Business News: Do Jobless Benefits Raise Unemployment?

Business News: Do Jobless Benefits Raise Unemployment?

Do Jobless Benefits Raise Unemployment?

Posted: 08 Dec 2010 08:00 PM PST

Aquila: The Real 'Truth' About Debt and Taxes

Posted: 08 Dec 2010 04:59 PM PST

U.S. Cities With the Most Tech Jobs

Posted: 06 Dec 2010 08:41 PM PST

When Groupon Dodged Google

Posted: 08 Dec 2010 08:00 PM PST

Yahoo CEO's Outlook

Posted: 08 Dec 2010 12:44 PM PST

Porsche 'Shock Therapy' Spurs VW, Lufthansa Efficiency Drive

Posted: 08 Dec 2010 06:17 PM PST

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By Andreas Cremer

Dec. 9 (Bloomberg) -- Just as car enthusiasts envy Porsche SE drivers, so company executives salivate over the carmaker’s profit margins, the highest in the industry.

Deutsche Lufthansa AG, Volkswagen AG and Meyer Werft GmbH have all turned to Porsche to make their manufacturing processes more efficient. While the maker of the 911 sports car is better known for earning top honors in J.D. Power & Associates’s annual quality study, Porsche also has a growing consulting business.

“The brand has become a synonym for masterminding the car industry’s complex work processes,” said Thomas Stueger, product and services chief at Lufthansa’s maintenance unit, which hired Porsche to help cut the service time for the Airbus SAS A340 plane. “Porsche is an interesting partner for us.”

The consulting division, which draws on lean-production techniques originally developed at Toyota Motor Corp., aims to expand its 220-strong workforce by more than 10 percent to serve an increased customer base of 150 companies. This year, the unit opened a branch in Brazil to benefit from business ahead of the 2014 World Cup and 2016 Olympics.

Porsche, the world’s most profitable carmaker, posted an operating margin in the automotive unit in the fiscal first quarter of 19 percent. Bayerische Motoren Werke AG, the biggest luxury carmaker, posted a third-quarter automotive profit margin of 8.1 percent, while Daimler AG’s Mercedes-Benz was 9.5 percent and VW’s Audi was 11 percent.

Climbing Shelves

The consulting business was borne out of former Chief Executive Officer Wendelin Wiedeking’s restructuring of production lines and work processes to stave off insolvency in the early 1990s. Saddled with high inventory levels and wasted factory space, Porsche had a net loss of 122 million euros ($162 million) and sales of no more than 14,000 cars when Wiedeking took over in 1993.

“Workers used to spend half their time climbing up and down shelves looking for pieces,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen and a former head of marketing strategies and research at Porsche. “Porsche had no alternative but to undergo a shock therapy which laid the groundwork for its huge success.”

Toyota, the world’s largest automaker and Porsche’s teacher, is also in the consulting business, operating the Toyota Production System Support Center at its North American manufacturing and engineering headquarters in Kentucky, where it holds ongoing seminars for outside companies, as well as schools, hospitals and charities, spokesman Mike Goss said.

Taught by Toyota

Under Toyota’s guidance, Porsche took steps to fine-tune cooperation with suppliers to ensure factories received parts just when they were needed on the assembly line, a method that’s been widely copied in the automotive industry and that Porsche is now helping companies in other industries implement.

Meyer Werft, a family-owned maker of cruise vessels based in the northwestern German town of Papenburg, hired Porsche two years ago to shorten production cycles and improve cooperation with its 1,800 suppliers, as 75 percent of components in luxury liners now come from outside contractors. Porsche helped the company move to a “just-in-time” supply system to cut inventory.

“We now have a lot of space in the hall and can do much more things at the same time,” said Bernard Meyer, Meyer Werft’s managing director. “We’re opening our own academy. We want to ensure that our staff doesn’t slip back into past routines.”

Assembling Toy Trucks

Porsche Consulting, which still advises the auto-making unit on improving manufacturing and administration, invites customers to its training center in Leipzig, Germany, where managers assemble toy trucks and fold cardboard boxes before being coached on lean-production techniques.

Porsche has come out on top of J.D. Power’s annual quality study for six consecutive years, leaving behind Mercedes-Benz, Toyota’s Lexus and BMW. Remedies applied at Porsche work just as well in other industries, with customers including car suppliers, plane makers, hospitals and furniture manufacturers, Eberhard Weiblen, who heads the unit, said in an interview.

“Many clients come to us and say, ‘Please turn us into the Porsches of our industries,’” Weiblen said.

Lufthansa’s catering division is now using Porsche’s services to help improve logistics at a unit that produced 405 million meals last year for 300 airlines such as American Airlines or Asiana Airlines Inc., he said.

Lufthansa, Volkswagen

Two years ago, Lufthansa’s maintenance unit used the sports- car maker to cut time on aircraft overhauls. Coaching in Leipzig and at the division’s Hamburg headquarters helped trim the time Lufthansa needs to dismantle, check and reassemble an A340 plane by 10 days to no more than 26 days.

Volkswagen, which is merging with Porsche, has contracted with the consulting unit on production since 1996, Weiblen said, declining to discuss the specifics of VW projects. Michael Macht, who succeeded Wiedeking as Porsche CEO in July 2009 and is now VW’s production chief, led the consulting unit from 1994 to 1998. Macht decline to comment for this story, VW spokesman Christoph Adomat said.

German builder Kirchhoff, a unit of Strabag SE, central Europe’s biggest contruction company, hired Porsche in 2006 to shorten construction times on highways and cut staff and equipment costs.

“Porsche was the pioneer in bringing those Japanese manufacturing methods to Germany,” Kirchhoff CEO Joerg Eschenbach said. “Those changes were very meaningful and they worked extremely well for Porsche. For us, it was definitely a worthwhile example to follow.”

--With assistance from Alan Ohnsman in Los Angeles. Editors: Chad Thomas, Kenneth Wong

To contact the reporter on this story: Andreas Cremer in Berlin at acremer@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net.

Indian Tech Moves Up the Value Chain

Posted: 09 Dec 2010 05:52 AM PST

U.S. Initial Jobless Claims Fell 17,000 to 421,000

Posted: 09 Dec 2010 05:40 AM PST

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By Courtney Schlisserman

(Updates analyst quote in fourth paragraph.)

Dec. 9 (Bloomberg) -- The number of workers filing first- time claims for unemployment insurance payments fell last week in the U.S., showing the labor market continues to improve.

Applications for jobless benefits decreased to 421,000, less than the median forecast of economists surveyed by Bloomberg News, from a revised 438,000 the prior week, Labor Department figures showed today. The four-week moving average, a less-volatile measure, dropped to the lowest level in more than two years.

Companies are holding on to more workers as sales improve and expectations for growth brighten. A faster pace of growth is needed for firms to add enough jobs to bring down the November unemployment rate of 9.8 percent, the highest since April, and alleviate concerns of policy makers including Federal Reserve Chairman Ben S. Bernanke.

“The labor market is moving in the right direction, slowly but surely,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “Things look a little better than they first appeared, but we’re still not creating enough jobs to lower the unemployment rate.”

Futures on the Standard & Poor’s 500 Index expiring this month rose 0.5 percent to 1,234.30 at 8:32 a.m. in New York. The yield on the 10-year Treasury note, which moves inversely to price, fell to 3.22 percent from 3.27 percent late yesterday.

Economists forecast claims would fall to 425,000, according to the median of 50 projections in a Bloomberg News survey. Estimates ranged from 394,000 to 445,000.

No Special Factors

A Labor Department official said there were no special factors that had an impact on the figures released today. The four-week moving average fell to 427,500, the lowest since August 2008, from 431,500.

The number of people continuing to collect jobless benefits fell by 191,000 in the week ended Nov. 27 to 4.09 million. They were forecast to fall to 4.24 million.

The continuing claims figure does not include the number of workers receiving extended benefits under federal programs.

Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 393,200 to 4.51 million in the week ended Nov. 20.

The Obama administration on Dec. 6 announced an agreement with congressional Republicans to extend Bush-era tax cuts, reduce the payroll tax and fund unemployment insurance for the long-term jobless for 13 months. Under current legislation, the extension in emergency benefits expired Nov. 30, which the Labor Department has estimated would interrupt aid to 1.36 million before the last week of 2010.

Unemployment Rate

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, dropped to 3.2 percent in the week ended Nov. 27, the lowest in two years, today’s report showed. Sixteen states and territories reported an increase in claims, while 37 had a decrease.

Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates. That relationship has broken down in recent months as some companies cut staff and others expand -- pointing to an uneven recovery.

The U.S. added 39,000 jobs in November, fewer than forecast, the Labor Department reported Dec. 3.

Federal Reserve Chairman Ben S. Bernanke has been among those saying the recovery has been too slow, keeping unemployment too high.

“At the rate we’re going, it could be four, five years before we are back to a more normal unemployment rate” of about 5 percent to 6 percent, Bernanke said in an interview broadcast Dec. 5 by CBS Corp.’s “60 Minutes” program.

The economy hasn’t grown to the point where demand can’t be met with current staff at Illinois Tool Works Inc., chief executive officer David Speer said in an interview on Dec. 3.

Next year “there will be some modest level of improvement in employment in industrial manufacturing in the U.S.,” Speer said. “I don’t think anything significant for us, because I still see us with enough capacity in terms of labor right now to not have to make any significant additions.”

ITW, the maker of Hobart food mixers and Duo-Fast nail guns, may do more hiring in 2012 if “we progress as I suspect we will,” Speer said. The company last week forecast business revenue, which doesn’t include sales from acquired companies, will increase 5 percent to 7 percent in 2011 over this year.

--Editors: Kevin Costelloe, Carlos Torres

To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

Dell in Exclusive Talks to Buy Compellent for $27.50 a Share

Posted: 09 Dec 2010 05:39 AM PST

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By Katie Hoffmann

(Adds shares in fourth, fifth paragraphs.)

Dec. 9 (Bloomberg) -- Dell Inc., the world’s third-largest personal-computer maker, is in exclusive talks to buy data- storage maker Compellent Technologies Inc. for about $876 million.

Dell would acquire all of the outstanding common stock of Compellent for $27.50 apiece in cash, the two companies said in a statement today. The price is an 18 percent discount to the company’s closing price yesterday. Compellent stock had almost doubled in the past two months before today on speculation it will get bought.

Compellent specializes in technology that helps companies store, recover and manage large amounts of data. It might be attractive to an acquirer, such as Round Rock, Texas-based Dell, that wants a larger slice of the growing market for data centers, Roger Cox, an analyst at Gartner Inc. in Stamford, Connecticut, has said.

Compellent, based in Eden Prairie, Minnesota, fell $4.89, or 15 percent, to $28.76 in trading before U.S. exchanges opened, after climbing 12 cents to $33.65 yesterday in New York Stock Exchange composite trading.

Dell added 12 cents to $13.80 in early trading, after rising 8 cents to $13.68 yesterday on the Nasdaq Stock Market.

The companies said there can be no assurances that an acquisition will be completed.

--Editors: Ville Heiskanen, Peter Elstrom

To contact the reporter on this story: Katie Hoffmann in New York at khoffmann4@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

VW, Peugeot Drop as China Group Says Rebates May End

Posted: 09 Dec 2010 05:38 AM PST

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By Bloomberg News

(Updates with comment from VW in 14th paragraph.)

Dec. 9 (Bloomberg) -- Volkswagen AG, PSA Peugeot Citroen and Continental AG dropped after an automobile industry association said Chinese incentives for buying cars will likely expire at the end of the month as planned.

“Last year, we wrote to the government requesting an extension for the tax incentives; this year, we don’t think it’s appropriate,” Xiong Chuanlin, vice secretary-general of the China Automobile Industry Association, said today at a briefing in Beijing. “Hence, I doubt the tax cuts will continue.”

Preferred shares at Volkswagen, whose largest market is China, plunged as much as 7 percent, Peugeot, Europe’s second- biggest carmaker after VW, declined as much as 4.8 percent and Continental dropped as much as 6.8 percent.

Stimulus measures in China, the world’s biggest auto market, including a consumption-tax rebate for smaller vehicles, subsidies for rural car-buyers and incentives to trade in older models are all due to expire at the end of the December. Deliveries in China last month surged 29 percent as buyers made purchases before the rebates run out.

“Consumers who expect the stimulus policies to be discontinued next year are bringing forward purchases before time runs out,” said Yu Bing, an automotive analyst at Pingan Securities Co. in Shanghai. “There is little reason to support the extension of the tax rebate and vehicle trade-in policies, given robust industry growth.”

VW dropped as much as 9.05 euros to 120.20 euros and was down 3.3 percent as of 2:34 p.m. in Frankfurt trading. Continental, the region’s second-largest auto supplier, was down 4.7 percent. French automaker Peugeot traded down 2.6 percent in Paris. The Stoxx 600 Automobiles and Parts subindex slumped as much as 2.8 percent today.

Business Case Unchanged

The Chinese government cut a 10 percent tax on car sales to 5 percent in 2009 and then raised the rate to 7.5 percent this year. The rate is set to go back to 10 percent in 2011.

“The news does not change the business case of VW in China and certainly not our estimates and rating,” Alexis Albert, an analyst with Nomura Securities in London who has a “buy” rating on the shares wrote in a note to investors. “We would buy on today’s weakness.”

Volkswagen’s nine-month operating profit in China more than doubled to 1.32 billion euros ($1.74 billion). The carmaker, based in Wolfsburg, Germany, announced plans this year to add two Chinese factories, bringing its total in the country to 11. VW is investing 6 billion euros to double production in China to 3 million vehicles within four years from 1.4 million in 2009.

Sales of passenger cars including multipurpose and sport- utility vehicles in China increased to 1.34 million in November, higher than the previous record of 1.32 million in January, CAAM, the industry association, said in a statement today. The pace of growth was the fastest since April.

Sales Advance

Total vehicle sales including trucks and buses surged to 1.7 million, 27 percent more than a year earlier, the association said. For the 11 months through November, total vehicle sales rose 34 percent to 16.4 million.

“The subsidy’s target was to boost sales and help the auto industry recover from the crisis in 2008,” said Marvin Zhu, a senior analyst at researcher J.D. Power & Associates in Shanghai. “Growth now is far beyond the government’s target.”

The removal of tax cuts will have the biggest impact on small car sales in China, said Zhu, who expects sales growth of small cars to be cut by as much as 5 percent in 2011 after the tax incentives end.

‘Success Story’

“We are aware that the supporting measure of the government for the sales of cars with 1.6-liter or smaller engines could fade out at the end of this year,” Christine Ritz, head of VW investor relations, said in an e-mailed statement. “China is a success story for Volkswagen and there is no reason why this should change.”

The stimulus measures helped China’s industrywide vehicle sales jump 46 percent last year to 13.6 million, surpassing the U.S. for the first time to become the world’s largest national automobile market.

Total vehicle sales in China may rise to 18 million this year, compared with an earlier forecast of 17 million, Xiong said at today’s briefing. Sales next year will rise at least 10 percent, exceeding the country’s forecasted economic growth, Xiong said.

“Car sales usually exceed GDP growth,” he said.

While demand may slow in 2011, carmakers such as General Motors Co. and Ford Motor Co. continue to add new models. GM introduced Baojun, a new “affordable” brand, on Nov. 22 to grab share from local automakers such as BYD Co. and Geely Automobile Holdings Ltd. and will begin selling the line next year. Ford opened 40 dealerships in China on Nov. 25 and plans to add a further 26 by year’s end.

--Liza Lin, Wang Ying, Tian Ying. Editors: Chad Thomas, Kenneth Wong

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editor responsible for this story: Kae Inoue at kinoue@bloomberg.net

Ireland’s Rating Cut Three Levels by Fitch on Banks

Posted: 09 Dec 2010 05:35 AM PST

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By Finbarr Flynn and Joe Brennan

(Updates with comment from economist in 10th paragraph.)

Dec. 9 (Bloomberg) -- Ireland’s credit rating was cut three levels by Fitch Ratings to the lowest of any of the major rating companies after the country sought international assistance last month to rescue its banks.

The rating was lowered to BBB+ from A+, Fitch said in a statement in London today as it cut Ireland for the second time in two months. The outlook on the rating, which is three steps above non-investment grade, is “stable,” it said.

Ireland agreed to an 85 billion-euro ($112 billion) bailout from European governments and the International Monetary Fund on Nov. 28 as the cost of protecting ailing lenders overwhelmed the state’s finances and sent the budget deficit soaring. European authorities pressured the nation to seek aid in a bid to stem a growing crisis and prevent contagion to Spain and Portugal.

“The downgrade reflects the additional fiscal costs of restructuring and supporting the banking system,” Fitch said. “Ireland’s sovereign credit profile is no longer consistent with a high investment grade rating.”

Irish bonds rose today after declining immediately after Fitch’s announcement. The yield on the 10-year security fell 3 basis points to 8.19 as of 12:44 p.m. in London.

The premium investors charge to hold the debt over German bunds, Europe’s benchmark, was at 503 basis points, compared with 502 basis points yesterday. It reached a euro-era record of 680 basis points on Nov. 30.

Greece Rating

Fitch analyst Chris Pryce said the three-step cut reflects the “seriousness of the situation,” though he doesn’t expect Ireland to default.

It’s “an investment grade rating. That doesn’t mean we expect the country to default,” Pryce said on Dublin-based RTE radio. “There is obviously a chance, but that is not our main expectation.”

The downgrade leaves Ireland two rating steps above Greece, which earlier this year became the first euro-area country to seek aid from the EU and the IMF.

“The key point is the rating is still investment grade and obviously Ireland needs to hold onto that,” said Dermot O’Leary, chief economist at Goodbody Stockbrokers in Dublin. “It has to sort out the banking system.”

Standard & Poor’s lowered Ireland’s rating by two levels to A on Nov. 23, citing increased borrowing by the sovereign to prop up its “troubled banking system.” Moody’s Investors Service, which has Ireland on an Aa2 credit rating, last month said a “multi-notch” downgrade was “most likely” because the bailout would increase its debt burden.

Bank Rescue

Under the EU-IMF bailout, Irish banks will receive as much as 35 billion euros of additional capital. The aid includes an “immediate” injection of 10 billion euros, with a further 25 billion euros in contingency funding. With deposits falling and lenders locked out of credit markets, Irish banks have increased their reliance on emergency European Central Bank funding.

Allied Irish Banks Plc, Ireland’s second-biggest bank, said Nov. 19 that deposits fell 17 percent this year. Anglo Irish Bank Corp., nationalized in 2009, lost about 12 billion euros of deposits this year, Chairman Alan Dukes said Nov. 25.

Ireland’s government this week unveiled a 6 billion-euro budget tightening for 2011, the first step on a four-year plan to lower the deficit to the EU limit of 3 percent of gross domestic product. The shortfall will be about 12 percent of GDP this year, or 32 percent of GDP once bank-rescue costs are included.

The outlook for the Irish economy is “highly uncertain,” Fitch said. The austerity measures, together with “accelerated bank deleveraging, could stall the incipient recovery,”

--With assistance from Paul Dobson in London. Editors: Fergal O’Brien, Jeffrey Donovan

To contact the reporter on this story: Finbarr Flynn in Dublin at fflynn3@bloomberg.net

To contact the editor responsible for this story: Colin Keatinge at ckeatinge@bloomberg.net

U.S. Initial Jobless Claims Fell 17,000 to 421,000 Last Week

Posted: 09 Dec 2010 05:34 AM PST

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By Courtney Schlisserman

Dec. 9 (Bloomberg) -- The number of workers filing first- time claims for unemployment insurance payments fell last week in the U.S., showing the labor market continues to improve.

Applications for jobless benefits decreased to 421,000, in line with the median forecast of economists surveyed by Bloomberg News, from a revised 438,000 the prior week, Labor Department figures showed today. The four-week moving average, a less-volatile measure, dropped to the lowest level in more than two years.

Companies are holding on to more workers as sales improve and expectations for growth brighten. A faster pace of growth is needed for firms to add enough jobs to bring down the November unemployment rate of 9.8 percent, the highest since April, and alleviate concerns of policy makers including Federal Reserve Chairman Ben S. Bernanke.

“Companies are maintaining very, very lean staffing levels,” Neil Dutta, an economist at Bank of America Merrill Lynch Global Research in New York, said before the report. “It would take a big shock for companies to significantly increase firings but at the same time, they’re not hiring.”

Economists forecast claims would fall to 425,000, according to the median of 50 projections in a Bloomberg News survey. Estimates ranged from 394,000 to 445,000.

A Labor Department official said there were no special factors that had an impact on the figures released today. The four-week moving average fell to 427,500, the lowest since August 2008, from 431,500.

Jobless Benefits

The number of people continuing to collect jobless benefits fell by 191,000 in the week ended Nov. 27 to 4.09 million. They were forecast to fall to 4.24 million.

The continuing claims figure does not include the number of workers receiving extended benefits under federal programs.

Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 393,200 to 4.51 million in the week ended Nov. 20.

The Obama administration on Dec. 6 announced an agreement with congressional Republicans to extend Bush-era tax cuts, reduce the payroll tax and fund unemployment insurance for the long-term jobless for 13 months. Under current legislation, the extension in emergency benefits expired Nov. 30, which the Labor Department has estimated would interrupt aid to 1.36 million before the last week of 2010.

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, dropped to 3.2 percent in the week ended Nov. 27, the lowest in two years, today’s report showed. Sixteen states and territories reported an increase in claims, while 37 had a decrease.

Weekly Firings

Initial jobless claims reflect weekly firings and tend to fall as job growth -- measured by the monthly non-farm payrolls report -- accelerates. That relationship has broken down in recent months as some companies cut staff and others expand -- pointing to an uneven recovery.

The U.S. added 39,000 jobs in November, fewer than forecast, the Labor Department reported Dec. 3.

Federal Reserve Chairman Ben S. Bernanke has been among those saying the recovery has been too slow, keeping unemployment too high.

“At the rate we’re going, it could be four, five years before we are back to a more normal unemployment rate” of about 5 percent to 6 percent, Bernanke said in an interview broadcast Dec. 5 by CBS Corp.’s “60 Minutes” program.

The economy hasn’t grown to the point where demand can’t be met with current staff at Illinois Tool Works Inc., chief executive officer David Speer said in an interview on Dec. 3.

Next year “there will be some modest level of improvement in employment in industrial manufacturing in the U.S.,” Speer said. “I don’t think anything significant for us, because I still see us with enough capacity in terms of labor right now to not have to make any significant additions.”

ITW, the maker of Hobart food mixers and Duo-Fast nail guns, may do more hiring in 2012 if “we progress as I suspect we will,” Speer said. The company last week forecast business revenue, which doesn’t include sales from acquired companies, will increase 5 percent to 7 percent in 2011 over this year.

--Editors: Kevin Costelloe, Carlos Torres

To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

BOE Maintains Bond Plan as Economy Sustains Momentum

Posted: 09 Dec 2010 05:16 AM PST

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By Svenja O'Donnell

(Updates with economist’s comment in fourth paragraph.)

Dec. 9 (Bloomberg) -- The Bank of England kept its emergency stimulus program unchanged after recent data suggested the economy may be strong enough to weather the government’s impending spending cuts, undermining the case for more aid.

The nine-member Monetary Policy Committee, led by Governor Mervyn King, held its bond-purchase plan at 200 billion pounds ($315 billion), as forecast by all 34 economists in a Bloomberg News survey. The bank also kept its main interest rate at a record low of 0.5 percent.

Manufacturing and services data indicate the recovery sustained momentum in the fourth quarter. While spending cuts to tackle the record budget deficit may curb expansion, inflation remains above the bank’s target and policy makers have split three ways on whether to raise rates to tame price growth or add to stimulus.

“The news that we’ve had through the month has been fairly positive, particularly in the manufacturing sector,” Philip Rush, an economist at Nomura International Plc in London, said in a telephone interview. “It seems too much of a communication challenge to do any kind of easing now, taking that off the cards completely in our view.”

The pound was little changed against the dollar after the decision and was down 0.1 percent at $1.5750 as of 1:12 p.m. in London. The yield on the 10-year gilt was 4 basis points lower at 3.504 percent.

Positive Data

U.K. manufacturing growth unexpectedly accelerated to the fastest pace in 16 years in November as export orders climbed, and an index of services stayed close to a four-month high, surveys last week showed. Gross domestic product increased 0.6 percent in the three months through November, more than the 0.5 percent recorded in the quarter through October, the National Institute of Economic and Social Research, whose clients include the Bank of England, said on Dec. 7.

“Quantitative easing will not be restarted unless there is a very severe slowdown in activity,” said Azad Zangana, an economist at Schroders Investment Management in London and an ex-Treasury official.

Other central banks have already added to measures to protect their economies. Federal Reserve Chairman Ben S. Bernanke said this week he may expand bond purchases beyond the $600 billion announced last month. The European Central Bank postponed its withdrawal of emergency stimulus last week and stepped up government-debt purchases.

Euro Crisis

At the Bank of England, policy maker Adam Posen has called for an expansion of the bond program, saying the fiscal squeeze will undermine domestic demand. The Office for Budget Responsibility, the Treasury’s fiscal watchdog, forecasts that the cuts will lead to the loss of 330,000 public-sector jobs by 2015. It cut its 2011 growth forecast to 2.1 percent from 2.3 percent on Nov. 29 and said the economy faces a “sluggish” medium-term outlook.

Britain’s economic prospects may also be hampered by the crisis engulfing the euro region, Britain’s biggest export market. The European Union and the International Monetary Fund on Nov. 28 agreed on an aid package for Ireland to try to stem contagion to other countries.

King told lawmakers on Nov. 25 that “a healthy European recovery is important to the ability of the U.K. economy to rebalance.” The strength of imports may hamper a shift away from domestic consumption the central bank is counting on. Data today showed the trade deficit unexpectedly widened in October as record imports overshadowed an increase in exports.

Inflation Risk

Europe’s debt crisis is “a risk you have to take into account,” Joost Beaumont, an economist at ABN Amro in Amsterdam, said in a telephone interview. “If this continues it will make the MPC less inclined to start raising rates. Currently the majority is very comfortable with the wait-and-see stance and the recent data has confirmed them in their view.”

Even as growth is threatened, an inflation rate above the government’s 3 percent upper limit may curb policy makers’ appetite for further loosening. King was forced to write his fourth letter this year to the government after consumer prices increased an annual 3.2 percent in October. He said last month that inflation was “likely to remain elevated” throughout next year.

Policy maker Andrew Sentance has argued for an interest- rate increase since June, citing the risk inflation expectations may become dislodged. His colleague Spencer Dale said in a speech last week that the combination of high inflation and loose policy made for an “uncomfortable juxtaposition.”

“With inflation so high I don’t think the Bank of England will feel that it’s credible with their mandate to be loosening policy any further,” Daiwa’s Mehta said.

--With assistance from Scott Hamilton in Editors: Fergal O’Brien, Craig Stirling

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

Abbas Rejects Further Talks Without Settlement Freeze

Posted: 09 Dec 2010 05:09 AM PST

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By Jonathan Ferziger

(Updates with Abbas comment in seventh paragraph, Ashrawi in ninth.)

Dec. 9 (Bloomberg) -- Palestinian Authority President Mahmoud Abbas said after consulting Arab leaders in Cairo that there will be no further direct peace talks with Israel unless it renews a moratorium on settlement construction.

Abbas met Egypt’s President Hosni Mubarak today and Amre Moussa, secretary-general of the Arab League, yesterday, according to the Palestinian news agency Wafa. His chief negotiator, Saeb Erakat, left Egypt by plane for Washington, where he will meet with Secretary of State Hillary Clinton to clarify a U.S. decision not to press Israel further on settlement construction to revive the talks, it said.

“We will not accept negotiations as long as settlement goes on,” Abbas told reporters. He said Erakat went to Washington because “things can’t be solved on the phone.”

President Barack Obama is sending envoy George Mitchell back to the Middle East next week to determine whether it is still possible to revive Israeli-Palestinian talks that have been stalled since mid-September, Philip J. Crowley, a State Department spokesman, said yesterday.

Israel’s chief negotiator, Yitzhak Molcho, is already in Washington for talks with Clinton and Mitchell to prepare for the U.S. envoy’s separate meetings with Abbas and Prime Minister Benjamin Netanyahu next week, according to an Israeli government official who asked not to be identified because Molcho’s itinerary had not been officially announced.

Separate Talks

Abbas said Erakat will not have any direct interaction with Netanyahu’s negotiator and that their talks with Clinton and Mitchell will be kept separate.

“There will be no meetings behind the curtain between him and the Israelis,” Abbas said, according to Wafa.

Direct talks between Israel and the Palestinian Authority collapsed after less than a month in September when a 10-month Israeli moratorium on settlement construction expired. Abbas said he wouldn’t continue direct talks without a building freeze.

The Palestinian leader will chair a meeting of the Palestine Liberation Organization’s decision-making Executive Committee in the West Bank city of Ramallah tomorrow to develop its strategy in light of the U.S. decision on settlements, said Hanan Ashrawi, a member of the committee.     “We should come out with a Palestinian policy to show it to the concerned parties in order to reach comprehensive support on Palestinian rights,” she said in an e-mailed statement.

Obstacles to Peace

Former Middle East negotiators say Mitchell faces an uphill battle in convincing both sides to find common ground on some of the stickiest issues blocking a final peace agreement, such as the borders of a Palestinian state and security guarantees.

After failing to get Israelis and Palestinians to resume face-to-face peace negotiations, the U.S. administration’s only real option was to try mediation on the fundamental issues needed for a two-state solution, said Aaron David Miller, a former Mideast peace negotiator and State Department official.

“The only good news is they’re going to be focused now on the end game and the substance that is required to actually get an agreement,” Miller said.

Clinton, who meets today with Molho, may outline a new U.S. approach in a speech she is scheduled to give tomorrow at the Brookings Institution in Washington.

“We’re looking forward to that like Moses coming down from the mountain with the tablets,” said Miller. Still, the speech is “likely to be more of a philosophy than a blueprint,” he said.

Change of Tack

Crowley said the U.S. recognized that persuading Israel to halt Jewish settlements in the West Bank had become “an end in itself rather than a means to an end.” Once that effort failed, he said it made sense to shift “to a different path.”

Asked what the new track would be, Crowley replied, “That’s what we’re trying to figure out.”

Israelis and Palestinians yesterday traded accusations about which side had undermined peace talks.

Erakat said Netanyahu “succeeded in torpedoing the peace talks.” Israeli Deputy Foreign Minister Danny Ayalon said the Palestinian strategy was “to avoid negotiations” and “blame Israel.”

Israel has built about 120 settlements in the West Bank since the late 1960s. Another 100 smaller settlements, which Israel calls outposts, were built during the past decade. The United Nations says the settlements are illegal, and the International Committee of the Red Cross says they breach the Fourth Geneva Convention governing actions on occupied territory.

Israel says the settlements don’t fall under the convention because the territory wasn’t recognized as belonging to anyone before the 1967 war, in which Israel prevailed, and therefore isn’t occupied.

--With assistance from Indira Lakshmanan and Flavia Krause- Jackson in Washington. Editors: Digby Lidstone, Heather Langan.

To contact the editor responsible for this story: Jonathan Ferziger in Tel Aviv at jferziger@bloomberg.net.

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net.

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