April 5, 2011 – Views on the Global Economy: Your Daily Briefing

Headlines

O.E.C.D. Lifts Global Growth Forecasts (NYT)
China Raises Interest Rates to Counter Inflation Pressure (Bloomberg)
Bernanke Says US Inflation Spike Won’t Last (CNBC)
Wages Not Rising with Consumer Prices (WaPo) 

Price of Petroleum (aka It’s not looking so great if you drive a car..)

Crude Oil Extends 2 1/2-Year High as Libya Fighting Adds to Supply Concern 

Margot Habiby, Bloomberg, April 4, 2011

Oil futures rose to the highest level in more than 30 months as Libyan rebels fought loyalists at an oil port, adding to concern that a protracted conflict in the Middle East and North Africa will curtail supply. Crude for May delivery advanced 53 cents to $108.47 a barrel on the New York Mercantile Exchange, the highest settlement level since Sept. 22, 2008. Prices are up 28 percent from a year ago.

Commodities Follow Oil Higher As Libya Fighting Rages
Dan Strumpf, Wall Street Journal, April 4, 2011

“You can’t expect that oil to come online anytime soon, even with the rebels making some headway here,” said Phil Flynn, an oil analyst at PFG Best in Chicago.  Crude prices also received a boost by positive economic data out of the U.S., signaling strong demand. The Labor Department said Friday that U.S. employers added 216,000 jobs last month, indicating the economy of the world’s largest oil consumer remains on a slow-but-steady path toward recovery. However, many analysts have said higher energy prices could stall the fragile recovery and stoke inflation. Worries about rising consumer and producer prices fueled investor appetite for precious metals, which in theory would maintain their value during a period of high inflation.   

Settling in (or not) for a long-term Libyan oil swap
Joseph Cotterill, Financial Times, April 4, 2011

Monday – a dramatic day in the story of Libyan rebels’ bid to get their country’s crude to the outside world. It is getting out one end, at least. The Equator, a Liberian-flagged tanker, is in Egyptian waters heading for Tubruq, the rebels’ oil port, for loading early on Tuesday, the FT reports. What is going on at the other end though? Reports swirled on Monday of Gaddafi loyalists attacking oil fields directly at Sarir and Misla, both of which are inland and east of the rebel capital of Benghazi. Nafoora, also in the east, may have been attacked too. It’s obviously difficult to confirm at the moment. But equally difficult to confirm are the rebels’ claims about the amount of crude they can bring to market.

The Never-Ending Budget Battle

GOP Budget Plan Cuts Taxes, Health Programs

Reuters, April 4, 2011

Republicans in the House of Representatives will unveil a budget plan Tuesday that will call for sweeping changes to health programs and slash tax burdens for corporations and individuals. The proposal by House Budget Committee Chairman Paul Ryan will serve as a blueprint for the coming fiscal year and set up yet another clash over spending with President Barack Obama’s Democrats while the two sides are still fighting to complete a long-overdue budget for the current fiscal year.

The Smart Way to Cut the Budget Deficit

Mark Thoma, MoneyWatch, April 4, 2011

Even though it is difficult on a variety of margins, to make good budget decisions we must consider more than just the costs of government programs. The overall benefits of these programs must be the focus of the conversation. It will also be important that we consider the benefits to those who have little sway within the political process, something the current conversation is not doing very well.

Harry Reid: ‘Some progress’ on budget

Meredith Shiner, Politico, April 4, 2011

Senate Majority Leader Harry Reid (D-Ne.) said Monday that “some progress” was made over the weekend in budget talks with House Republicans, but negotiations are not where they need to be in advance of Friday’s government shutdown deadline. Reid kept up the Democratic line that a spending cut target has been reached, despite GOP insistence that there is no deal until there’s an entire deal. Reid added that the debate has shifted to where to cut.    

Obama to meet on budget with Boehner, other lawmakers

David Jackson, USA Today, April 4, 2011

President Obama stepped directly into sensitive budget negotiations today, inviting key members of Congress to the White House to a meeting on Tuesday, three days before the government is scheduled to run out of money. “The president will urge leaders to reach final agreement and avoid a government shutdown that would be harmful to our economic recovery,” said White House spokesman Jay Carney. “The president has made clear that we all understand the need to cut spending, and significant progress has been made in agreeing that we can all work off the same number, $73 billion in spending cuts in this year alone,” Carney said. The Boehner spokesman, Brendan Buck, said no $73 billion figure has been agreed to.  

Now That’s Interesting…

McDonald’s to hire 50,000 workers – in 1 day

Aaron Smith, CNN, April 4, 2011

McDonald’s said Monday that it is planning a one-day hiring spree of 50,000 new workers on April 19 for its U.S. restaurants. McDonald’s, which has 14,000 restaurants in the United States, said the hires will occur nationwide. Fields, who started working at a McDonald’s restaurant as a crew member behind the counter in 1978, said the 50,000 new hires will increase the U.S. workforce to 700,000 from its current level of 650,000.  

Court Throws Out Verizon’s Net Neutrality Challenge on Technicality

Josh Smith, NationalJournal, April 4, 2011

In what may only be a speed bump in a longer legal battle, a D.C. court of appeals has thrown out Verizon’s challenge to the Federal Communications Commission’s recent net neutrality rules, saying the company filed the lawsuit prematurely. Verizon launched the legal challenge before the rules, which were enacted in December, were filed in the Federal Registry.The regulations, which aim to prevent Internet providers from blocking high-volume websites, are still not officially published in the Federal Register. The rules are expected to be published sometime next month.  

Stock Rally Still Hasn’t Lured Average Investors Off Sidelines

Jeff Cox, CNBC, April 4, 2011

Though the market is coming off its best quarter in 13 years, the rally has been accomplished with only sporadic help from the mom-and-pop investors counted on to power the US economy. While stocks surged, retail investors took money out and hedge funds plowed in, posting their biggest inflows ever in March while equity mutual funds broke a two-month streak of positive flows.