Economy hurts Deutsche Post DHL freight business

FRANKFURT, Germany (AP) — Mail and freight company Deutsche Post DHL saw its profits dip in the first quarter as a tough global economy meant companies shipped fewer goods by air.

A large one-time gain in the year-ago quarter from the sale of the Postbank business to Deutsche Bank also hurt the profit comparison, the Bonn, Germany based company said Tuesday.

Overall, Deutsche Post made a net profit of 498 million euros ($647 million) in the first three months of the year, 5.9 percent lower than the year ago equivalent of 529 million euros. The Postbank sale added 186 million euros last year.

The profit fall came despite a 0.6 percent rise in revenues to 13.44 billion euros.

Deutsche Post, which operates an air freight hub in Cincinnati, Ohio, said its freight business saw slower demand for freight in "a strained macroeconomic environment" that includes a stagnant European economy.

Air freight revenue fell 8.2 percent to 1.2 billion euros, with a particularly strong decline in the technology and manufacturing sectors. Still, operating earnings for the freight division showed a 1 percent increase due to strict cost management.

Deutsche Post, which has 473,000 employees in 220 countries and territories, emerged from the former government post office through privatization, and remains Germany's domestic mail carrier. The German government owns a 24.9 percent stake through its KfW bank.

The company maintained its full-year forecast for as much as 2.95 billion euros in earnings before interest and taxes.

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Brazil's big government seen as good for politics, bad for economy

By Anthony Boadle

BRASILIA (Reuters) - President Dilma Rousseff added a new minister to her Cabinet on Thursday, further enlarging a federal government whose rapid growth since her leftist party came to power a decade ago has increased Brazil's heavy tax burden.

Rousseff, who is seeking re-election next year, swore in Guilherme Afif Domingos to head the newly created Ministry of Micro and Small Businesses, the country's 39th ministry.

When civilian rule replaced military dictatorship in 1985, there were only 17 ministries in Brasilia. The number of Cabinet posts has almost doubled since the Workers' Party took office under former President Luiz Inacio Lula da Silva in 2003.

Brazil's Cabinet now has twice the number of ministers that Organization of Economic Cooperation and Development nations have on average.

Rousseff said the new ministry's priority would be to cut bureaucracy and red tape that strangle small businesses as her government strives to inject new life into the fragile recovery of the world's seventh largest economy.

Political analysts say, however, the main reason is to widen support for the president's re-election by bringing Afif Domingos' fast-growing PSD party, the third largest in Congress, into her unwieldy 18-party coalition.

"The number of ministries is a result of the president's political need to accommodate such a variety of different parties," said Octavio Amorim Neto, a political science professor at Brazil's Getulio Vargas Foundation.

Their leaders range from former communists to conservative evangelicals, such as Bishop Marcelo Crivella who became fishing minister last year, even though he admitted publicly to understanding little about fishing.

Even Rousseff's top adviser from the business sector, steelmaker Jorge Gerdau, criticized the new ministry, saying the government could operate with "half a dozen" key ministries and did not need 39.

"But as the number of parties grows, this is all but impossible," Gerdau, who heads an advisory group on making government more efficient, told the Folha de S.Paulo newspaper.

TAX BURDEN

Officials in Rousseff's administration say that while the federal government has grown steadily in size, revenues have risen even faster.

But economists warn that the increasing cost of government is to blame for Brazil's tax burden, which at 36 percent of GDP is close to the average for rich OECD countries, but far too high for an emerging middle-income nation, economists say.

Over the past decade, Brazil greatly expanded social programs to lift more than 30 million Brazilians from poverty through conditional cash transfers, to the point where spending on social assistance, pensions, health and education now account for 91 percent of the government's current expenditure.

That has come at the expense of public investment in Brazil's deficient infrastructure that has become a costly hurdle to economic growth, said economist Mansueto de Almeida of the government think tank IPEA. Add Brazil's high taxes and labor costs and that has undermined Brazilian industries' ability to compete in the world, he said.

The once-booming Brazilian economy grew a mere 0.9 percent last year and the government has resorted to a barrage of tax breaks, lower interest rates and other incentives over the past two years to try to restore solid growth, so far to no avail.

De Almeida said the Rousseff government had begun to see the tax burden as a problem, but had no solution, especially since it was cranking up spending as it enters an election year.

"We have a large government that increased the number of ministries, expanded social spending, but wants to increase investment to grow: something has to give," he said.

(Reporting by Anthony Boadle; Editing by Peter Cooney)

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British economy claims new victim - Prince Charles' veg shop

LONDON (Reuters) - Britain's weak economy has taken its toll on the nation's poshest greengrocer with Prince Charles forced to close his organic vegetable store, citing falling trade and rising prices.

Prince Charles, the heir to the throne and a champion of the environment, opened a store near to his country home Highgrove in Gloucestershire, south-west England, about eight years ago after converting his estate to organic farming in 1986.

The store, The Veg Shed, sold organic vegetables and fruit freshly grown on the estate's Duchy Home Farm and became known for selling edible but oddly shaped organic produce that would normally be rejected by supermarkets.

But a spokeswoman for the prince said the store had closed after it failed to make a profit as it was no longer financially viable. The produce was invariably more expensive than at local supermarkets.

"The Veg Shed has closed, basically in response to consumer trends, a preference for shopping remotely," a spokeswoman from Clarence House, the prince's official London residence, told Reuters on Tuesday.

She said consumers wanting a taste of the royal organic produce can still order boxes online.

(Reporting by Limei Hoang, Editing by Belinda Goldsmith)

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New jobs and energy gains helping lift US economy

WASHINGTON (AP) — A stronger-than-expected April rebound in job creation and recent dramatic discoveries of vast U.S. oil and gas reserves are helping to lift the American economy out its long funk.

The economic good news is also drawing attention to the importance of private-sector innovation rather than government policy in fostering growth.

The Labor Department's report that payrolls expanded by 165,000 jobs last month and the unemployment rate declined to a four-year low of 7.5 percent does not represent explosive job growth by any measure.

Yet the report offered a big sigh of relief to President Barack Obama and his Democratic allies in Congress.

It also may help blunt Republican criticism of Obama's policies and make it easier for him to give more attention to other issues on his agenda, including immigration, gun control and global warming.

At the same time, it provided the GOP with more support for their call for a smaller government and fewer regulations on business.

The recent jobs improvements were mostly driven by private-sector gains independent of action by the president and Congress.

Most legislative fiscal stimulus programs, begun in 2008 under President George W. Bush and expanded under Obama, have run their course. The Federal Reserve, however, continues to stimulate the economy by holding down interest rates and effectively printing money to buy government and mortgage-related bonds.

In fact, the report showed employer confidence about the economic outlook even in the face of new federal budget cuts. Economists widely agree that job gains would have been bigger were it not for the automatic across-the-board cuts that are beginning to take an $85 billion bite out of government spending.

House Speaker John Boehner, R-Ohio, said that while the report had "some good news" on the jobs front, it was still important to "focus on growing our economy rather than growing more government." He said that includes "expanding our energy production."

The energy sector plays a major role in global economic growth and recovery.

Recent discoveries have put the United States on track to become the world's largest producer of oil and natural gas in a few years. At the same time, oil imports have fallen to a 17-year low.

The energy breakthroughs have come despite Obama's heavy emphasis on promoting renewable clean-energy sources, such as wind and solar power, for the future.

In the months and years ahead, domestic energy production "is going to be a real driver of economic growth," said economist Douglas Holtz-Eakin, a former director of the Congressional Budget Office and chief economic adviser to Sen. John McCain's 2008 presidential campaign.

These energy gains, while not that big yet, will be reflected in more jobs at drilling and other energy work sites, reduced manufacturing costs and improvements in the nation's balance of trade, said Holtz-Eakin, now head of the American Action Forum, a conservative public policy institute.

"There's a lot of things in this jobs report one could like. But it's also something that leaves you with a long way to go."

It's hard to appreciate when you're in the grips of one, but recessions always come to an end. Recoveries always eventually follow, obeying the physics of business cycles.

But this recovery has been agonizingly shallow, given that the recession officially ended way back in mid-2009. Even at 7.5 percent, the jobless rate hovers well above pre-recession levels.

Even at the improved pace of job creation over the past six months, it will still take until early 2018, five more years, to get back to the more normal unemployment rate of 5 percent or less that prevailed before the recession began in late 2007, said economist Heidi Shierholz of the labor-oriented Economic Policy Institute.

"This is one of those reports that is totally context driven. In good times, the 165,000 new jobs would be fine, but nothing to write home about," she said.

"It's not bad. But we should have added over 6 million jobs since December 2007. Instead, we're down 2.6 million jobs," she said. "There's a big disconnect between people who are just happy that job growth was better than their expectations and what the report really says about where the labor market is."

Even so, stocks soared on cue, with the Dow industrials on Friday briefly rising above 15,000 for the first time before falling back a bit to close at 14,974, still a record close.

The jobs report also reflected a recovering housing industry. But not all sectors were up. Manufacturing, for instance, was flat.

While most energy-related sectors may be on the rise and new technological developments are "promising," the benefits to manufacturers will be muted because "U.S. manufacturing has become so much less energy intensive overall in recent years," said Alan Tonelson of the U.S. Business and Industry Council, which represents close to 2,000 mainly family-owned manufacturing companies.

Tonelson worries about foreign trade barriers, continued high levels of government spending despite recent cutbacks, and the Fed's continuing efforts to stimulate growth by printing money.

"Debt-led growth never ends well," he said.

Still, the latest jobs report gave the administration a big dose of good news, even as officials agreed there was still far to go.

"The economy has now added private-sector jobs every month for 38 straight months, and a total of 6.8 million jobs," said Alan Krueger, chairman of the White House Council of Economic Advisers.

"It is critical that we remain focused on pursuing policies to speed job creation and expand the middle class as we continue to dig our way out."

___

Follow Tom Raum on Twitter: http://www.twitter.com/tomraum

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Economy may need shock therapy soon - employers group

LONDON (Reuters) - Britain's chancellor may have to apply shock treatment to the country's economy, including the controversial option of new borrowing to fund investment, if there is no sign of growth in six months' time, a business leader has said.

This month's budget announcement by George Osborne must include several measures to boost the economy which could be funded by cuts to welfare and other spending, said John Longworth, director general of the British Chambers of Commerce.

But if growth prospects remain elusive, more radical options will be needed, he said.

"If within the next six months there is no prospect of growth ... you might have to consider actually borrowing more money but you should only do it to fund areas that the market would forgive," he told reporters.

As well as taking on new debt to fund more infrastructure spending, the government may also have to consider big cuts in corporate and capital gains taxes to kick-start growth.

"It would be a sort of defibrillator approach to the economy," said Longworth, whose organisation represents more than 100,000 British businesses.

Osborne and Prime Minister David Cameron have ruled out any shift from their plan to rein in Britain's budget deficit, even as the economy runs the risk of falling into its third recession in four years. Cameron said last week that the country would plunge "into the abyss" if he changed course.

But signs have grown of differences within the ruling coalition ahead of the March 20 budget statement. Business minister Vince Cable suggested it might be possible for the government to borrow to fund more spending without spooking financial markets.

The BCC and another leading employers group, the CBI, both said on Monday that they backed the government's focus on tackling the budget deficit but said there was room for measures to boost growth too.

Those measures included moving ahead with the government's long-delayed business bank which would help provide credit to companies struggling to get loans from commercial banks.

The two employers groups called for more investment in housing and road repairs as quick ways to spur growth, and a freeze in business rates - the taxes companies pay based on the value of their properties.

The BCC estimated the measures it was proposing for Osborne's budget this month would cost 29.6 billion pounds over three years, it said could be found by cutting benefits for people who do not need them and through other savings.

The CBI's proposals would cost 2.2 billion pounds in the 2013 fiscal year which could be funded through savings in central government spending and the sale of public land and property, said the CBI's chief policy director, Katja Hall.

The CBI represents around 240,000 British businesses.

(Editing by Toby Chopra)

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Abe vows to revive Japanese economy, sees no escalation with China

WASHINGTON (Reuters) - Japanese Prime Minister Shinzo Abe told Americans on Friday "I am back and so is Japan" and vowed to get the world's third biggest economy growing again and to do more to bolster security and the rule of law in an Asia roiled by territorial disputes.

Abe had firm words for China in a policy speech to a top Washington think-tank, but also tempered his remarks by saying he had no desire to escalate a row over islets in the East China Sea that Tokyo controls and Beijing claims.

"No nation should make any miscalculation about firmness of our resolve. No one should ever doubt the robustness of the Japan-U.S. alliance," he told the Center for Strategic and International Studies.

"At the same time, I have absolutely no intention to climb up the escalation ladder," Abe said in a speech in English.

After meeting U.S. President Barack Obama on his first trip to Washington since taking office in December in a rare comeback to Japan's top job, he said he told Obama that Tokyo would handle the islands issue "in a calm manner."

"We will continue to do so and we have always done so," he said through a translator, while sitting next to Obama in the White House Oval Office.

Tension surged in 2012, raising fears of an unintended military incident near the islands, known as the Senkaku in Japan and the Diaoyu in China. Washington says the islets fall under a U.S.-Japan security pact, but it is eager to avoid a clash in the region.

Abe said he and Obama "agreed that we have to work together to maintain the freedom of the seas and also that we would have to create a region which is governed based not on force but based on an international law."

Abe, whose troubled first term ended after just one year when he abruptly quit in 2007, has vowed to revive Japan's economy with a mix of hyper-easy monetary policy, big spending, and structural reform. The hawkish leader is also boosting Japan's defense spending for the first time in 11 years.

"Japan is not, and will never be, a tier-two country," Abe said in his speech. "So today ... I make a pledge. I will bring back a strong Japan, strong enough to do even more good for the betterment of the world."

'ABENOMICS' TO BOOST TRADE

The Japanese leader stressed that his "Abenomics" recipe would be good for the United States, China and other trading partners.

"Soon, Japan will export more, but it will import more as well," Abe said in the speech. "The U.S. will be the first to benefit, followed by China, India, Indonesia and so on."

The United States and Japan agreed language during Abe's visit that could set the stage for Tokyo to join negotiations soon on a U.S.-led regional free trade agreement known as the Trans-Pacific Partnership.

In a carefully worded statement following the meeting between Obama and Abe, the two countries reaffirmed that "all goods would be subject to negotiations if Japan joins the talks with the United States and 10 other countries.

At the same time, the statement envisions a possible outcome where the United States could maintain tariffs on Japanese automobiles and Japan could still protect its rice sector.

"Recognizing that both countries have bilateral trade sensitivities, such as certain agricultural products for Japan and certain manufactured products for the United States, the two governments confirm that, as the final outcome will be determined during the negotiations, it is not required to make a prior commitment to unilaterally eliminate all tariffs upon joining the TPP negotiations," the statement said.

Abe repeated that Japan would not provide any aid for North Korea unless it abandoned its nuclear and missile programs and released Japanese citizens abducted decades ago to help train spies.

Pyongyang admitted in 2002 that its agents had kidnapped 13 Japanese in the 1970s and 1980s. Five have been sent home, but Japan wants better information about eight who Pyongyang says are dead and others Tokyo believes were also kidnapped.

Abe also said he hoped to have a meeting with new Chinese leader Xi Jinping, who takes over as president next month, and would dispatch Finance Minister Taro Aso to attend the inauguration of incoming South Korean President Park Geun-hye next week.

(Additional reporting by Jeff Mason and Doug Palmer; Editing by David Brunnstrom and Paul Simao)

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