George Bush's re-election prospects received a jolt yesterday after news that rising oil prices have hit the spending power of American voters to an extent not seen since the recession of three years ago.
As the price of crude hit 21-year highs on the New York markets, Wall Street analysts said they were surprised at the weakness of consumer spending in the latest three months, during which it increased at an annual rate of only 1%.
Petrol prices in Britain are expected to rise over the next few days as the impact of more expensive crude starts to feed through to garage forecourts. With the price of US light crude trading at almost $43.50 a barrel, a 1p per litre increase was being predicted by industry experts.
"Problems could always occur in Iraq. It's difficult to see someone turning a switch and the situation changing there," said Steve Turner, an oil analyst at Commerzbank Securities.
The American gross domestic product figures underlined how more expensive fuel has already affected real incomes of consumers and made the world's biggest economy more reliant on exports and investment as the engines of growth.
Overall, according to figures from the commerce department in Washington, the economy expanded at an annual rate of 3% in the second quarter of the year, a bigger deceleration than Wall Street had been expecting from a revised growth rate of 4.5% in the first quarter.
"We're looking at a more pronounced than expected slowing of economic activity, mostly because of the shockingly small increase by consumer spending," Moody's In vestors Service chief economist John Lonski said.
Consumer spending rose at a 1% rate in the second quarter, a mere shadow of the robust 4.1% first-quarter gain. Big energy price rises meant consumers had less to spend on other goods and services.
Dearer fuel meant inflation was unchanged at 3.3% in the second quarter, but core inflation - which strips out food and energy - fell from 2.1% to 1.8%. Analysts said weaker price pressure would allow the Federal Reserve, America's central bank, to stick to its approach of raising US interest rates only gradually.
"What we see in this data is the Fed will stick to their measured pace or maybe even slow down a bit," said Kevin Logan, an economist with Dresdner Kleinwort Wasserstein in New York.
The Guardian
As the price of crude hit 21-year highs on the New York markets, Wall Street analysts said they were surprised at the weakness of consumer spending in the latest three months, during which it increased at an annual rate of only 1%.
Petrol prices in Britain are expected to rise over the next few days as the impact of more expensive crude starts to feed through to garage forecourts. With the price of US light crude trading at almost $43.50 a barrel, a 1p per litre increase was being predicted by industry experts.
"Problems could always occur in Iraq. It's difficult to see someone turning a switch and the situation changing there," said Steve Turner, an oil analyst at Commerzbank Securities.
The American gross domestic product figures underlined how more expensive fuel has already affected real incomes of consumers and made the world's biggest economy more reliant on exports and investment as the engines of growth.
Overall, according to figures from the commerce department in Washington, the economy expanded at an annual rate of 3% in the second quarter of the year, a bigger deceleration than Wall Street had been expecting from a revised growth rate of 4.5% in the first quarter.
"We're looking at a more pronounced than expected slowing of economic activity, mostly because of the shockingly small increase by consumer spending," Moody's In vestors Service chief economist John Lonski said.
Consumer spending rose at a 1% rate in the second quarter, a mere shadow of the robust 4.1% first-quarter gain. Big energy price rises meant consumers had less to spend on other goods and services.
Dearer fuel meant inflation was unchanged at 3.3% in the second quarter, but core inflation - which strips out food and energy - fell from 2.1% to 1.8%. Analysts said weaker price pressure would allow the Federal Reserve, America's central bank, to stick to its approach of raising US interest rates only gradually.
"What we see in this data is the Fed will stick to their measured pace or maybe even slow down a bit," said Kevin Logan, an economist with Dresdner Kleinwort Wasserstein in New York.
The Guardian
