NEW YORK - Record high oil prices are beginning to take their toll on the U.S. economy, but not enough to halt or reverse the recovery, U.S. Treasury Secretary John Snow said on Tuesday.
"Energy prices are way too high," Snow said on CNBC television. "Clearly, it's hurting."
After hitting a three-month low in May, U.S.-traded oil futures have risen around 32 percent to a record high of $60.95 a barrel on Monday. In early trading Tuesday, oil prices slipped to $59.58.
High energy prices often sap domestic spending, as consumers have to shell out more for gasoline and less for other goods. A consumer-led slowdown has the potential to dent U.S. economic growth, particularly since consumer spending makes up roughly two-thirds of the economy.
But Snow said the U.S. economy is managing to withstand the "headwinds" of oil at $60 a barrel. When asked if these energy prices portended a recession, Snow said: "No. I don't see it derailing the strong recovery we're in ... but it does take a few tenths of a (percentage) point off GDP growth, that's for sure."
The U.S. gross domestic product grew at an annualized pace of 3.5 percent in the first three months of 2005, according to the preliminary reading from the Commerce Department. The GDP grew 3.8 percent in the fourth quarter.
Snow, a guest host on the television program, focused his growth concerns on Europe, which he said is having an indirect effect on U.S. economic growth.
"They are a huge trading partner," Snow said of the euro zone. "The fact they aren't growing (close to potential) hurts our growth," he said.
The recent rejection of the EU constitution by voters in France and the Netherlands has spawned political turmoil and economic uncertainty in the 12-nation euro zone.
The differences in perceived growth potential between Europe and the United States have helped to push the euro down to a 10-month low of $1.1981 last week .
The European Central Bank expects euro zone growth of 1.4 percent in 2005.
Snow reiterated the Bush administration's oft-repeated strong dollar policy, underscoring that the value of the currency is best set in open and competitive markets.
"As many times as I say it, I need to say it again: we have a strong dollar policy," he said.
Snow says oil prices hurting US economy -report
June 30, 2005, 6:23 pmG8 to voice fears over oil, economy risks -official
June 30, 2005, 6:20 pm
PARIS - Group of Eight leaders will renew support for trade liberalisation negotiations and voice concern over soaring oil prices and other "imbalances" threatening the global economy when they meet next week, a G8 official said.
Germany, one of the G8 group of leading industrial nations, is particularly concerned about oil prices, which hit a record $60.95 this week, and wants a G8 summit in Scotland to address issues of economic concern, the official said.
Climate change and aid for Africa are the two big issues on which British Prime Minister Tony Blair wants deals at a meeting he chairs on July 6-8, where he will be joined by leaders of the United States, Canada, Japan, Germany, France, Italy and Russia.
The official, speaking to Reuters on condition of anonymity, said the summit would issue a statement that addresses the main economic concerns of the G8 group, namely oil and "imbalances," jargon for problems such as record U.S. deficits.
G8 leaders are also set to reiterate the stand rich nations voiced on currencies more than a year ago in Florida, when they called for flexible exchange rate regimes in an implicit appeal to China to ease state control of the yuan, the official said.
Chinese President Hu Jintao, whose country's breakneck speed of economic and foreign export growth has the G8 economies torn between fear and admiration, is due to attend the G8 summit.
But Beijing repeatedly says it will only adjust its currency system when the economy is ready, not in response to pressure from abroad, where many say China's peg to the dollar is making its currency and its exports unfairly cheap.
G8 leaders will also give another signal on their commitment to the so-called Doha round of free trade talks ahead of a what have been billed as crunch talks on that matter later this year in Hong Kong.
"There will be a political push to support Doha," said the official. Britain is pushing for some kind of pledge by rich nations to end export subsidies for farm produce, arguing that there is little point in offering Africa debt relief and aid if wealthy countries are distorting competition in world trade at the expense of Africa and other developing countries.
It was not yet clear whether there would be any pledge of that kind in the declarations issued at the summit, however, the official said.
The European Union argues that farm export aid can only go if the United States does likewise and as part of a wider deal in trade in industrial goods and services.
Germany, one of the G8 group of leading industrial nations, is particularly concerned about oil prices, which hit a record $60.95 this week, and wants a G8 summit in Scotland to address issues of economic concern, the official said.
Climate change and aid for Africa are the two big issues on which British Prime Minister Tony Blair wants deals at a meeting he chairs on July 6-8, where he will be joined by leaders of the United States, Canada, Japan, Germany, France, Italy and Russia.
The official, speaking to Reuters on condition of anonymity, said the summit would issue a statement that addresses the main economic concerns of the G8 group, namely oil and "imbalances," jargon for problems such as record U.S. deficits.
G8 leaders are also set to reiterate the stand rich nations voiced on currencies more than a year ago in Florida, when they called for flexible exchange rate regimes in an implicit appeal to China to ease state control of the yuan, the official said.
Chinese President Hu Jintao, whose country's breakneck speed of economic and foreign export growth has the G8 economies torn between fear and admiration, is due to attend the G8 summit.
But Beijing repeatedly says it will only adjust its currency system when the economy is ready, not in response to pressure from abroad, where many say China's peg to the dollar is making its currency and its exports unfairly cheap.
G8 leaders will also give another signal on their commitment to the so-called Doha round of free trade talks ahead of a what have been billed as crunch talks on that matter later this year in Hong Kong.
"There will be a political push to support Doha," said the official. Britain is pushing for some kind of pledge by rich nations to end export subsidies for farm produce, arguing that there is little point in offering Africa debt relief and aid if wealthy countries are distorting competition in world trade at the expense of Africa and other developing countries.
It was not yet clear whether there would be any pledge of that kind in the declarations issued at the summit, however, the official said.
The European Union argues that farm export aid can only go if the United States does likewise and as part of a wider deal in trade in industrial goods and services.
Metal prices prompt rethink on Chinese economy
June 29, 2005, 2:37 pm
A rise in base metal prices over the weekend was seen as a sign that China's economy is not slowing down, as some analysts had feared.
All metals rose off the back of China's latest strong gross domestic product figures and low inventory stocks.
The head of research with Patersons's Securities, Rob Brierley, says copper prices jumped the most, as demand surged to a record high of nearly $3,700 dollars a tonne.
"Copper led the way, up 3 per cent," he said.
"Other commodities such as zinc, nickel, lead and aluminium were all up 1 per cent plus.
"It is significant in that in the last couple of months we've seen a reduction in commodity prices as concerns about the Chinese economy and the strength of that economy and the likelihood that it will continue to grow at those levels.
"There were some doubters but the recent data shows those doubters were a little bit too quick off the mark."
All metals rose off the back of China's latest strong gross domestic product figures and low inventory stocks.
The head of research with Patersons's Securities, Rob Brierley, says copper prices jumped the most, as demand surged to a record high of nearly $3,700 dollars a tonne.
"Copper led the way, up 3 per cent," he said.
"Other commodities such as zinc, nickel, lead and aluminium were all up 1 per cent plus.
"It is significant in that in the last couple of months we've seen a reduction in commodity prices as concerns about the Chinese economy and the strength of that economy and the likelihood that it will continue to grow at those levels.
"There were some doubters but the recent data shows those doubters were a little bit too quick off the mark."
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