Economic Stimulus Plan Signed By Bush

President Bush signed legislation on Wednesday to send $300 to $1,200 rebate checks to millions of Americans as a "booster shot" for the economy.

Rebates are to go out beginning in May to taxpayers and low-income people, including seniors living off of Social Security and veterans who depend on disability checks. Businesses would get tax breaks for investing in new plants and equipment.

"I know a lot of Americans are concerned about our economic future," Bush said. "Our overall economy has grown for six straight years, but that growth has clearly slowed."

Several dozen members of Congress, including House Speaker Nancy Pelosi, stood on the stage behind Bush as he signed a bill to fend off a possible recession. He said the stimulus package was achieved after he talked with leaders of Congress in January about "whether or not we could come together to provide a booster shot for our economy — a package that is robust, temporary, and puts money back into the hands of American workers and businesses."

Most taxpayers will receive a check of up to $600 for individuals and $1,200 for couples from the Internal Revenue Service, with an additional $300 per child. People earning at least $3,000 and those who owe little or no taxes would get $300 for singles, $600 for couples. Those making more than $75,000 and couples with income exceeding $150,000 are to get smaller rebates — $50 less per $1,000 they make over those thresholds.

"Americans struggling with the high cost of energy, groceries and health care will soon receive relief, and our economy will get a timely, targeted, and temporary boost — thanks to our bipartisan stimulus package," Pelosi said. "This package gets money into the hands of Americans struggling to make ends meet, helps families with children, cuts taxes for small businesses that will create new jobs and stimulates our slowing economy."

Economic analysts generally believe the $168 billion package Bush signed will help prevent the current downturn from ballooning into a crisis. But if the rebates don't spur a consumer spending spree strong enough to cure what ails the economy, Congress is ready to throw more money at the problem. Bush said the measure was "large enough to have an impact."

Democrats and Republicans who put aside deep differences to craft the plan and rush it to enactment joined the president at the White House for the signing ceremony in the East Room. The package is designed in part to inoculate lawmakers from voter blame should the economy continue to lag as the November elections bear down.

Congressional leaders already are considering more economic rescue measures that could include transportation spending, unemployment aid and measures to address the housing crunch that's at the root of the current economic doldrums.

In the meantime, economists are debating how effective the rebates will be, with critics arguing that debt-burdened consumers will use the money to pay bills rather than spending the checks and spurring growth.

An Associated Press-Ipsos poll found that only 19 percent of those surveyed said they planned to spend their rebate checks. Forty-five percent said they would pay bills, while 32 percent said they planned to invest the money.

The last time the government sent out rebates, in 2003, recipients spent a little less than a third in the first six months, and about two-thirds within the first year, according to findings by the University of Michigan Survey of Consumers, cited by congressional tax analysts. After rebates were sent out in 2001, just 22 percent said they would mostly spend them — rather than saving the money or using it to pay off debt — and only one-third of the rebate was spent in the short run, according to the same study.

Profits Up as Coca-Cola Sales Rise

The Coca-Cola Co. reported Wednesday a 79 percent jump in fourth-quarter profit and maintained its growth targets despite a slowing U.S. economy, but has no plans to be more aggressive with its stock buybacks.

The results posted by the world's largest beverage maker beat Wall Street expectations, but company shares slipped.

The Atlanta-based company said it earned $1.21 billion, or 52 cents a share, for the three months ending Dec. 31, compared to a profit of $678 million, or 29 cents a share, a year earlier, when the company took a big impairment charge at its largest bottler.

Excluding one-time items, Coca-Cola said it earned $1.36 billion, or 58 cents a share, in the quarter, ahead of the 55 cents a share analysts surveyed by Thomson Financial were expecting.

Revenue in the quarter rose 24 percent to $7.33 billion, compared to $5.93 billion recorded a year earlier.

Looking ahead, Coca-Cola executives said the company is mindful of the slowing U.S. economy.

Chief Financial Officer Gary Fayard said the company is confident about its overall volume and growth targets. But, he said Coca-Cola only plans to buy back $1 billion to $2 billion in company stock in 2008, about the same amount as in 2007.

Fayard said the company wants to be conservative because of uncertainty in the credit markets.

Chief Executive Neville Isdell told analysts during a conference call that the fourth quarter was "a very positive finish to 2007" that "capped an excellent year for The Coca-Cola Co."

He said the company is doing well based on its growth goals.

"We realize the journey is long, and we are by no means declaring victory," Isdell said, adding that Coca-Cola will respond to future "opportunities and challenges."

Worldwide unit case volume was up 5 percent in the fourth quarter and 6 percent for all of 2007.

Growth in several international markets was strong in the fourth quarter. Unit case volume in Coca-Cola's Africa group increased 7 percent in the quarter. It increased 18 percent in the quarter in India and 10 percent in Latin America.

However, unit case volume in the company's key North America unit increased only 1 percent in the quarter. Unit case volume in the company's European Union group increased 2 percent in the quarter. That group's results for the fourth quarter were weighed down by a volume decline in Germany.

President and Chief Operating Officer Muhtar Kent said Coca-Cola remains committed to creating strong, consistent growth in its home market, though he acknowledged that "international operations continue to be the primary driver of growth for the company."

Kent has been named to succeed Isdell as CEO on July 1. Isdell remains as chairman until Coke's annual meeting in April 2009.

For all of 2007, Coca-Cola said it earned $5.98 billion, or $2.57 a share, compared to a profit of $5.08 billion, or $2.16 a share, for all of 2006. Full-year revenue rose 20 percent to $28.86 billion, compared to $24.09 billion recorded in 2006.

Coca-Cola completed its $4.1 billion purchase of Vitaminwater maker Glaceau last June. Kent said Wednesday that Glaceau will be moving beyond the U.S. market. "You will certainly see Glaceau in international markets in the very near future," Kent said.

Coca-Cola shares fell 33 cents to $59.58 in afternoon trading Wednesday.

___

Retail Sales Shot Dollars Skywards

The dollar hit a one-month high against the yen on Wednesday after an unexpected rise in US retail sales.
Figures revealed US sales rose 0.3 per cent in January, confounding expectations for a 0.3 per cent fall.

Michael Woolfolk at Bank of New Mellon said the report implied US consumers might be in better shape than previously thought and the Federal Reserve's aggressive interest rate cuts in January might indeed succeed in averting a US recession. "The implication for the dollar is undeniably positive," he said.

By midday in New York, the dollar rose 0.8 per cent to Y108.20 against the yen, climbed 0.2 per cent to $1.4550 against the euro and gained 0.5 per cent to SFr1.1070 against the Swiss franc.

However, the dollar was flat at $1.9610 against the pound as the Bank of England's quarterly Inflation Report tempered expectations for aggressive cuts in UK interest rates.

The Bank said its projections for UK consumer price inflation were higher than in its November report, particularly in the near-term because of sharp rises in food, energy and import prices. It said consumer price inflation could well rise higher than 3 per cent - far above the central bank's 2 per cent target - in the short term if rates fell as expected.

Analysts said the projections suggested the Bank of England believed UK interest rates could fall by 50 basis points to 4.75 per cent in the coming months, but that expectations of a 75 basis-point cut might be overdone.

"The Bank of England believes the market has got a little ahead of itself on rate cut expectations," said James Knightley at ING.

However, he said he still believed that the deteriorating global backdrop would further damp price pressures. He said weaker domestic demand would lead to UK inflation dropping well below 2 per cent in 2009.

"Consequently, we retain our view that the Bank of England will be cutting rates to 4.5 per cent by the fourth quarter of this year, with the risks skewed to policy-easing coming earlier rather than later," said Mr Knightley.

The pound rose 0.2 per cent to £0.7421 against the euro and gained 0.8 per cent to Y212.10 against the yen.

Meanwhile, the Swedish krona rose 0.5 per cent to SKr9.3540 against the euro and climbed 0.3 per cent to SKr6.4250 against the dollar after a surprise rise in Swedish interest rates.

The Swedish central bank, raised interest rates by 25 basis points to 4.25 per cent. It justified the rise based on a 14-year high in inflation and solid economic activity but also hinted that this would be the last rate rise of the current cycle. The move wrong-footed analysts, who were expecting increased worries over global growth to keep the Swedish authorities from acting.

Fed To The Rescue: Cuts Rate By A Quarter Point

The Federal Reserve cut a key interest rate by one-quarter of a percentage point Tuesday, but Wall Street took a tumble. Investors were disappointed that the central bank did not act more boldly to keep the country out of a recession.
The reduction in the federal funds rate to 4.25 percent marked the third rate cut in the past three months. Fed officials signaled that further cuts were possible if a severe housing downturn and mortgage lending crisis get worse.
But Wall Street was looking for a much stronger sign. The Dow Jones industrial average, which had been up about 40 points in afternoon trading, plunged by more than 200 points as investors deciphered the Fed's comments.
"They should have issued a statement that they were prepared to do what they needed to do to return the credit markets to more normal conditions and to protect the economy from the effects of the credit crisis," said David Jones, chief economist at DMJ Advisors.
David Wyss, chief economist at Standard & Poor's in New York, said he was still looking for three more rate cuts early next year, even though the language in the statement was not as forceful as some had expected.
Commercial banks quickly matched the Fed move by trimming their prime lending rate to 7.25 percent. That put the benchmark rate for millions of business and consumer loans at its lowest point in two years.
In addition to cutting the funds rate, the Fed announced it was reducing its discount rate, the interest it charges to make direct loans to banks, by a quarter-point as well to 4.75 percent. This reduction was aimed at encouraging banks to borrow more freely from the Fed at a time when there are worries that a rising number of bad loans will prompt banks to tighten credit conditions too severely, adding another strain on the already fragile economy.
The Fed embarked on this round of rate cuts in September in response to severe turbulence in credit markets around the globe as investors reacted to various reports of mounting losses from defaults in subprime mortgages, the latest fallout from the worst slump in the U.S. housing market in more than two decades.
After cutting the funds rate by a half-point on Sept. 11 and a quarter-point on Oct. 31, the central bank indicated that those two reductions might be all that were needed to combat the threat of a recession given that financial markets appeared to be stabilizing.
However, increased market turbulence following the October meeting and growing fears of a recession caused the Fed to do an about-face.
In a brief statement explaining its action, the Fed said that recent economic data indicated that the economy is slowing, "reflecting the intensification of the housing correction and some softening in business and consumer spending."
The Fed also noted that "strains in financial markets have increased in recent weeks."
In its Oct. 31 statement, the Fed said it viewed the risks from weak growth as roughly balanced with the risks of higher inflation.
However, that phrase was changed in the current statement to read, "Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation."
The Fed vote for the rate cut was 9 to 1 with Eric S. Rosengren dissenting, arguing for a bigger, half-point cut in the funds rate.
Many economists believe the housing slump and credit turmoil have raised the risks of a recession. Many analysts believe that economic growth, as measured by the gross domestic product, may have dipped to a barely perceptible 1 percent rate, raising the chance that some shock, such as another surge in energy prices, could push the country into a recession.
But many analysts still believe the Fed will be able to respond forcefully enough with rate cuts that it will keep the current expansion alive. These analysts believe that the economy will start to rebound to faster growth by the middle of next year, when they expect that lower mortgage rates will have spurred a rebound in home sales.