Higher food, oil prices weigh on the US economy

WASHINGTON  - new data out this week suggested the US economy remains deep in the doldrums, thwart the efforts of Washington for the industry to revive and create jobs two years after the end of the last recession.

High oil prices and rising food costs seem to have delayed what was supposed to be more dynamic in the private sector of the country which would be taken relay while federal and local governments slash spending.

Surprised by the data economists have reduced forecasts for economic growth in the second quarter following the dismal 1.8% pace in the first, with indicators of industrial production, consumer spending and unemployment appearing all sweet.

Consultancy Macroeconomic Advisers lowered its gross domestic product (GDP) growth forecasts for the period April-June to 2.8 per cent Wednesday, 3.5 percent only two weeks earlier, after seeing a sharp decline in orders for manufactured goods sustainable in April - a fact flag how the industrial sector.

The Commerce Department reported overall orders fell by 3.6% the previous month.

And, excluding volatile orders for aircraft and other transportation equipment, orders are always down 1.5% - showing us manufacturers sell less.

Numbers of Ministry of labour has published Thursday show that it weekly new claims for unemployment insurance - a sign of the pace of layoffs - are more than 400 000 for the seventh consecutive week, after a drop below that level for several weeks in February and March seems a signal improvement job market.

Meanwhile, the Commerce Department has confirmed its previous estimate that the economy only increased at a slow annual rate of 1.8% in the first quarter, when economists had expected a higher number.

Notable in the latest data was that consumer spending had been lower than initially included - a sign, analysts said, that high oil and food prices were hitting the budgets of buyers for other things.

Ian Shepherdson, US economist for high frequency economics, said the sharp rise in the price of oil has helped stifle job creation.

"The trend in claims has pushed up to a little as companies responded to rising oil prices," he said.

Commenting on the figure of the GDP in the first quarter, Michael Gapen of Barclays Capital said that low consumption suggested that "the thrust of the global food inflation higher and energy prices cut into more than initially estimated real expenses."

For two months the rise in new jobless claims data was explained by statistics, seasonal or weather features.

Maximum number of 424 000 new claims Thursday - the previous week to 414,000 - came with no such explanation but the trend has been hard to deny.

"The initial data of claims, on balance, deteriorated in the second quarter," said RDQ Economics in a report.

"We can no longer hide behind (Ministry of labour) asserts that the increase in applications is bound quarter volatility.".

The unemployment rate of 9.0% has dogged the White House, which has tried to keep expenditure low rates of interest of the Government, and the competitive dollar to stimulate commerce and industry in the hope that they will start hiring.

Interviewed by a magazine for the elderly that he would like for its 50th anniversary on August 4, President Barack Obama responded: "a much lower rate of unemployment." And declining gas prices. Those who would be perfect gifts. ?

Economists said that they always plan a second half stronger, as consumers and businesses to adapt to the high price of oil.

The second half "will be better that oil has hit fades,", said Shepherdson.

"If reinforces the underlying economy as credit faster, because we believe, then the interruption of oil will not last longer and (new unemployed) claims will lead South once again in the summer."

But other more unexpected turns in the data information.

"The surprises of negative economic data have significantly only positive surprises,", said Deutsche Bank Securities.

But the bank kept at the same time its any year of the forecast at 3.4%.

"The theme remains that productivity is largely slowing as continued economic expansion, which means that the pace of hiring should accelerate - as is typical at this stage of an economic expansion".