critical component

Weekly Jobless Claims Fall to Near Six-Year Low

August 15, 2013 by NewsMaker

The government reports on Thursday suggested an acceleration in job growth in early August and hinted at pockets of pricing power in the sluggish economy, which could ease concerns among some Fed officials that inflation was too low.

While data on manufacturing was less encouraging, economists were little fazed and said it merely suggested the improvement in factory activity was slower than had been anticipated.

“It looks like the weakness in employment last month was a fluke and the breadth of gains in CPI suggest that there will be less push back against tapering because of low inflation,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester Pennsylvania. “A September taper is still on the table.”

The U.S. central bank has said it plans to start trimming the $85 billion in bonds it is purchasing each month to keep borrowing costs low later this year.

Shares on Wall Street fell and yields on U.S. Treasuries jumped to a two-year high on the data. The dollar briefly climbed to a near two-week peak against the euro.

First-time applications for state unemployment benefits dropped 15,000 to a seasonally adjusted 320,000, the lowest level since October 2007, the Labor Department said. Economists had expected initial claims to come in at 335,000 last week.

The four-week moving average for new claims, which irons out week-to-week volatility, fell to its lowest level since November 2007, offering hope of an improvement in labor market conditions after hiring slowed a bit in July.

Carl Riccadonna, a senior economist at Deutsche Bank Securities in New York, said new claims and the four-week average at pre-recession levels were consistent with a pick-up in the pace of hiring, if not in August, then some time in the next couple of months.

“The critical component is going to be the August jobs report. If that comes in at least where it was in July, then this is going to keep the Fed on track to initiate tapering at the September (policy) meeting,” said Riccadonna.

Employers added 162,000 jobs to their payrolls last month, with the jobless rate hitting a 4-1/2 year low of 7.4 percent.

BROAD GAINS IN PRICES

In another report, the Labor Department said its Consumer Price Index rose 0.2 percent, in line with economists’ expectations, as the cost of goods and services ranging from tobacco to apparel and food increased.

The CPI had increased 0.5 percent in June. In the 12 months through July, the CPI advanced 2.0 percent, the largest increase since February, after increasing 1.8 percent in June.

The push in inflation to the Fed’s 2 percent target suggested the downward drift in prices seen early in the year was over and could comfort some central bank officials who have warned on the potential dangers of inflation running too low.

Stripping out energy and food, consumer prices rose 0.2 percent for a third straight month. That took the increase over the past 12 months to 1.7 percent after core CPI gained 1.6 percent in June.

The uptick in prices fits in with Fed Chairman Ben Bernanke’s views that the low inflation was temporary. Last month, there were also increases in the prices of gasoline, transportation and shelter.

Medical care services recorded a second successive month of gains in July. Medical care, which makes up about 10 percent of the core CPI, had been subdued in April and May.

The lack of pressure on health care costs had been attributed to the expiration of patents on several popular prescription drugs and government spending cuts that have cut payments to doctors and hospitals for Medicare.

Furniture prices posted their largest decline in three years, while airline fairs fell for second straight month.

News on the factory sector was a bit downbeat, with the Fed reporting that manufacturing output slipped 0.1 percent last month, held down by a 1.7 percent fall in the production of motor vehicles and machinery.

That, together with a drop in utilities production, left industrial output unchanged in July.

Separately, the New York Federal Reserve said its “Empire State” general business conditions index fell to 8.24 in August from 9.46 in July. A reading above zero indicates expansion.

However, details of the report were fairly encouraging, with strong gains in labor market gauges. The inventory drawdown continued, which bodes well for future production.

The Philadelphia Federal Reserve, meanwhile, said its business activity index fell to 9.3 in August from 19.8 in July, amid a slowdown in new orders growth and factory jobs.

But economists do not view this survey as a good barometer of national factory activity and were optimistic manufacturing will regain muscle, supported by a strengthening housing market recovery and firming demand overseas which is pushing up domestic exports.

“Growth in Europe and a pop in exports in June suggests we might see production growth resume after a flat first half,” said Mei Li, an economist at FTN Financial in New York.

(Reporting by Lucia Mutikani, additional reporting by Paige Gance in Washington and Steven C Johnson in New York; Editing by Chizu Nomiyama)

Article source: http://www.nytimes.com/reuters/2013/08/15/business/15reuters-usa-economy.html?partner=rss&emc=rss

I.H.T. Special Report: Oil & Money: China Leads the Way as Demand for Coal Surges Worldwide

But another problem stood out. India relies on coal for 55 percent of its electrical power and struggles to keep enough on hand.

Coal remains a critical component of the world’s energy supply, despite its bad image. In China, demand for coal in 2010 resulted in a traffic jam 120 kilometers, or 75 miles, long caused by more than 10,000 trucks carrying supplies from Inner Mongolia. India is increasing coal imports.

So is Europe, as it takes advantage of lower coal prices in the United States. Higher-priced natural gas on the Continent is creating demand for more coal imports from the United States, where coal is taking a drubbing from less costly natural gas.

Dirty, fickle and dangerous, coal may seem an odd contender in a world where promising renewable energy sources like solar, wind and hydroelectric power are attracting attention. Anathema to environmentalists because it creates so much pollution, coal still has the undeniable advantages of being widely available and easy to ship and burn.

The biggest attraction, however, is low cost. By many estimates, including that of Li Junfeng, longtime director general of the National Development and Reform Commission of China, burning coal still costs about one-third as much as using renewable energy like wind or solar.

Coal is not subject to the vagaries of windless or sunless days and can easily meet base-load demands of electricity consumers without interruption. So can nuclear power, but the nuclear industry is still reeling from the March 2011 disaster at the Fukushima Daiichi power plant in Japan. Countries like Germany have turned away from nuclear reactors.

Global demand for coal is expected to grow from 7.9 billion tons this year to 8.9 billion tons by 2016, with the bulk of new demand — about 700 million tons — coming from China, according to a Peabody Energy study. China is expected to add 240 gigawatts, the equivalent of adding about 160 new coal-fired plants to the 620 operating now, within four years. During that period, India will add another 70 gigawatts, via more than 46 plants.

“If you poke your head outside of the U.S., coal-fired plants are being built left and right,” said William Burns, an energy analyst with Johnson Rice in New Orleans. “Coal is still the cheapest fuel source.”

Besides strong demand for thermal coal, which is burned in power plants, use of metallurgical coal or coking coal, used in blast furnaces, is also expected to more than double in China, to about 1.7 billion metric tons by 2016, as the country’s steel mills churn out more steel for automobiles, skyscrapers, and export goods, the Peabody study says.

Coking coal will be increasingly in demand in other steel centers like Brazil and India, pushing coal companies to scrounge for new reserves in places like Botswana, Mongolia and Mozambique.

In all, coal use is expected to increase 50 percent by 2035, said Milton Catelin, executive director of the London-based World Coal Association

“Last year, coal represented 30 percent of world energy and that’s the highest share it has had since 1969,” he said.

Within a year or two, coal will surpass oil as the planet’s primary fuel, Mr. Catelin predicted.

For now, coal seems to be sidestepping a major potential impediment to its use. International accords restricting greenhouse gas emissions to prevent climate change so far have been ineffective.

China plans to put carbon-emission reducing equipment on new plants. But China and other big coal producers still have a long way to go in matters like mine safety. On average, about 2,500 Chinese coal miners die in accidents every year.

On Aug. 29, for instance, a blast at the Xiaojiawan mine in Sichuan province killed more than 40 miners. Officials blamed lax safety and overcrowding in the shafts.

Industry officials insist that as large Chinese coal companies like the Shenhua Group buy out smaller mines, and new technologies develop that can detect dangerous methane gas and automatically shut down mines, safety will improve.

Nowhere are the controversies surrounding coal more pronounced than in the United States. Coal became an important issue in the 2012 U.S. presidential campaign, with the Republican nominee, Mitt Romney, accusing President Barack Obama of being anti-coal.

The American coal industry says Mr. Obama is waging a “war on coal” in response to his proposed regulation of air pollution and surface mining in mountain areas.

This article has been revised to reflect the following correction:

Correction: November 12, 2012

An earlier version of this article included an incorrect middle initial for the author. The initial (which he does not use in his byline) is A, not G.

Article source: http://www.nytimes.com/2012/11/13/business/energy-environment/china-leads-the-way-as-demand-for-coal-surges-worldwide.html?partner=rss&emc=rss

Weekly Jobless Claims Fall to Near Six-Year Low

I.H.T. Special Report: Oil & Money: China Leads the Way as Demand for Coal Surges Worldwide

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