Finance news. My opinion.

WASHINGTON • The economy grew late last year at a pace that in normal times would suggest it’s healthy.

But the 2.8 percent annualized growth rate in the October-December quarter — the fastest pace since the spring of 2010 — isn’t being cheered by most economists or investors. That’s because growth would need to be much stronger to sharply reduce unemployment. And signs in the data point to slower growth ahead.

For all of last year, the economy grew just 1.7 percent. That was barely more than half the growth in 2010. The outlook for all 2012 is slightly better. The Federal Reserve estimates growth of roughly 2.5 percent for the year.

Though the economy has picked up and is far stronger than during the Great Recession, unemployment is still a high 8.5 percent. Many people remain reluctant to spend more or buy homes. Many employers are still hesitant to hire.

For the final three months of 2011, Americans spent more on vehicles, and companies restocked their shelves at a robust pace. But overall growth last quarter — and for all of last year — was held back by the sharpest cuts in annual government spending in four decades, the Commerce Department said Friday.

Several factors are expected to exert more of an economic drag this year: Cuts in military and other federal spending. A slower pace of company restocking. Weak or flat pay increases. Sluggish growth in consumer spending.

“Overall, the pickup in growth doesn’t look half as good when you realize that most of it was due to inventory accumulation,” said Paul Ashworth, an economist at Capital Economics, who expects growth to slow to below 2 percent in the first three months of this year.

In the final three months of last year, consumer spending grew at a 2 percent annual rate. That’s up modestly from the third quarter. Consumer spending is important because it makes up 70 percent of economic activity.

Much of the growth was powered by a 14.8 percent surge in sales of autos and other long-lasting manufactured goods.

Incomes, which have been weak all year because of high unemployment, grew at a modest 0.8 percent annual rate. That followed two straight quarters of declining incomes. But unless pay increases pick up, consumers who have dipped into savings in recent months may pull back.

Business restocking, which can vary widely from quarter to quarter, was the greatest contributor to growth in the October-December period. It added nearly 2 percentage points to the gross domestic product, or GDP.

Government spending at all levels fell at an annual rate of 4.6 percent in the fourth quarter and 2.1 percent for the year — the biggest decline since 1971. Sweeping federal defense cuts at the beginning and end of 2011 were a major factor.

The economy is measured by GDP, which covers everything from haircuts to hotel bookings to jet fighters. Friday’s estimate was the first of three for the fourth quarter.

Other data show that in some ways, the economy ended 2011 on a strong note. Companies invested more in equipment and machinery in December. The unemployment rate fell to 8.5 percent last month — the lowest level in nearly three years — after the sixth straight month of solid hiring.

People are buying more cars, and consumer confidence is rising. Even the depressed housing market has shown enough improvement to make some economists predict a turnaround has begun.

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Greek debt talks are said to be progressing but officials have yet to announce a deal to scale back the nation’s overwhelming debt load.

Negotiations between the government and experts representing the private banks and investors that hold Greek debt — the Institute of International Finance — have been ongoing since last Wednesday.

But the outcome still remains uncertain ahead of a key two-day meeting of eurozone finance officials that starts Monday.

The lead negotiators from the IIF, Charles Dallara and Jean Lemierre, left Athens Saturday to attend "long-standing personal appointments" in Paris, according to a statement.

In a statement, Dallara stressed that progress has been made over the last few days and that the "elements" of a deal "are coming into place."

"Now is the time to act decisively and seize the opportunity to finalize this historic deal and contribute to the economic stability of Greece, the euro area and the world economy," said Dallara.

The IIF also said Dallara and Lemierre are available to Greek officials by phone "should this be necessary."

The lure to leave the euro may prove irresistible

At issue is an agreement to reduce Greece’s debt load by writing down the value of Greek bonds owned by the private sector by 50%.

In addition to the writedown, the deal is expected to include a debt exchange, in which investors would swap Greek bonds for new 30-year securities with an interest rate, or coupon, of about 4%.

The exchange could result in "real" losses of up to 70% for the private sector.

But it could also ease the burden on the Greek government as it struggles under a massive €350 billion pile of debt and a deepening recession.

The talks have been hindered by disagreements over the terms of the debt exchange and signs the participation rate may fall short of expectations.

The stipulation that investors voluntarily accept the writedowns has also been a stumbling block.

A non-voluntary writedown could trigger credit default swaps, a form of insurance that investors use as protection against a default.

Eurozone officials have insisted that the agreement be voluntary, arguing that credit default swaps could spread chaos in the financial system. But investors who have purchased credit protection might have an interest in holding out for a default.

The private sector owns over €200 billion worth of Greek debt, so the 50% writedown would translate to €100 billion.

That would help shrink Greek government debt to 120% of gross domestic product by 2020, according to eurozone officials. Currently, Greece’s debts are equal to about 160% of GDP.

Both sides are under pressure to reach agreement before Monday’s meeting of euro area finance ministers, known as the Eurogroup.

The restructuring of Greece’s private sector debt is a key condition for the nation to receive additional bailout funds from the European Union and International Monetary Fund.

Greece is facing a €14.5 billion bond payment in March that it may not make without another injection of emergency financing.

Europe: Still a huge pain in the neck for investors

Officials from the EU, IMF and European Central Bank arrived in Athens last week to begin reviewing the government’s finances.

The troika, as three institutions are known, is beginning the process of negotiating a second bailout for Greece, valued at €130 billion.

Greece has struggled in the past to implement the austerity measures and structural reforms that are a condition of its existing bailout loans.

Prime Minister Lucas Papademos, a former ECB vice president, was appointed last year to impose more budget cuts and revive Greece’s moribund economy.

The big concern is that Greece could default in a disorderly way, a development that could force the nation out of the euro currency union.

That would likely cause the Greek banking system to collapse and plunge the nation’s economy deeper into recession. It could also drive up borrowing costs for other vulnerable euro area economies, such as Italy and Spain.

The spread of a debt contagion in the eurozone is seen by most economists as the single biggest threat facing the global economy. 

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Sales (ETSLTOTL) of previously owned U.S. homes probably rose in December to the highest level in more than a year, a sign the housing market ended 2011 with momentum, economists said before a report today.

Purchases increased 5.2 percent last month to a 4.65 million annual rate, the most since May 2010, according to the median forecast of 75 economists surveyed by Bloomberg News.

Historically low mortgage rates and a pickup in employment may be giving Americans the confidence to purchase homes that have fallen in value. At the same time, another wave of foreclosures may inhibit a faster recovery in real estate as more distressed properties are put on the market.

Facebook has opened its new Timeleine feature to all 800 million of its users, the social network announced on Thursday morning.

The new feature replaces a user

President Barack Obama is wrapping up a three-day tour through crucial political states, searching for votes and money and unveiling executive steps to prime the economy even as his jobs bill struggles in Congress.

Obama held six fundraisers, including star-studded events in Los Angeles. He gathered backers in Denver and Las Vegas, urging them to find energy for the 2012 campaign. And he coined a new slogan _ “We can’t wait” _ to draw distinctions with congressional Republicans who oppose his $447 billion economic plan.

On Wednesday, at the University of Colorado’s Denver campus, he will highlight a new initiative to make it easier for graduates to repay their student loans. He earlier announced a mortgage refinancing program and on Tuesday the White House announced new steps to help veterans.

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Hurricane Ophelia has intensified to a Category 4 storm as it passes east of Bermuda and heads north toward Newfoundland, where the entire Avalon Peninsula is under a tropical storm watch.

The National Hurricane Center in Miami said Saturday evening that Ophelia had maximum sustained winds near 135 mph (217 kph), up from 120 mph (193 kph) late Saturday afternoon.

It was moving north at 26 mph (42 kph) and was 140 miles (225 kilometers) east of Bermuda. It was expected to weaken rapidly late Sunday, though tropical-storm-force winds are possible on the Avalon Peninsula early Monday payday loans.

Ophelia is the season’s fourth hurricane. Earlier, Ophelia caused flooding and cut off communities on Dominica.

Meanwhile, Tropical Storm Philippe was stronger but it remained far from land in the Atlantic.

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President Barack Obama says the U.S. Postal Service should be allowed to reduce mail delivery to five-days-a-week to cut its massive losses.

The Postal Service lost $8.5 billion last year. It’s facing even more red ink this year as the Internet siphons off large amounts of first-class mail and the weak economy reduces advertising mail.

While the post office has cut more than 100,000 workers in the last few years it needs to cut more, close offices and find other ways to reduce costs to keep operating.

In his economic growth and debt reduction plan unveiled Monday, Obama endorsed the idea of dropping one day of mail delivery _ it is expected to be Saturday _ and urged other changes in postal operations

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The end of Blockbuster in Canada doesn’t mean the DVD is going the way of the VHS tape.

Thank a lowly vending machine for this lease on life.

Although web-streaming services such as Netflix and Apple’s iTunes have been getting a lot of buzz in recent months, many industry players are still putting their money on traditional DVD and the Blu-ray discs.

On Wednesday morning, coinciding with the start of this year’s Toronto International Film Festival, Ottawa-based movie-rental firm Zip.ca is setting up a trio of DVD rental kiosks in Yonge-Dundas Square.

Featuring the top new releases and what the company calls the Top 200 movies of all time, the 1,020 DVDs inside a red Zip.ca machine can’t offer the breadth of selection of a full-sized Rogers Video or former Blockbuster outlet.

But at $1 (plus HST) per 24-hour period – $2 for new releases and Blu-Ray discs – the cost is anywhere from a quarter to a tenth of a video-store or online rental. Customers are allowed to keep their disc for a maximum of 25 days, with a fresh charge added daily to their credit card. If the rental remains unreturned after this period, Zip.ca adds a penalty charge of $50, plus tax.

A customer can rent a maximum of three movies on a single visit.

Zip.ca currently has 44 working kiosks in Ontario, located inside Metro supermarkets. This is in addition to a movies-by-mail service that has been around for several years.

“We hope to be in 100 Metros by the end of the month, and I want us to be in all 800 of the stores before this time next year,” says Zip.ca chair, Rob Hall, who will be handing out promotional coupons for free rentals in Yonge-Dundas Square.

This is the leading ripple in what could turn into a wave of movie kiosks coming to grocery and convenience stores and grabbing a larger slice of Canada’s $300 million annual video-rental market. Industry researcher Nielsen does not currently publish separate revenue totals for online versus traditional DVD rentals low fee payday loans.

“We’ve seen a real surge in calls from investors Canada in the last 40 days,” says Shamira Jaffer, president and CEO of Signifi Solutions, a Toronto-based manufacturer of video-kiosk technology.

The timing coincides with the demise of Blockbuster on this side of the border. It also acknowledges the success of DVD kiosks in the United States.

Redbox, the leading American brand, is reported to be eyeing expansion into Canada in the coming months.

“This is becoming the norm,” says Jaffer. “I don’t know why it’s taken so long to get into Canada.”

She points out that a $1 rental is particularly alluring against web streaming, when one adds up downloading time, rental cost as well as data usage through a customer’s Internet provider.

Pete Popcke was a pioneer in the American DVD kiosk business, starting with a company called DVDPlay, which still operates a network of machines at Safeway stores in the greater Vancouver area.

Now he is chief operating officer of Xona Media, a California firm that has developed a DVD kiosk that offers a traditional disc or the option of downloading a movie onto a memory stick or SD memory card.

“The tail on this opportunity will be really long,” says Popcke. “You hear digital, digital, digital, but we forget that folks in Ohio are still getting their movies on disc.”

By offering a choice of media through its kiosks, Popcke is hedging his bets on the big studios eventually releasing their movies digitally. “We don’t know when it’s going to happen, but we know it is going to happen,” he says.

Even so, Popcke agrees with Jaffer and Hall that the traditional DVD will continue to be commercially viable for five to 10 more years – long enough to make their vending-machines attractive to investors as well as consumers.

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VIA Rail commuters to Toronto are uniting to fight proposed ticketing changes that they say will make the system less flexible and convenient to them.

It also prevents them from gaining the same HST exemption and federal income-tax break granted to GO Train and TTC pass users.

In reply, the company says that holding seats empty for commuters who might not show up is no way to run a railroad.

Typically, commuters buy open-ended tickets in packets of 20

The Libyan government says any citizen caught using an unlicensed satellite phone will be charged as a spy for NATO.

Libya’s news agency, JANA, reported Friday that those carrying a satellite phone without a permit could be sentenced to death as punishment for treason.

Many Libyans have been using satellite phones to communicate with one another after the government cut off mobile phone communications when the civil war started in February.

Libya’s 6-month-old civil war has been deadlocked for months despite NATO’s airstrikes to protect civilians.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

BENGHAZI, Libya (AP) _ Libyan rebels battling Moammar Gadhafi’s troops along the country’s Mediterranean coast said they captured a key oil terminal Thursday that has repeatedly changed hands in the 6-month-old civil war.

Rebel spokesman Mohammed al-Rijali said he was with the fighters in Brega when they gained control of the strategic port city, 125 miles (200 kilometers) southwest of the de-facto rebel capital of Benghazi, after three weeks of intense fighting.

“Brega is liberated,” al-Rijali told The Associated Press after nightfall.

Al-Rijali, who spoke over the telephone from nearby Ajdabiya, didn’t provide any details or a casualty toll. His claim could not be immediately verified. Officials in the Libyan capital Tripoli made no comment on the rebel claim.

Brega fell under rebel control briefly in March, but was recaptured by Gadhafi’s forces shortly afterward. The fighting around the city has gone back and forth since then, with the rebels not managing to keep their ground.

Brega’s capture would be an important boost for the rebels because whoever controls the strategic oil terminal, which is also Libya’s second-largest hydrocarbon complex, is in charge of the country’s main oil fields.

Another rebel spokesman, Mohammed al-Zawawi, said earlier Thursday that two rebels died in the day’s fighting in Brega, while 16 others were wounded.

Libya’s civil war has been deadlocked for months despite NATO’s airstrikes to protect civilians.

The revolt began in mid-February, with the rebels quickly wresting control of much of the eastern half of the country, as well as pockets in the west.

The conflict later settled into a stalemate with the rebels failing to budge the front lines in the east since April.

However, in recent weeks, rebels based in the western Nafusa mountains have made some gains, advancing toward Gadhafi-held towns along the coast.

On Thursday, hundreds of rebel fighters seized control of Nasser City, a small town about 16 miles (25 kilometer) south of the coastal town of Zawiya, after several hours of battle. Nasser City is the closest rebels have come to Tripoli, Gadhafi’s main stronghold. Zawiya is just 30 miles (50 kilometers) west of the Libyan capital.

The streets of Nasser City were deserted and shops were shuttered, witnesses said. At one point, rebel fighters stopped at an abandoned gas station and filled up the tanks of their pickup trucks.

Video footage showed one rebel fighter climbing upon an earth mover to pull down a string of green pro-Gadhafi flags suspended from electricity poles. Another threw a green flag from a second floor balcony, replacing it with the rebels’ tricolor. “Nasser City has been liberated,” he shouted.

The rebels hope to first capture towns near Tripoli, before launching an offensive on the capital, commanders have said.

Two rebel fighters were killed and one wounded in the battle for Nasser City, said Mohammed Salem, a hospital medic in Zintan, a rebel-held town south of the front line.

Capturing both Brega or Zawiya would mark a significant gain in the Libyan rebels’ goal to topple the Gadhafi regime.

“It will be a huge morale victory,” said Fawzi Bukatef, a Brega rebel operations chief and head of the Coalition of Revolutionaries _ a large group of armed Libyan volunteers and civilians who fight at the front lines.

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