.
Other reports today are forecast to show consumer spending has slowed, firings have picked up and spending on construction projects is down.
Household spending, which accounts for more than two-thirds of the economy, probably rose 0.2 percent in March after a 0.1 percent gain a month earlier, economists project an 8:30 a.m. report from the Commerce Department will show. The two-month increase in purchases would be the smallest in more than a year.
Construction Declines
Another Commerce report at 10:00 a.m. is forecast to show that investment in building projects dropped 0.7 percent in March. While home construction has fallen for more than two years, builders have now also begun cutting back on commercial projects such as shopping malls and offices.
The number of workers filing first-time claims for jobless benefits probably rose to 365,000 last week from 342,000 a week earlier, economists estimate a Labor Department report at 8:30 a.m. will show.
The deepest housing recession in a generation is pushing the U.S. to the brink of a recession http://savingpaydayloans.com cashadvance. The economy expanded at a 0.6 percent annual pace in the first quarter, matching the prior quarter's rate, the Commerce Department reported yesterday.
The economy would have shrunk at a 0.2 percent pace if not for a gain in inventories that contributed 0.8 percent to growth.
No Collapse
So far, manufacturing has done better than in past downturns. While the ISM's factory index has been falling, it's still well above the 42.1 reading reached in February 2001, a month before the start of the 2001 recession.
Growing overseas demand is preventing manufacturing from sinking even more. The U.S. trade deficit shrank in the first quarter to the lowest level in more than five years on record exports, Commerce reported yesterday.
Government reports have shown the slowdown in manufacturing isn't deepening. Industrial output rose 0.3 percent in March following a 0.7 percent decline in February, according to Fed data. Orders for durable goods excluding transportation equipment rose more than forecast, the Commerce Department said last week.
The Federal Reserve yesterday cut its benchmark rate by a quarter point and said the housing contraction and tight credit were “likely to weigh on economic growth'' for the next few quarters. Policy makers also indicated they were ready to pause after seven rate cuts since September.
Auto Sales Down
Industry figures today are forecast to show sales of cars and light trucks fell in April at a 15 million annual pace, according to analysts and economists surveyed. Vehicles sold at an average 15.2 million annual pace in the first three months of the year, the fewest since the third quarter of 1998.
Carmakers have been at the epicenter of the slowdown in manufacturing. Detroit-based General Motors Corp., the world's largest automaker, said this week it's cutting output of large pickup trucks and sport-utility vehicles by about 10 percent this year at four plants in the U.S. and Canada because of slowing sales.
Asia’s fear of impending rice shortages looks to have become something of a self-fulfilling prophecy and exposed the over-reliance of many of the region’s economies on food subsidies and other market-imbalancing steps.
Economic analysts and experts said the sense of crisis should begin to ease with harvests arriving in markets in coming weeks, but policymakers should take this as a wake-up call to start focusing on sustainable increases in productivity.
Spooked by the possibility of a shortfall and surging prices, Asian nations have in recent weeks slapped export curbs on their staple food and subsidized prices, reversing years of economic reform. The measures have helped stoke inflation and sowed more panic, the analysts said.
“The current rice crisis is sort of man-made,” said Randy Barker, acting head of Philippines-based International Rice Research Institute’s social sciences division.
“We sort of created this situation by restricting exports and even on the imports side, countries are trying to build stocks.”
Trade officials are now urging the World Trade Organisation to push food-producing countries to maintain exports to prevent a worsening of the crisis.
“At the moment there is no shortage, but the controls are based on the national security point of view payday loans in 1 hour absolutely free credit report. It’s a decision by governments,” said Kazuyuki Tsurumi, representative of the Food and Agriculture Organization of the United Nations in Manila.
“When the harvest in 2008 becomes clear, maybe some countries’ export bans will be relaxed or lifted I hope.”
European Central Bank officials are raising the prospect of interest-rate increases for the first time since the global credit squeeze began last August, stepping up their battle to keep inflation in check.
Comments by policy makers including Axel Weber and Christian Noyer are forcing investors and economists into an about-face after they previously bet the bank would follow the U.S. Federal Reserve in cutting rates to shore up growth.
The ECB officials are reacting to a surge in oil and food prices, which pushed inflation to a 16-year high of 3.6 percent in March. They're concerned that faster inflation will feed into wage demands and prompt companies to pass on higher costs. The contrasting stances by the world's two most important central banks helped push the euro to a record $1.60 yesterday.
“They're not threatening an immediate rate hike, but the hawks are framing the debate now,'' said Nick Kounis, an economist at Fortis Bank NV in Amsterdam who expects the ECB's next step to be an increase in mid-2009. The stronger rhetoric “has been forced on them by the fact that headline inflation has surprised significantly.''
The ECB last month forecast that inflation would average about 2.9 percent this year and 2.1 percent in 2009. The bank aims to keep the rate of consumer-price increases just below 2 percent. The UBS Bloomberg Constant Maturity Commodity Index, which tracks 26 raw materials, has risen 37 percent in the past year, with commodities including oil, corn and rice hitting records.
High Enough?
The Frankfurt-based ECB on April 10 kept its key rate at a six-year high of 4 percent, and President Jean-Claude Trichet said current policy will help the bank achieve price stability. Since then, policy makers including Weber have said they're not sure rates are high enough to contain inflation.
The ECB will “monitor very closely all developments in the coming weeks and decide whether the current level of interest rates ensures we'll meet our objective'' of controlling inflation, Weber, who heads Germany's Bundesbank, said this week.
“If needed we'll move rates,'' France's Noyer told RTL radio yesterday. By contrast, on April 4, he said he was “absolutely certain'' inflation would drop below 2 percent at the end of 2008.
Noyer's colleague Yves Mersch of Luxembourg said the ECB will have to raise the question “every month'' whether an increase in interest rates is necessary, the Financial Times Deutschland reported yesterday, citing an interview.
`Wishful Thinking'
Eonia swap contracts, a widely used market gauge of interest- rate expectations, rose to 4.1 percent yesterday, up from around 3.2 percent in mid-March creditreport bad credit payday loan.
“The market is starting to quickly re-price its rate expectations as it realizes it was wishful thinking to have thought the ECB would follow the Fed in cutting,'' said Guillaume Menuet, an economist at Merrill Lynch & Co. in London, who predicts the ECB will leave its key rate unchanged through 2009.
The Fed has lowered its benchmark rate by 3 percentage points since mid-September, taking it to 2.25 percent, as the U.S. economy teetered on the brink of a recession. The Bank of England on April 10 pared its key rate for the third time, to 5 percent. The Bank of Canada yesterday lowered its benchmark rate by half a point to 3 percent.
Financial institutions worldwide have reported losses or writedowns of $290 billion since the start of 2007. The cost of borrowing euros for three months has surged the most in four months, with the Euribor rate increasing to 4.82 percent yesterday compared with 4.37 percent on Feb. 22, the European Banking Federation said.
IMF Pessimism
Growth in Europe's manufacturing activity slowed more than forecast in April, while a gauge of growth in services industries such as banking and telecommunications unexpectedly rose.
The International Monetary Fund estimates growth in the 15- nation euro region will slow to 1.4 percent this year from 2.6 percent in 2007. Inflation is forecast to drop to 1.9 percent.
As soon as commodity prices start to drop, the ECB needs to lower rates, “not into 2009, but in the next three, six months.'' IMF Europe Director Michael Deppler said in a Bloomberg Television interview this week.
“Inflation expectations may recede rapidly'' if the IMF is right, Noyer told the Wall Street Journal in an interview late yesterday. Interest-rate moves “can go both ways.''
For now, inflation expectations, as measured by French inflation-indexed bonds, are rising, going above 2.3 percent this week from 2.1 percent a month ago, and fueling the ECB's concerns about so-called second-round effects.
Germany's Ver.di union last month negotiated a settlement for as many as 2.1 million public-sector staff that it said was worth 8.9 percent over two years. The German chemical-workers' union last week settled a new contract that raises wages 4.4 percent this year and another 3.3 percent in 2009.
“It would be very challenging for the ECB to lower interest rates, particularly in the months ahead,'' said Julian Callow, chief European economist at Barclays Capital in London. “As for rate increases, they can't be ruled out.''
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