WASHINGTON (AP) — The U.S. economy slowed in the final three months of 2014, but a burst in consumer spending and the prospect of continued low energy prices are bolstering confidence that growth will strengthen this year.
The economy, as measured by the gross domestic product, grew at a 2.6 percent annual rate in the October-December period, the government said Friday. That was down from a sizzling 5 percent gain in the previous quarter.
Though business investment, government spending and trade weakened, consumers signaled rising confidence by stepping up their spending at the fastest rate in nearly nine years. Thanks to steady job growth, tumbling oil prices and signs that pay may finally be picking up, Americans appear poised to keep the economy expanding at a solid pace. On Friday, the University of Michigan reported that its index of sentiment showed that U.S. consumers are more confident than they have been since January 2004.
Also Friday, the government said wages and benefits are ticking up, a sign that steady job gains may be compelling employers to pay a bit more. An index that measures pay and benefits rose 2.2 percent in 2014, up slightly from 2 percent in 2013 and ahead of inflation, which rose 1.3 percent.
Though the overall GDP figure for last quarter was mildly underwhelming, many of the components of the report were consistent with an economy that's outpacing others around the world and is on course to post solid growth this year.
Paul Ashworth, chief U.S. economist at Capital Economics, said the fourth quarter's slowdown is "nothing to worry about."
Ashworth noted that the result was heavily influenced by a swing in the volatile defense spending category. He pointed to the acceleration in consumer spending as more indicative of where the economy is headed.
"With the collapse in energy prices increasing households' purchasing power, we expect strong consumption growth to continue driving GDP growth in the first half of this year," Ashworth said.
For 2014 overall, the economy grew a moderate 2.4 percent. The year began on a sour note as a brutal winter sent the economy into reverse. GDP dropped at a 2.1 percent annual rate in the first quarter. But the economy rebounded, with growth averaging a 4.1 percent annual rate over the next three quarters.
Many analysts expect growth above 3 percent this year. That would mark a significant acceleration after a prolonged period of weakness. Since the recession ended in 2009, the economy's expansion has averaged 2.2 percent a year, far below the gains typical after a deep recession.
In the October-December period, consumer spending — which accounts for roughly 70 percent of the economy — grew at a 4.3 percent rate, up from 3.2 percent in the third quarter. It was the best gain for consumer spending since the first three months of 2006.
But business investment in equipment shrank after big increases in the previous two quarters. Economists partly blamed the weakness on cutbacks in oil and gas drilling by energy companies grappling with the plunge in energy prices.
Government spending fell at a 2.2 percent annual rate after a 4.4 percent gain in the third quarter. The third quarter had been bolstered by a 16 percent rise in defense spending, which backpedaled last quarter.
Trade reduced growth by a full percentage point in the fourth quarter. Business stockpiling added 0.8 percentage point.
The government's estimate of GDP — the total output of goods and services — was the first of three for the October-December quarter.
Even with the fourth quarter slowdown, the U.S. economy is still the star of the global economy. Europe is battling renewed weakness, Japan is in a recession, and even growth in China slowing.
Last week, the International Monetary Fund cut its outlook for global growth over the next two years, warning that weakness in most major economies will trump lower oil prices. But the IMF increased its outlook for the U.S. economy, pegging growth this year at 3.6 percent. If that forecast proves accurate, it would mark the fastest annual U.S. growth in over a decade.
"It took us awhile to get here, but I think the economy is finally off and running," said Mark Zandi, chief economist at Moody's Analytics. "Businesses are hiring aggressively, and the big drop in gas prices means that people have more money to spend on other items."
Global oil prices have fallen nearly 60 percent in seven months, with the nationwide average for gasoline now around $2 a gallon. That decline translates into a savings for consumers of about $175 billion, Zandi said.
"A big part of growth this year will be people spending their gas savings," he said.
The Federal Reserve on Wednesday took note of the brightening economic picture while pledging to remain "patient" in deciding when to begin raising interest rates from record lows.
The Fed has leeway to be patient because the weaker global economy has helped strengthen the dollar against other countries, and gasoline prices are plunging. Both developments are helping to hold down already-low inflation.
WASHINGTON (AP) — Holding out the promise of major medical breakthroughs, President Barack Obama on Friday called on Congress to approve spending in medical research that tailors treatment to an individual's genes.
Obama wants $215 million for what he's calling a precision medicine initiative that moves away from one-size-fits-all treatments. The ambitious goal: Scientists will assemble databases of about a million volunteers to study their genetics — and other factors such as their environments and the microbes that live in their bodies — to learn how to individualize care.
"That's the promise of precision medicine -- delivering the right treatment at the right time, every time, to the right person," Obama said in announcing the proposal Friday.
The effort is a hot but challenging field in medical research that has already yielded some early results.
For example, it's becoming more common for patients with certain cancers to undergo molecular testing in choosing which drug is their best match. People with a rare form of cystic fibrosis now can choose a drug designed specifically to target the genetic defect causing their illness. Some medical centers, such as the Mayo Clinic, have opened "individualized medicine clinics."
But only recently has the cost of genomic sequencing dropped enough, and the computer power of medicine increased, to make it possible for large-scale pursuit of the approach, said Dr. Francis Collins, director of the National Institutes of Health, which will lead the initiative.
The hope is to "harness the power of science to find individualized health solutions," Collins said.
Obama noted that doctors often try to personalize care, such as matching blood transfusion to blood types.
"What if matching a cancer cure to a genetic code was just as easy, just as standard?" he asked. "What if figuring the right dose of medicines was as a simple as taking a temperature?"
In the short term, precision medicine holds the most promise for cancer because scientists already know a lot about the molecular signatures of different tumors, Collins said.
Details of the initiative still are being worked out, but the NIH plans to use some large genomic studies already under way as well as new volunteers, he said.
CHICAGO (AP) — The U.S. attorney's office in Chicago has quietly dropped dozens of serious narcotics conspiracy charges stemming from undercover stings involving fictional drug stash houses, a federal law enforcement technique critics contend amounts to entrapment and displays racial bias against minorities.
U.S. Attorney Zachary Fardon's office this month moved to dismiss the charges — which carry mandatory minimum prison terms of 10 or 20 years — for 27 out of a total of 33 suspects whose cases are still pending in the district. The suspects were arrested after federal agents led them to believe that the would-be stash houses contained valuable drugs. The drugs never existed and there were often no houses involved. The suspects were usually arrested on the way to the location.
The move from Fardon's office comes amid increasing scrutiny and criticism of the stings by federal judges, who have noted they usually occur in lower-income minority neighborhoods. Even though the drugs are an invention, suspects are typically charged with conspiring to distribute the amount of drugs they were told was in the would-be stash house.
Fardon did not announce the move publicly, and the court filings dismissing the charges offer no explanation. The spokesman for the U.S. attorney's office, Randall Samborn, declined comment, including on whether prosecutors planned to drop the charges against the remaining six stash house defendants.
It's rare for a U.S. attorney to drop the same charges in separate cases and strongly suggests a broader shift in policy against stash house cases by the Chicago office, said Katharine Tinto, who teaches law at the Cardozo School of Law in New York and has followed the issue in districts nationwide.
Indicting suspects for drug conspiracy based on the amount of drugs undercover agents tell targets were inside a phony stash house has been among most controversial and most criticized aspects of the stings, Tinto said.
Dropping the drug conspiracy charges "does address at least many of the concerns of critics," she said.
She hadn't heard of other U.S. attorneys taking similar steps, saying it was likely no coincidence the move occurred in a district where courts have spotlighted the issue.
The U.S. Bureau of Alcohol, Tobacco and Firearms oversees stash house stings nationwide. ATF Chicago spokesman Thomas Ahern said its agents work closely with prosecutors and they "respect" their prosecutorial decisions. He declined to say if the ATF had run any stash house stings in the Chicago area over the past year but said using the method is still "an option."
"We are continuing to learn from the past and previous investigations," Ahern said. "We adapt so we don't repeat some of these same hard lessons."
The 7th U.S. District Court of Appeals in Chicago in November tossed out a Chicago-area man's conviction for trying to rob a drug stash house, saying a trial judge erred by not letting Leslie Mayfield, of Naperville, argue to jurors that agents entrapped him. He was sentenced to more than 26 years in prison, including for drug conspiracy.
And the chief judge of U.S. District Court in Chicago, Ruben Castillo, said in a 2013 decision that the question of whether agents racially profiled minorities should at least be explored, noting the more than 90 percent of stash-house stings are conducted in African-American or Latino communities.
In a 2012 decision by the 7th Circuit, Judge Richard Posner called the stings "a disreputable tactic," with a greater risk of illegally entrapping suspects because hundreds of thousands of dollars in drug money is dangled before targets, most of whom are poor and desperate for money.
In San Francisco, a decision by the 9th U.S. Circuit Court of Appeals in December restored the stash house cases of three men from the Los Angeles area, reversing a ruling by a lower court judge who had thrown them out. Still, three appellate judges said they "question the wisdom of the government's expanding use of fake stash house sting operations."
Federal authorities have defended the stings, denying that they entrap suspects and insisting that they only target those who previously indicated a willingness to take part in robberies.
Defense attorneys in the Chicago cases — who say they were given no advance warning or explanation — said Fardon's decision to drop the charges may signal his disquiet about such stings.
Another possible indication the method isn't favored by Fardon: In his year-and-a-half in the job, his office has not initiated any indictments arising from stash house stings, according to court records. All the pending cases began before his appointment.
"With these kinds of cases getting criticism across the country ... they might be thinking ... these cases are disturbing and the punishments excessive," said Chicago-based attorney Steven Shobat.
His client, Alfred Washington and four alleged accomplices were told a Chicago-area stash house run by Mexican cartel dealers held at least 20 kilograms of cocaine; after loading up with sawed-off shotguns and other weapons, they were arrested on their way to the robbery, a 2012 complaint says.
The Chicago defendants still face robbery and weapons charges, which, while still serious, don't carry the same stiff mandatory minimums that offer judges little flexibility during sentencing.
Debate over whether the stash house cases involve entrapment and racial bias, Tinto said, will remain — in and out of the courts.
"This alleviates some concerns about the tactic — especially (regarding) the imaginary drugs," she said. "But it doesn't allay all the concerns about how targets are chosen and how they end up participating."
EL-ARISH, Egypt (AP) — Egyptian President Abdel Fattah el-Sissi blamed the Muslim Brotherhood for playing a role in a sophisticated insurgent attack that killed 31 people in Egypt's volatile northern Sinai Peninsula. El-Sissi, a former army chief, cut short a trip to Ethiopia to return to Cairo Friday, as state television broadcast the arrival of the bodies of slain soldiers in coffins draped with Egyptian flags.
It is the second major deadly attack on Egyptian security forces in Sinai in the last 6 months; 31 soldiers were killed in another operation in October 2014. The continued success of the Sinai-based Islamic militants, despite more than a year of being targeted by massive military operations, highlights the resilience of the militants and represents an embarrassing security failure for el-Sissi and his administration's high-profile war on terror.
An Islamic State group affiliate in Egypt has claimed responsibility for the attack. The group, previously known as Ansar Beit al-Maqdis, has launched a steady stream of attacks against police and the army in Sinai in recent years. It was initially inspired by al-Qaida, but last year it pledged allegiance to the Islamic State group — which controls about a third of Iraq and Syria — and renamed itself the group's Sinai Province.
However El-Sissi immediately laid the blame on the Muslim Brotherhood, the Islamist movement that has been banned from Egypt and declared a terrorist group. El-Sissi, then defense minister, ousted longtime Muslim Brotherhood official Mohammed Morsi from the presidency in July 2013 after massive nationwide protests against Morsi's rule.
The popular coup against Morsi produced an immediate spike in violence in Sinai, where Islamic militias declared war on the Egyptian government and all Egyptian security personnel. Brotherhood officials insist they have no direct connection to the Sinai militants. But el-Sissi directly blamed the group for coordinating the ongoing Sinai violence.
"What is happening now is the price Egypt is paying for rejecting this organization," el-Sissi said before leaving Ethiopia. "Egypt is waging a war against the strongest clandestine group over the past two decades...This organization has secretive arms, secretive thoughts and secretive forums."
El-Sissi has already presided over a massive crackdown on the Brotherhood, imprisoning thousands and killing hundreds in street protests. His government has declared a state of emergency in northern Sinai, imposed a curfew and ordered the demolishing of hundreds of houses in order to clear a buffer zone along the border with the Gaza Strip and choke the flow of weapons through underground tunnels.
Meanwhile details emerged about the multi-pronged insurgent attack, which targeted multiple sites inside a heavily fortified military zone in the northeastern region of the peninsula. According to Egyptian authorities, the attacks started while soldiers were watching a soccer match Thursday night inside the Battalion 101 base in the city of el-Arish, the provincial capital of North Sinai province.
One suicide bomber disguised as a tanker-truck driver delivering water to the base, blew up his vehicle after soldiers allowed him onto the grounds, a senior army official said. Two other suicide bombers in pickup trucks then blew up their vehicles at the rear gate of the base and at an adjacent security headquarters, demolishing the gates and wall.
At the same time, insurgents in multiple locations launched mortar attacks, targeting police and army checkpoints, a police social club and a hotel for the armed forces. The total death toll reached 31, including two civilians. At least 60 people were wounded, some critically, health officials said. All officials spoke on condition of anonymity because they were not authorized to speak to the media.
In Washington, State Department spokeswoman Jen Psaki condemned the attacks, adding that the "United States remains steadfast in its support of the Egyptian government's efforts to combat the threat of terrorism in Egypt."
Sinai-based militants have exploited long-held grievances in the impoverished north of the peninsula, where the mainly Bedouin population has complained of neglect by Cairo authorities and where few have benefited from the famed tourist resorts in the more peaceful southern part of Sinai.
The police in northern Sinai largely fled during the 2011 uprising that toppled longtime autocrat Hosni Mubarak, as militants attacked their stations and killed scores of security forces.
In a posting on its Twitter account, the Sinai Province called the attack "an extensive, simultaneous offensive for the soldiers of the caliphate."
In its first statement after the attacks, the General Command of the Armed Forces vowed to continue to "uproot terrorism" and intensify its crackdown on militants across the country
Michael reported from Cairo. Associated Press Writer Maamoun Youssef in Cairo and Matt Lee in Washington contributed to this report.
PARIS (AP) — It was bad enough when France learned that the minute of silence for victims of the nation's deadliest terror attacks in decades was not respected by all students. Some children contested it, others walked out. But when an 8-year old Muslim boy proclaimed, "I am with the terrorists," the alarm bells sounded at full strength.
The chilling call from a child so young brought into stark relief the divide between mainstream France and a portion of the Muslim population, often from neglected neighborhoods. But the official reaction — hauling the boy into the police station for questioning — also triggered debate, with many seeing it as a sign of mounting hysteria.
The fierce official backlash against expressions of Muslim extremism in the wake of this month's Paris terror attacks stems in part from the sheer numbers of homegrown jihadis. More French have embraced jihad in Syria and Iraq than in any other European country — over 1,000. Dozens of these fighters have returned, feeding fears they could turn their battle skills on France. In early January, those fears were realized, as three Frenchmen with links to Islamic extremists went on their murderous rampage, killing journalists at the satirical weekly Charlie Hebdo, a policewoman, a policeman and shoppers at a kosher grocery store.
The French government is desperate to prevent more bloodshed. This week, it started a "stop jihad" website that mimics the media tactics of the Islamic State group luring youth to the battlefront — while, crucially, adding a dose of real-life warnings about what the siren calls from Syria can mean. They range from being killed far from home to having a role in massacres of children.
President Francois Hollande held a day-long emergency meeting on Thursday with school officials, associations and mayors of poor suburbs with crime-infested housing projects — widely believed to also be filled with potential jihadis. The government is trying to devise a plan to bridge the divide between the haves and have-nots and bring the values that define French citizenship, notably equality and secularism, to this parallel world.
The pronouncement by the 8-year-old at a school in Nice in support of the terrorists who killed 17 people this month illustrates how the issues that divide may be seeded long before adolescence.
Police interrogated the boy and his father on Wednesday after the school director informed them of the Jan. 9 incident.
"I said, my son, do you know what terrorism is. He said, 'No,'" the father, Mohamed Kebabsa, said later on French television. He said he told his son the killings were "barbaric ... not an act of Islam."
Education Minister Najat Vallaud-Belkacem has tried to tamp down the controversy over the child's interrogation, backing the school director's decision to refer the matter to police. She has said that up to 200 incidents of disrupting the minute of silence had been brought to her attention — enough to make clear to French officialdom that the values binding the nation together are not shared by all.
France's social fracture has been a problem for decades, and the extent of the divide was revealed during fiery riots in 2005 that hopscotched through the nation's housing projects ringing big cities. The projects began as bedroom suburbs to solve an urban housing crisis, but ended up as enclaves for immigrants from France's former Muslim colonies in Africa and elsewhere.
Today, the problems are being rediscovered and a new emergency treatment ordered up. Hollande is expected to announce new measures for the projects at a Feb. 5 news conference.
The nation has already sunk hundreds of milllions of euros into trying to cure the ills within the heavily immigrant projects, including razing buildings in some neighborhoods and replacing them with town house-style accommodations. But the jobless rate is more than double the national rate of 10 percent, crime is rampant in many neighborhoods and project dwellers are often physically isolated from mainstream life.
Prime Minister Manuel Valls, shocking some, used the term "apartheid" to describe the French divide.
At a small cafe in the Montfermeil project Les Bosquets (The Groves), northeast of Paris, about a dozen young men agreed recently that students should have observed the minute of silence — but out of respect for the teachers, not the victims.
"There have been lots of dead and no minute of silence. In Syria, there are airstrikes," said Samir Ouahfi, 29, who has three children. "They say equality, fraternity, but there's none of that. If we speak out we go to prison."
Ouahfi was referring to the scores of arrests since the attacks and urgent court appearances for anyone seen as defending the three terrorists who carried them out. The Collective Against Islamophobia in France denounced the interrogation of a child as symptomatic of the "collective hysteria" gripping France since the attacks.
Latifa Ibn Ziaten, a Muslim whose son Imad, a paratrooper, was the first victim of the terror spree of Islamic radical Mohamed Merah in March 2012, knows the depth of the fracture between mainstream France and youth who grew up on the margins of society. She has been trying to heal it with a human touch, visiting schools and prisons for minors.
Her work was triggered by the anguish of a mother trying to understand the real identity of her son's killer. Her despair deepened when she confronted youth from Merah's neighborhood — who praised him as a "hero of Islam." For her, it felt as if her son was killed a second time — until she understood that "these young people were completely lost."
"Look, Madame, where we live, look how we live ... look at the life we have," she recalled them telling her. "The Republic has forgotten us."
Sylvie Corbet in Paris contributed to this report.