Fewer people applied for unemployment benefits last week, a sign that layoffs are dropping and companies may be stepping up hiring.
The Labor Department says the number of people seeking benefits dipped by 6,000 to a seasonally adjusted 388,000 for the week that ended March 26. That’s the second decline in three weeks.
Applications near 375,000 or below are consistent with a sustained increase in hiring. Applications peaked during the recession at 659,000.
The four-week average of applications, a less volatile measure, rose to 394,250. Still, that figure has dropped by 35,500, or 8 percent, in the past two months.
The department also revised the previous five years of data. The changes showed that applications in recent weeks were moderately higher than previously reported.
The Swiss franc, the best- performing major currency the past year, has become the only haven in the foreign-exchange market as the Group of Seven weakens the yen and the Federal Reserve floods the U.S. financial system with dollars.
The franc has surged 7.8 percent in the past year, the most among the 10 most-widely traded currencies tracked by the Bloomberg Correlation-Weighted Indexes. Not even the cash spent by Switzerland’s central bank last year to curb the franc’s strength was enough to keep it from appreciating more than 18 percent against the euro.
Bets by futures traders on further gains against the dollar reached the highest level this month since 2004, even as Swiss National Bank President Philipp Hildebrand said its rise poses “considerable risks” to the economy. Swiss growth will likely lag behind Germany and the U.S. this year as exports from watchmaker Swatch Group AG (UHR) to technology company OC Oerlikon Corp. risk becoming less competitive.
“The franc has become the ultimate safe haven,” said Audrey Childe-Freeman, head of European currency strategy in London at the private-bank unit of JPMorgan Chase & Co., the second-biggest U.S. lender by assets. “In a world where there are question marks against both the dollar and the euro and an environment that will be choppy for the yen in the context of intervention, the franc seems to be the best bet.”
Currency Trading
Switzerland’s currency has benefited from the nation’s role as a stable, neutral financial center and as an exporter of precision products from watches to machine tools. Since 1975, only the yen has appreciated more than the franc among the 10 currencies tracked by the Bloomberg Correlation-Weighted Indexes.
Exports account for about 50 percent of Switzerland’s economy, compared with 39 percent for Germany. The Alpine nation’s current-account surplus — the broadest measure of trade because it includes investment — may shrink to 10.95 percent of the economy this year, from 15.33 percent in 2010, according to the median of 10 estimates in a Bloomberg survey. Germany’s surplus may expand to 5.3 percent this year from 5 percent, a separate survey shows.
While Switzerland’s $491 billion economy is the 19th biggest in the world, the country has the sixth-most actively traded currency, according to the Basel, Switzerland-based Bank for International Settlements. The bank’s data show it accounts for 6.4 percent of the $4 trillion average daily turnover in foreign-exchange markets during the three years ended 2010.
‘Victim of Success’
“We are a victim of our own success,” Rudolf Minsch, chief economist at Economiesuisse, the biggest Swiss industry group, representing 30,000 companies totaling 1.5 million employees, said in a phone interview from Zurich on March 23.
The franc fell 1.4 percent last week to 1.29593 per euro and was 2.1 percent weaker at 91.99 centimes per dollar, after climbing to a record 88.52 centimes on March 17. It traded at 1.24025 per euro on Dec. 30, the strongest level since the euro’s 1999 debut. The franc was at 1.29482 per euro and 91.88 centimes as of 1:05 p.m. in New York.
The currency is still over-valued by 39 percent against its U.S. counterpart and is 32 percent too expensive versus the euro, according to an index developed by the Paris-based Organization for Economic Cooperation and Development that uses relative costs of goods and services.
Hedge funds and other speculators held a net 27,640 contracts at the Chicago Mercantile Exchange as of March 15 betting on a gain in the franc versus the dollar, the most since December 2004, before slipping to 21,301 last week. Traders on average have held a net 10,029 contracts expecting declines over that period, according to the Washington-based Commodity Futures Trading Commission.
Abandoning Euros
“The currency we are longest in Europe is the Swiss franc,” John Taylor, chairman of New York-based FX Concepts LLC, the world’s largest foreign-exchange hedge fund. “I don’t see any chance that the flow of money into Switzerland will change. People just want to get the heck out of the euro.”
Taylor, whose firm’s global currency fund returned 12.53 percent last year, its best performance since before the global financial crisis, said the franc may appreciate to 1.10 per euro, or 17.7 percent, as investors seek refuge from Europe’s sovereign-debt crisis, which has forced Greece and Ireland to seek bailouts from the European Union and International Monetary Fund personal business card.
The franc may be vulnerable as EU leaders negotiate an aid mechanism for the region’s most-indebted nations and the European Central Bank raises interest rates faster than the SNB.
Optimism Tempered
“We continue to see the franc as a safe haven, but we have to recognize that a lot of that is priced into the currency,” said Axel Merk, president of Merk Investments LLC in Palo Alto, California. “Yes, we like the Swiss franc but I wouldn’t bet my house on it.”
The median of at least 30 analyst estimates in Bloomberg surveys is for the currency to weaken to 1.35 per euro by year- end, and to 97 centimes per dollar.
Switzerland’s benchmark rate will probably end the year 1 percentage point below that of the ECB, Bloomberg News surveys of economists show. The SNB’s main rate is 0.25 percent compared with the ECB’s 1 percent.
Yield Differences
The extra yield that investors get for holding German two- year notes instead of similar maturity Swiss securities has more than doubled since Dec. 31, reaching 114 basis points, or 1.14 percentage point, on March 21, the most since June 2009 and up from last year’s low of 17 basis points in June.
Investors have little concern that the SNB will seek to buy and sell currencies in an effort to weaken the franc after the central bank failed at such attempts from March 2009 to June 2010. The intervention contributed to a $21 billion loss for the SNB last year, according to the central bank.
While Oxford-educated Hildebrand, 47, who has been head of the central bank since January 2010, and the SNB tried to weaken the franc on their own, the G-7 jointly sold yen on March 18 as that currency’s strength threatened Japan’s recovery from the magnitude 9 earthquake. The yen has fallen 6.8 percent to 81.81 per dollar from the postwar high of 76.25 touched on March 17.
In the U.S., the Fed began buying $600 billion of Treasuries in November in a second round of its quantitative- easing policy that will run through June. The central bank held $2.61 trillion of assets as of last week, up from less than $1 trillion in 2008. The Fed has kept its target rate for overnight loans at a record low of zero to 0.25 percent since December 2008.
Relative Growth
The Swiss economy will expand 1.95 percent this year, lagging behind growth of 2.6 percent in Germany and 3.1 percent in the U.S., according to Bloomberg surveys of economists. While the SNB raised its growth forecast for this year on March 17 to about 2 percent from 1.5 percent, the economy is “still facing considerable risks,” Hildebrand said in Geneva on March 22.
Swiss stocks are trailing their counterparts in Western Europe. The benchmark Swiss Market Index has declined 1.1 percent this year, compared with a 0.2 percent gain in Germany’s DAX Index and a 4.3 percent increase by France’s CAC 40 Index.
Stephen Urquhart, president of Omega, Swatch’s largest watch brand, said Swiss companies cope with a strong currency by focusing on the perceived quality of their products.
‘We Are Swiss’
“Most people buy our product because we are Swiss, and I think we just have to face the pros and cons of being a Swiss company,” he said in an interview March 23. “There are probably more pros than cons by the way.”
Oerlikon said the franc will reduce its reported revenue by about 200 million francs ($218 million).
“It would certainly be easier with euros but you can’t change your reporting currency overnight,” Juerg Fedier, the company’s chief financial officer, said in an interview.
Swiss exports increased in February as growth in Germany and Asia fueled demand for watches and machinery parts. The country’s trade surplus widened to 2.49 billion Swiss francs from 2.04 billion francs the previous month, the Federal Customs Office in Bern reported on March 22.
“The franc is basically the only safe-haven currency left,” said Kasper Kirkegaard, a senior strategist at Danske Bank A/S in Copenhagen, who expects the currency to trade at about 90 centimes per dollar in six months “The fundaments are very strong. That speaks in favor of a strong currency.”
A projected February increase in sales of U.S. new homes probably failed to make up for the ground lost the prior month, adding to evidence the industry is floundering, economists said before a report today.
Purchases, tabulated when contracts are signed, climbed 2.1 percent to a 290,000 annual pace after slumping 13 percent in January, according to the median estimate in a Bloomberg News survey of 77 economists. Even with the gain, sales are close to the record-low 274,000 pace reached in August.
Builders are struggling to compete with existing homes as foreclosures add to the overhang of unsold properties and drive down prices. The figures underscore the Federal Reserve’s view that the housing market “continues to be depressed” even as the rest of the economy improves.
“This is the bouncing-a-long-the-bottom scenario,” Julia Coronado, chief economist for North America at BNP Paribas in New York. “We’re seeing the flood of existing homes coming onto the market, really sapping demand for new homes. The new-home and the whole construction picture looks very vulnerable.”
The Commerce Department report is due at 10 a.m. in Washington. Economists’ forecasts ranged from 240,000 to 325,000, following a 284,000 rate in January.
Previously owned home purchases dropped more than forecast in February, figures from the National Association of Realtors showed this week. The median home price fell to a 9-year-low, while the supply of unsold properties rose.
Leading Gauge
New-home sales are considered a more timely barometer than purchases of previously owned homes, which account for about 90 percent of the housing market. Existing-home purchases are calculated when a contract closes.
Builders are putting off new construction as inventory swells. Housing starts fell in February to a 479,000 annual rate, the lowest level since April 2009, and construction permits slumped to a record low, Commerce Department figures showed last week.
Homebuilder shares have underperformed the broader stock market in the last year. The Standard & Poor’s Supercomposite Homebuilder Index of 12 builders has declined 9.3 percent in the 12 months ended yesterday, compared with an 11 percent increase for the broader S&P 500.
Jobs Needed
“We need confidence to go up,” Chief Executive Officer Ara Hovnanian said March 2 during a call with analysts. “We need employment numbers to get better, and I think that’ll attract traffic as well as customers.”
While signs such as stronger manufacturing and exports indicate the world’s largest economy is gaining momentum, Fed Chairman Ben S. Bernanke and his fellow policy makers reaffirmed plans to buy $600 billion of Treasuries through June to “promote a stronger recovery” after their second meeting of the year on March 15.
Bernanke told Congress during a March 2 testimony that until more people want homes, “there’s no demand for construction to build houses and so the construction industry is quite reduced.”
Bloomberg Survey =========================================== New Home New Home Sales Sales ,000’s MOM% =========================================== Date of Release 03/23 03/23 Observation Period Feb. Feb. ——————————————- Median 290 2.1% Average 291 2.5% High Forecast 325 14.4% Low Forecast 240 -15.5% Number of Participants 77 77 Previous 284 -12.6% ——————————————- 4CAST Ltd. 290 2.1% ABN Amro 295 3.9% Action Economics 295 3.9% Aletti Gestielle SGR 300 5.6% Ameriprise Financial 300 5.6% Banesto 304 7.0% Bank of Tokyo- Mitsubishi 281 -1.1% Bantleon Bank AG 290 2.1% Barclays Capital 289 1.8% BBVA 297 4.6% BMO Capital Markets 301 6.0% BNP Paribas 290 2.1% BofA Merrill Lynch 295 3.9% Briefing.com 275 -3.2% Capital Economics 300 5.6% CIBC World Markets 295 3.9% Citi 300 5.6% ClearView Economics 300 5.6% Commerzbank AG 285 0.4% Credit Agricole CIB 296 4.2% Credit Suisse 270 -4.9% Daiwa Securities America 290 2.1% Danske Bank 281 -1.0% DekaBank 290 2.1% Desjardins Group 285 0.4% Deutsche Bank Securities 310 9.2% DZ Bank 290 2.1% Exane 300 5.6% Fact & Opinion Economics 300 5.6% First Trust Advisors 286 0.7% FTN Financial 298 4.9% Goldman, Sachs 298 5.0% Helaba 300 5.6% High Frequency Economics 325 14.4% HSBC Markets 300 5.6% Hugh Johnson Advisors 300 5.6% IDEAglobal 300 5.6% IHS Global Insight 284 0.0% Informa Global Markets 293 3.2% ING Financial Markets 290 2.1% Insight Economics 290 2.1% Intesa-SanPaulo 295 3.9% J.P. Morgan Chase 290 2.1% Janney Montgomery Scott 280 -1.4% Jefferies & Co. 297 4.6% Landesbank Berlin 260 -8.5% Landesbank BW 290 2.1% Maria Fiorini Ramirez 290 2.1% MET Capital Advisors 280 -1.4% MF Global 280 -1.4% Mizuho Securities 278 -2.0% Moody’s Analytics 290 2.1% Morgan Keegan & Co. 284 0.0% Morgan Stanley & Co. 290 2.1% National Bank Financial 285 0.4% Natixis 290 2.1% Nomura Securities Intl. 305 7.4% OSK Group/DMG 297 4.6% Parthenon Group 288 1.4% Pierpont Securities 290 2.1% PineBridge Investments 277 -2.5% PNC Bank 290 2.1% Raymond James 305 7.4% RBC Capital Markets 280 -1.4% RBS Securities 300 5.6% Scotia Capital 294 3.5% Societe Generale 240 -15.5% Standard Chartered 290 2.1% State Street Global Markets 289 1.8% Stone & McCarthy Research 290 2.1% TD Securities 315 10.9% UBS 285 0.4% University of Maryland 295 3.9% Wells Fargo 285 0.4% WestLB AG 300 5.6% Westpac Banking Co. 284 0.0% Wrightson ICAP 285 0.4% ===========================================
To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net
Nike shares took a drubbing in early trading Friday after the athletic wear maker’s executives said they would raise prices across the board in response to increased costs.
The comments came during a conference call after the market closed Thursday in which the company announced earnings per share of $1.08 on revenue of $5.1 billion in the third quarter, slightly lower figures than analysts had anticipated.
Coupled with revelations of rising costs and prices, the news sent shares down more than 9% to $77.13, a sharp decrease from Thursday’s close of $85.41.
Nike (NKE, Fortune 500) CFO Don Blair said the company was already fighting higher costs in the third quarter, with specific input costs of oil, cotton and labor leading the way. The company was also paying more than usual for air freight due to high demand for some of its shoe products.
That means narrowing margins for Nike, a prospect Blair said would require higher prices.
"Beginning in spring 2012, we’ll take more significant price increases across a broader range of styles," he told analysts and reporters.
Turmoil in Japan will also present problems for the athletic apparel manufacturer. The company reported Thursday that revenue declined 16% in the third quarter in Japan.
"Japan was a challenging business environment even before the catastrophic events of last week," Blair said, noting the disaster will impact Nike’s business in the country moving forward.
"It’s too early to fully assess the financial impact of these ongoing events on our business, but we do anticipate there will be a negative impact on our revenues and profits for this geography," he said.
China ordered banks to set aside more cash for the third time this year, judging that inflation remains a bigger threat to the world’s second-largest economy than Japan’s earthquake and nuclear crisis.
Reserve requirements will increase half a percentage point from March 25, the People’s Bank of China said on its website yesterday. The ratio will rise to 20 percent for the nation’s biggest banks, excluding any extra limits for individual lenders.
Premier Wen Jiabao has set taming inflation as the nation’s top economic priority this year, citing “exorbitant” house- price increases and risks to social stability. China followed India, which raised interest rates the previous day, in tightening monetary policy even after Japan’s crisis roiled global stock markets and threatened to disrupt supply chains across Asia.
The move “is another sign that the tragic events in Japan are unlikely to have a significant impact on policy decisions elsewhere in Asia,” said Brian Jackson, an emerging-markets strategist at Royal Bank of Canada in Hong Kong. “Uncomfortably strong inflation throughout the region suggests that more policy action is required.”
Crude oil pared gains and copper fell after the announcement. The move may lock up about 350 billion yuan ($53 billion), according to Australia & New Zealand Banking Group.
Reining in Credit
An interest-rate increase for China is “a couple of weeks away,” said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd. He said the reserve-ratio increase was to soak up money as central-bank bills matured short term personal loan. Shen estimated that annual inflation may accelerate to 6 percent this month, the fastest pace since July 2008.
The benchmark one-year lending rate stands at 6.06 percent after three increases since mid-October. The government is aiming to rein in credit growth after a record 17.5 trillion yuan ($2.7 trillion) of lending over 2009 and 2010.
“This is clear evidence that the tightening agenda is still alive in China and signals that when nerves have settled, we will get more interest rate hikes,” said Stephen Green, a Shanghai-based economist for Standard Chartered Plc.
Zhou Xiaochuan, the governor of the People’s Bank of China, said this month that rates will be used to curb inflation, and played down the role of currency gains, which U.S. officials have encouraged China to use as a tool.
Consumer prices rose at an annual 4.9 percent pace in February and output increased 14 percent in the first two months of 2011, according to the statistics bureau. Producer prices jumped 7.2 percent last month, the most since September 2008.
Inflation has topped the government’s 4 percent target for this year for each of the past five months.
–Zheng Lifei, with assistance from Sophie Leung. Editors: Paul Panckhurst, Stephanie Phang.
To contact Bloomberg News staff for this story: Lifei Zheng in Beijing at +86-10-6649-7560 or lzheng32@bloomberg.net
The disaster in Japan could slow shipments of popular cars like Toyota’s Prius to auto lots. And many dealers are already taking advantage of expected shortages to raise prices.
Buyers will now typically have to pay sticker prices, instead of enjoying discounts that had been the norm for small cars and hybrids from Japan. Besides the Prius, models that suddenly cost more include Honda’s Insight, Fit and CR-V; Toyota’s Yaris; and several Acuras and Infinitis.
Small cars such as the Yaris, with a $12,955 sticker price for a base model, and the Honda Insight, priced at $18,200, are losing their typical discounts of 5 percent to 10 percent.
The price increases “will last weeks, if not months,” says Jesse Toprak, vice president of industry trends and insights for TrueCar.com, a website that tracks what cars sell for at dealerships.
Dealers are acting on the possibility that disruptions in car deliveries from Japan will cause a shortage of higher-demand vehicles. Demand will exceed supply.
So they won’t cut deals on those cars, Toprak says.
Car buyers rarely pay sticker price, also known as the MSRP or Manufacturer’s Suggested Retail Price. Companies typically offer discounts of a few hundred to a few thousand dollars off the MSRP.
On top of all that, there’s typically room for further negotiation. Toyota, for example, had been offering a $500 rebate on the Prius, plus zero-percent financing. And it offered a $1,000 rebate on the Yaris.
Many smaller cars and hybrids are built in Japan, where car manufacturing has mostly stopped in the aftermath of the earthquake, tsunami and nuclear crisis.
Toyota says it has shut down production until Tuesday. Honda remains closed and has not said when its plants will restart. A shipment of more than 1,000 Nissan and Infiniti cars headed to the U.S. was destroyed in the tsunami. At least one hybrid battery maker is shut down.
It took only minutes for the earthquake and tsunami to devastate Japan’s northeast. Rebuilding will take years _ if it can be afforded.
The relentless wall of water that the quake unleashed killed thousands, swept away whole towns, inundated roads and knocked ports, oil refineries, steel plants and factories out of action.
Experts say the cost of the destruction likely exceeds that of the catastrophic 1995 Kobe earthquake _ estimated by Standard & Poor’s to have totaled $159 billion.
The four most severely affected prefectures (states) _ Iwate, Miyagi, Fukushima and Ibaraki _ are home to industries from farming to auto parts to electronics and make up some 6 percent of Japan’s economy.
Hundreds of thousands of people have spent five nights with little food, water or heating in near-freezing temperatures as they dealt with the loss of homes and loved ones.
The biggest port on the northeast coast, Sendai, has been destroyed. It handled mainly container shipments of exports including rubber and marine products, office machinery, paper goods and auto parts. Three others _ Hachinohe, Ishinomaki and Onahama _ were severely damaged and will likely be out of commission for months.
Six oil refineries that can turn 1.4 million barrels of oil a day into fuel _ a third of Japan’s refining capacity _ are shut down, two due to fires. An out of control blaze at one refinery is raging for a sixth day.
Steel plants have also been hit.
Nippon Steel Corp.’s factory in Kamaishi, Iwate Prefecture was shut after the tsunami flooded part of the plant. The facility makes steel and wire rods for vehicle powertrains and chassis. Sumitomo Metal Industries Ltd. plant in Kashima, Ibaraki prefecture also went dark after the earthquake.
Elsewhere, widespread power shortages from damage to four nuclear plants _ an unfolding crisis in itself _ have forced many companies to halt production.
Sony Corp. has halted output at several factories, including one that makes Blu-Ray discs. Toshiba Corp. has done the same. All automakers including Toyota Motor Corp., the world’s biggest, have stopped making cars nationwide.
Companies are also facing problems shipping components, receiving raw materials and getting workers to facilities that are working, said Dale Ford, an analyst at technology market research firm IHS iSuppli.
The components made by Japan’s hi-tech industry are destined for final assembly in China and other countries. Analysts said there’s enough inventory in the global supply chain to tide over customers up to four weeks and companies such as Apple, Dell and Lenovo will have to switch to backup sources by then to avoid shortages of parts for iPads and computers.
Initial estimates of insurance losses from the disaster range as high as $60 billion.
Reconstruction will be extremely challenging because the damage is so widespread and has likely destroyed power lines and water treatment facilities, said Jun Yang, president of the Hong Kong branch of the American Society of Civil Engineers.
“In my view it would take five to 10 years to rebuild or repair,” said Yang, who as an associate professor at Hong Kong University carried out field research in Sichuan, China after the devastating earthquake there in 2008.
That timeframe doesn’t include any radiation contamination from earthquake-crippled nuclear reactors, which could have a “potentially significant effect on the post-earthquake rebuilding,” he said.
The nuclear crisis has taken a dramatic turn for the worse following an explosion and a fire at reactors at the Fukushima Dai-ichi power complex. Japanese authorities ordered emergency workers to withdraw from the stricken nuclear plant Wednesday amid a surge in radiation, temporarily suspending efforts to cool the overheating reactors.
“The destruction to ports, power plants and oil refineries in northeast Japan has been extensive,” economists Matt Robinson and Ruth Stroppiana at Moody’s Analytics wrote in a report. “The cleanup will take months, and the rebuilding of key infrastructure will take substantially longer.”
The rebuilding effort is expected to require tens of billions of dollars of public spending that will benefit construction companies but add to the already swollen national debt.
After the 1995 Kobe quake, Japan’s economy was able to rebound relatively quickly because the government hiked public spending by more than 15 percent in the following 12 months.
This time around, the government can’t afford to spend so freely because it’s already straining under a debt load that is double the size of the economy, said the Moody’s analysts.
Any stimulus package will probably be paid for in later years by austerity measures, they said.
The mammoth recovery effort will likely mean rebuilding entire towns from scratch and it could be several years before significant construction work is even started, said Ken Collis, an Australian standby member with RedR, which coordinates engineering teams for disaster relief efforts.
Collis said that from his experience helping on reconstruction efforts in the Maldives after the 2004 tsunami, the initial planning phase could take up to a year as people who have lost their homes are given temporary shelter and officials decide what exactly is needed and where money is best spent.
Another year could be spent on designing the new roads, bridges, houses and other buildings that need to be rebuilt, while a third year is spent putting contracts out for bidding.
“It could easily take three years before significant reconstruction is done,” Collis said.
He said housing, transport links and factories and other businesses would all have to be rebuilt at the same time.
“It’s very difficult to provide a lot of housing if there are no jobs available or transport to and from,” he said.
Reuben Chu, president of the Hong Kong Institution of Engineers, contrasted the disaster with the Sichuan quake, saying they each posed different problems.
Rebuilding after the Sichuan quake was technically challenging because much of the destruction was on steep hillsides.
That’s not such a big problem in northeastern Japan. Instead, Chu said, the biggest challenge will be getting enough money, materials and workers.
One of the big problems that planners face at the outset of the rebuilding phase is whether it’s a good idea to rebuild in the same place with the same type of buildings, said Collis.
Many survivors are suffering from psychological trauma, he said.
“People would be horrified if they were asked to go back live in same location.”
Feuding lawmakers have found another small chunk of the federal budget they agree can be cut.
But don’t break out the champagne just yet.
By agreeing to a three-week spending bill that would cut $6 billion, lawmakers are kicking the can down the road while they attempt to negotiate a spending plan for the rest of the fiscal year.
On Friday, House Republicans introduced a bill that would reduce or terminate 2011 funding for 25 government programs, for savings of $3.5 billion; it would eliminate an additional $2.6 billion in earmarks.
The Republicans identified the programs to cut by combing their own budget plan and Obama’s 2012 budget proposal for spots where they agreed.
And for that reason, the top Democrat in the Senate was quick to say he supported the measure.
"I am glad that we were able to come to an agreement with Republicans on a three-week continuing resolution made up of cuts already proposed by Democrats that will also be free of any ideological, special-interest legislation," Sen. Harry Reid said in a statement.
On the chopping block are programs within the National Park Service, Environmental Protection Agency and Social Security Administration that both Obama and House Republicans want to cut.
It’s the second time Congress has agreed to cut the budget this way, and when enacted, it will be the sixth short-term budget fix of the year no teletrack payday loan. (How Congress is failing to pass a real budget)
For lawmakers, the real difficulty will start when the parties run out of things they both agree should be cut. In one section of the budget, they are already scraping the bottom of the barrel.
In the most recent budget compromise, lawmakers agreed to cut $2.7 billion in earmarks. Friday’s bill would cut another $2.6 billion for a total of $5.3 billion.
After those reductions, pretty much all that’s left to cut is defense earmarks, according to Steve Ellis, vice president of Taxpayers for Common Sense, a nonpartisan spending watchdog group.
And defense spending is a third rail in budget negotiations.
If Republicans get their way, Democrats will make the next move as the parties try to strike a budget deal that would cover the seven remaining months of the fiscal year.
"The short-term funding measure introduced in the House today will give the American people another round of spending cuts as they wait for the Democrats who run Washington — in the Senate and White House — to determine a position other than the status quo," House Speaker John Boehner said in a statement.
After harrowing late-night negotiations, the leaders of the 17-country eurozone thrashed out a strategy on how to deal with the debt crisis that has crippled the currency union over the past year and already pushed two of its members into multibillion euro bailouts.
The region’s bailout fund, the European Financial Stability Facility, will be able to lend the full euro440 billion that it was initially promised, European Council President Herman Van Rompuy said in the early hours of Saturday morning.
Up to now, the EFSF was only able to lend out about euro250 billion because of several buffers required to get a good credit rating _ fanning fears that it would not be big enough to save a large country like Spain.
The fund will also be allowed to buy the bonds of governments in financial difficulties on the open market, but only if the respective country is locked into a national bailout program based on strict conditions, Van Rompuy said.
That step marks an important expansion in the fund’s powers, since buying bonds can help stabilize their prices and a country’s funding costs.
The leaders also agreed to give Greece more time to repay its euro110 billion bailout, extending the maturity of its loans to seven years from just 3 1/2 years payday loans in one hour.
The country, which was the first victim of the crisis, will also have to pay less interest. Eurozone leaders decided to lower the rate by 1 percentage point, which should take it down to about an average 4.2 percent.
Ireland, the crisis’s second victim, did not get the same leniency from the heads of state and government. It will have to wait until another summit on March 24-25 for a decision on the interest rate for its euro67.5 billion bailout, currently at about 5.8 percent.
The reason for the holdout on Ireland was the country’s refusal to make concessions on its rock-bottom corporate tax rate _ long a sore point for France and Germany.
“Ireland was asked to make a gesture, but we didn’t get satisfaction. So the renegotiation of loans that Greece has was not done for Ireland,” French President Nicolas Sarkozy told journalists. “It’s difficult to ask others to help finance a plan but not concern themselves with the tax side,” Sarkozy said.
__
Greg Keller and Don Melvin contributed to this report.
Businesses added to their stockpiles in January for a 13th consecutive month and total sales rose by the largest amount in 10 months.
Business inventories rose 0.9 percent in January, the Commerce Department said Friday. Sales for all businesses at the manufacturing, wholesale and retail level increased 2 percent, the seventh consecutive gain and the largest since March. Healthy gains in sales and inventory restocking should translate into strong orders for U.S. factories.
The string of increases in inventories pushed stockpiles to $1.45 trillion in January. That’s a level that economists consider to be healthy for this stage of the recovery. It’s 10.1 percent higher than the recent low of $1.32 trillion reached in September 2009.
Manufacturing has helped to lead the economic recovery. Economists expect that will continue as long as businesses are seeing strong demand. A separate report Friday said sales at the retail level posted a solid 1 percent gain in February.
In January sales were up at all levels of business, led by a 3.4 percent jump in demand at the wholesale level.
The rise in inventories in January followed a 1.1 percent increase in December. Manufacturers boosted their stocks by 1.3 percent while wholesale inventories rose 1.1 percent and retailers increased their stockpiles 0.4 percent.
The big gain in sales pushed the ratio of inventories to sales down to 1.23, matching the record low set last April. That means it would take only 1.23 months to exhaust inventories at the January sales pace.
The lean level of inventories in relation to sales is another good sign that factory production should be headed higher in coming months.
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