Oil rises above US$77 a barrel

NEW YORK: Energy prices ticked higher Wednesday after government reports showed gains in U.S. industrial production and new home building.

Benchmark oil for March delivery added 32 cents to settle at US$77.33 a barrel on the New York Mercantile Exchange. Prices rose as high as US$77.82 earlier in the day, the highest in two weeks.

Weak fuel consumption has kept oil and natural gas prices from rising higher during the past few months.

But reports by the Federal Reserve and the Commerce Department suggested that the U.S. may soon increase its appetite for petroleum.

A report on industrial production from the Federal Reserve showed gains in manufacturing, mining and utilities.

It was the first collective increase since August.

The Commerce Department said new home and apartment construction increased in January to the highest level in six months.

However, home construction may not hold at that rate as applications for building permits fell nearly 5 percent.

Uncertainty about the European economy pushed prices in different directions over the past few trading days.

After jumping nearly 4 percent on Tuesday, oil prices have mostly leveled off.

"The market seems to have priced in all the news, and it's waiting for the next story," analyst Phil Flynn said.

In other Nymex trading in March contracts, heating oil increased 1.04 cents to settle at $2.0067 a gallon, and gasoline rose 1.89 cents to settle at $2.0071 a gallon.

Natural gas gained 7.6 cents to settle at $5.386 per 1,000 cubic feet.

In London, Brent crude added 59 cents to settle at $76.27 a barrel on the ICE futures exchange. - AP

US debt will keep growing even with recovery

WASHINGTON (AP): It's bad enough that Greece's debt problems have rattled global financial markets. In the world's largest economic and military power, there's a far more serious debt dilemma.

For the U.S., the crushing weight of its debt threatens to overwhelm everything the federal government does, even in the short-term, best-case financial scenario - a full recovery and a return to prerecession employment levels.

The government already has made so many promises to so many expanding "mandatory" programs. Just keeping these commitments, without major changes in taxing and spending, will lead to deficits that cannot be sustained.

Take Social Security, Medicare and other benefits. Add in interest payments on a national debt that now exceeds $12.3 trillion. It all will gobble up 80 percent of all federal revenues by 2020, government economists project.

That doesn't leave room for much else. What's left is the entire rest of the government, including military and homeland security spending, which has been protected and nurtured by the White House and Congress, regardless of the party in power.

The U.S. debt crisis also raises the question of how long the world's leading power can remain its largest borrower.

Moody's Investors Service recently warned that Washington's credit rating could be in jeopardy if the nation's finances didn't improve.

Despite election-year political pressure from voters for lawmakers to restrain spending, some recent votes suggests that Congress, left to its own devices, probably isn't up to the task of trimming deficits.

Japan still world's No. 2 economy

TOKYO (AP): Japan is still the world's second-biggest economy as fourth-quarter growth beat expectations and kept the country just ahead of a surging China.

Real gross domestic product grew at an annual pace of 4.6 percent in the October-December period, the government said Monday. The average forecast of 15 economists polled by The Associated Press was annualized growth of 3.4 percent.

The results indicate that Japan continues to benefit from government stimulus measures around the world, which have bolstered global trade and persuaded Japanese households to boost spending.

GDP, or the total value of the nation's goods and services, has climbed for three straight quarters. The annualized figure corresponds to quarterly growth of 1.1 percent. Japan posted zero growth in the July-September quarter.

Japan's nominal GDP for the 2009 calendar year came to about $5.1 trillion. China said last month its domestic output totaled $4.9 trillion.

Government officials said they were encouraged by the latest numbers, particularly since it was the first time in seven quarters for domestic demand to push GDP higher. Consumer spending, which accounts for about 60 percent of the economy, rose 0.7 percent from the previous quarter as shoppers took advantage of incentives on cars and home appliances.

Companies are also gaining confidence and starting to invest in factories and equipment.

Japan may now be strong enough to avoid falling back into recession, said Cabinet official Keisuke Tsumura, according to Kyodo News agency.

Analysts agreed but predicted that consumer demand will decelerate, dragging growth in the months ahead and putting pressure on Prime Minister Yukio Hatoyama to draw up more stimulus measures.

"Policy benefits will fade in subsequent quarters and deflationary tendencies remain stubborn," said Tetsufumi Yamakawa, chief Japan economist at Goldman Sachs.

Corporate capital spending climbed 1 percent in the first expansion since January-March 2008. Public investment fell 1.6 percent, while exports jumped 5 percent.

The fourth quarter figures cap a miserable economic year overall that sent Japan to its steepest recession since World War II.

GDP fell a record 5 percent in 2009, the Cabinet Office report said in its report.

Japan managed to hold on to its spot as the world's No. 2 economy, though analysts expect a quickly growing China to overtake it sometime this year.

But it is precisely the strength of China and other emerging markets in Asia that has lifted Japan from its downturn, helping to offset domestic risks such as deflation and falling wages.

Exports in December rose for the first time since the collapse of Lehman Brothers in late 2008, powering industrial production up 2.2 percent from the previous month.

Other major economies also face uncertainty ahead.

The U.S. economy expanded at an annual rate of 5.7 percent in the fourth quarter, but many analysts predict a slowdown this quarter as double-digit unemployment chills consumer spending.

The 16 countries that use the euro barely grew in the fourth quarter, as a modest recovery stalled amid turmoil in financially troubled members such as Greece and a flat performance from Germany, the biggest euro economy.

New Zealanders Unemployment Rate Rose to 7.3%

Statistics NZ said the number of unemployed New Zealanders kept climbing during the December quarter, jumping 18,000 to reach 168,000. New Zealand, which recorded an unemployment rate of 7.3 per cent for the December quarter, is still not doing too badly when compared with the rest of the world. The Reserve Bank of New Zealand (RBNZ) was expecting an unemployment rate of 6.6 percent, while the market was expecting 6.8 percent.

The NZ dollar fell to a five month low of US69.60c from US70.80c just before the report. It was at US69.80c at 5pm from US71.06c at the same time yesterday. The higher than expected increase in unemployment means interest rates may remain lower for longer, which makes the NZ dollar less attractive to investors.

The Government says a leap in the population is behind unemployment levels reaching their highest level since 1999. The jump in the unemployment rate was largely due to an increase in the number of people entering the labour force but who were unable to find work. There were 341,300 visitors in December, the highest ever recorded in one month, and a 6 per cent increase over the previous record of 322,200 in December 2008.

Wage and Benefit Growth Hits Historic Low

Wage and benefit costs, both before and after adjusting for inflation, grew more slowly in 2009 than in any year since the U.S. government began tracking data in 1982, as double-digit unemployment weakened workers' ability to command higher pay.

In the past 12 months, the cost of wages and benefits received by workers other than those employed by the federal government rose 1.5%, according to the Labor Department's employment cost index. In the same period, consumer prices rose 2.7%.

Adjusted for inflation, wages and benefits fell 1.3%, after rising 2.8% in 2008, the first year of the recession. The inflation-adjusted cost of wages and benefits at the end of 2009 stood just 1.1% higher than at the end of the previous recession in 2001, the Labor Department said.

The Employment Cost Index measures the cost of labor independent of the influence of changes in compensation caused when high-wage sectors grow more or less rapidly than low-wage sectors. Unlike widely cited data on wages, the index includes the cost of benefits, which account for about 30% of total compensation costs.

Before adjusting for inflation, the index rose 0.5% in the fourth quarter, slightly higher than the 0.4% increase in third quarter. "The weak labor market will help keep inflationary pressures benign," said economist Anika Khan of Wells Fargo Securities. "As such, the Federal Reserve continues to have the flexibility to keep short-term interest rates at the current level."

State and local government workers' compensation in 2009 grew 2.4%, twice the pace of the 1.2% increases in the private sector. State and local government employees' compensation has outpaced private-sector increases for the past few years.

Private employers' health-insurance costs rose 4.4% in 2009, after increasing 3.5% the year before. The 2009 increase, though, was the second-lowest rate of increase in more than a decade, according to the survey. The Labor Department noted that this reflects, in part, employers' reducing their contributions to employees' health insurance or switching to lower-cost health plans.

Economy Still Bleeding Jobs

Crude prices edged higher to end the week, despite huge supplies and tens of thousands of lost jobs in the U.S. last month. Employers cut another 85,000 jobs last month, dashing hopes of a turnaround in employment, even as the U.S. economy grows.

Energy prices have rallied for weeks on some signs that manufacturing activity had picked in the U.S. and China, but again it was the falling dollar that inflated the price of crude Friday.

Crude and gasoline futures are up 15 percent since mid-December and prices at the pump this week are higher than at any point last year.

Prices are rising steadily even as the job picture grows worse.

With December's losses, there were 7.2 million fewer jobs than in December 2007, when the recession began. Although the unemployment rate was unchanged at 10% from November, that's only because many workers stopped looking for work and weren't counted in the numbers. A broader measure of unemployment, including those who have quit job hunting as well as those working part time because they can't find full-time work, remained about the same at 17.3% in December from 17.2% in November.