Snow says oil prices hurting US economy -report
NEW YORK (Reuters) – Record high oil prices are beginningto take their toll on the U.S. economy, but not enough to haltor reverse the recovery, U.S. Treasury Secretary John Snow saidon Tuesday.
“Energy prices are way too high,” Snow said on CNBCtelevision. “Clearly, it’s hurting.”
After hitting a three-month low in May, U.S.-traded oilfutures have risen around 32 percent to a record high of $60.95a barrel on Monday. In early trading Tuesday, oil pricesslipped to $59.58.
High energy prices often sap domestic spending, asconsumers have to shell out more for gasoline and less forother goods. A consumer-led slowdown has the potential to dentU.S. economic growth, particularly since consumer spendingmakes 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 energyprices portended a recession, Snow said: “No. I don’t see itderailing the strong recovery we’re in … but it does take afew tenths of a (percentage) point off GDP growth, that’s forsure.”
The U.S. gross domestic product grew at an annualized paceof 3.5 percent in the first three months of 2005, according tothe preliminary reading from the Commerce Department. The GDPgrew 3.8 percent in the fourth quarter.
Snow, a guest host on the television program, focused hisgrowth concerns on Europe, which he said is having an indirecteffect on U.S. economic growth.
“They are a huge trading partner,” Snow said of the eurozone. “The fact they aren’t growing (close to potential) hurtsour growth,” he said.
The recent rejection of the EU constitution by voters inFrance and the Netherlands has spawned political turmoil andeconomic uncertainty in the 12-nation euro zone.
The differences in perceived growth potential betweenEurope and the United States have helped to push the euro downto a 10-month low of $1.1981 last week .
The European Central Bank expects euro zone growth of 1.4percent in 2005.
Snow reiterated the Bush administration’s oft-repeatedstrong dollar policy, underscoring that the value of thecurrency is best set in open and competitive markets.
“As many times as I say it, I need to say it again: we havea strong dollar policy,” he said.
(Reporting by John Parry and Jamie McGeever)