Relaxed G7 Happy with Economy, Oil a Risk

WASHINGTON (Reuters) - Finance chiefs from the world's rich nations agreed on Saturday the global economic outlook had brightened significantly but the threat of further oil price rises was one of the few clouds on the horizon.

Government ministers and central bankers from the Group of Seven economic powers stopped short of recommending action on energy costs, in part because of differences on how severe an impact oil price rises would have on their economies.

"Prospects are favorable and although risks remain, such as energy prices, overall the balance of risks to the outlook has improved," G7 officials said in a communique after their Washington gathering alongside spring meetings of the International Monetary Fund (News - Websites) and World Bank (News - Websites) .

European ministers appeared more anxious than their U.S. counterparts about the threat from oil.

"The principal risk is the oil price risk," said French Finance Minister Nicolas Sarkozy. His German counterpart Hans Eichel said he hoped planned output cuts by the Organization of Petroleum Exporting Countries would not become a reality.

Concerns were tempered, however, by a presentation to the meeting by U.S. Federal Reserve Chairman Alan Greenspan who, according to French officials, explained that precautionary stock building was partly behind surging energy costs.

Still, discussion of the risks could not disguise an overarching contentment with world growth this year that is forecast to come in at its fastest pace in four years.

Not even the noise of thousands of pot-banging, whistle-blowing demonstrators -- angry at the treatment of highly indebted poor countries by multilateral Western institutions -- seemed to darken the G7 mood.

The ministers sounded more sanguine about the economy's fortunes than even 2-1/2 months ago, saying the recovery "continued to strengthen and broaden" since they last met in Boca Raton, Florida, in February.

The G7 -- the United States, Britain, Canada, France, Germany, Italy and Japan -- met as key economies like the United States and even Japan show persuasive signs of gaining momentum that finance ministers expect to be sustained.

"Beyond the United States, there is also good news," U.S. Treasury Secretary John Snow told a news conference. "Japan has turned in several good quarters, as has the United Kingdom."

Snow said growth in Germany and France must be stepped up. European officials acknowledged this lag.

"I explained our analysis of the euro area situation. I confirmed that we had a gradual recovery," European Central Bank President Jean-Claude Trichet told a news briefing -- stressing that the ECB had not faced any G7 demands to ease its currently neutral stance on interest rates.

With the dollar's recovery since the Florida meeting pushing foreign exchange down the agenda, the communique stuck to wording adopted in February that warned against excess currency volatility.

The ministers also repeated a call first made in Dubai last September for "more flexibility" in exchange rates -- language seen as referring to China's rigid yuan peg to the dollar.

The dollar, under heavy pressure going into the Florida meeting, has partly recovered and this has clearly come as a relief to G7 participants that export to U.S. markets.

"It is not clear whether there was a link, like the cause and effect, on foreign exchange since the statement of the G7 in Boca Raton. But all in all, G7 and Italy consider positive the development of foreign exchange since Boca Raton," Italian Economy Minister Giulio Tremonti said.

Earlier this week, the International Monetary Fund warned about the potential impact of higher U.S. interest rates, now considered inevitable.

Bundesbank Vice President Juergen Stark told reporters: "There are signs that the present situation of globally low interest rates does not necessarily have to persist."

Snow conceded the recovery would likely generate some moderate inflation pressures but in general "we look at a fairly benign cost outlook."

Generally, though, G7 members looked forward to the end of a stretch of weak global growth and pledged to use the upturn to repair damaged budgets and seek long-term economic reforms.

The G7 members agreed to work for "sustained medium-term fiscal consolidation" as growth picks up, an apparent reference to tackling big budget deficits.

A senior U.S. Treasury official told reporters there had been considerable discussion in the meeting about the risk of economic overheating in China and said ministers recognized this as a danger to global expansion.

He said a place at the top economic table for China may have to be considered but that it was not a U.S. decision.

"China is a critically important player in the global economy -- and yes, I think some role for them participating in the meetings at some point in the future will clearly (be) useful," the official said. (Additional reporting by Ritsuko Ando, Cyrille Cartier, Sumeet Desai, Francesca Landini, Gilbert Le Gras, Brian Love, Anna Willard, Andrea Hopkins, Tim Ahmann, Jonathan Nicholson, Alister Bull in Washington and John Parry in New York)

You need to get a grip.

Interest rates are still historically low and would have to rise by SEVERAL points before anyone (well, except you perhaps) would be concerned.

Inflation is a non issue at this point according to the economists and Greenspan.

What makes you think you are smarter than the economists who DO think that the deficit will be halved by 2009? What makes you concerned about overheating in China?

It's still the lowest GDP in years:

Reagan 1983 $208 billion deficit 6% GDP
Bush 1992 $290 billion deficit 4.7% GDP
Clinton 1993 $255 billion deficit 3.9% GDP
Bush 2003 $374 billion deficit 3.5% GDP

Try not to sound like a Democrat with your doom and gloom.

And, btw, you are still missing some excellent numbers, numbers that Wall Street and others are happy with:

Despite the Democrat’s mantra that the economy is in trouble and that over 2.3 million jobs have disappeared, the truth is considerably different.

There are two primary measures of unemployment. The Department of Labor conducts a monthly Household Survey, which has always generated the official unemployment rate used by the government. This official survey shows 2.4 million jobs have been added to the work force between November ’02 and February ‘04. The Bureau of Labor Statistics (BLS) conducts its payroll survey by phoning businesses. It is unprecedented to use the BLS unemployment statistics when discussing America’s unemployment rate and yet this is where the Democrats are getting their 2.3 million lost jobs figure.

For example, had the unofficial BLS survey been used in the mid-90’s, we would have had a 12.8% unemployment rate using the same methodology. Instead, in 1996, the unemployment rate was 5.6%, the exact same rate as we have today.

The government began collecting unemployment data in 1939. Since that time, there has never been positive job growth two years after a recession ended. Never.

Other economic indicators are just as good:

-- The number of working Americans, 138.5 million, is a level never previously attained in our history.

-- The percentage of families living in poverty today averages 9.4%, a decrease of approximately 1.1% from the 90’s.

-- Home ownership is currently 68.6% which is an increase of 1.1% from the 90’s.

-- A manufacturing survey released in February showed US factories boomed at their highest level in 17 years. The Institute for Supply Management reported more and more factories were reporting hiring although it has not yet shown up in government employment statistics. Manufacturing makes up nearly one-fifth of the US economy.

-- The combined net worth of all US households is $44.4 trillion, the highest ever achieved.

-- Consumer prices (inflation) increased just 1.9% last year.

-- As of February, the stock market had advanced 45% in the last 12 months.

--The gross domestic product, the total goods and service produced in the US, increased in the 3rd quarter last year at an annual rate of 8.2% after inflation and 4.1% in the 4th quarter. Growth in the 90’s averaged a little better than 3% annually.

-- The wealthiest five percent of our population pays more than half the taxes, while people at the bottom half pay just 4% of all taxes in the country. Economists credit the recovering economy to the Bush tax cuts as opposed to what an increased regressive taxation on the nation’s wealthiest would have had on the economy.

-- The average wage of American workers is currently $15.40 vs. $11.80 during the 90’s.

Despite 9/11 and the over $500 billion it took out of our economy, it appears the economy is booming.

I will leave it to freepers to speculate why the media seems driven to repeat unchallenged the Democrat’s unemployment numbers and constant derision of the US economy.

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