LONDON, July 23--The British economy grew at its weakest annual pace in more than 12 years in the second quarter of 2005 as manufacturing fell into recession, reinforcing expectations of an interest rate cut next month, Reuters reported.
The Office for National Statistics said on Friday gross domestic product rose by just 0.4 percent in the three months to June. This was the same rate as the first quarter but weaker than the 0.5 percent predicted by analysts. That meant output was 1.7 percent higher than a year earlier, its weakest rate since the first quarter of 1993 when Britain was just coming out of an economic slump.
“If there were any doubt that the UK economy has turned for the worst, then the second quarter GDP data should clear that up,“ said Alan Clarke, economist at BNP Paribas.
Experts expect the Bank of England, however, to take action to revive consumer demand. Interest rate futures rose as traders became ever more certain that borrowing costs would fall from their current 4.75 percent in August.
“It confirms the view that a 25 basis points rate cut next month is still on the cards,“ said Peter Dixon, economist at Commerzbank.
The European Central Bank, meanwhile, is expected to keep interest rates on hold at 2.0 percent, where they have been for about two years.
The ONS said quarterly growth was driven by the service sector which accounts for nearly three-quarters of the economy and expanded by 0.6 percent in the second quarter, a weaker rate than in the first.
Second quarter growth is also now much weaker than the 2.55 percent annualized pace predicted for the quarter by the BoE in its May Inflation Report, although that forecast was made before significant revisions to GDP data last month.
British finance minister Gordon Brown’s forecast for 3.0 to 3.5 percent growth is also looking shaky. Achieving the forecast would require a big pick-up in the second half but that seems unlikely with manufacturing hardly in a position to drive growth and consumer demand looking even more vulnerable after this month’s terrorist attacks in London.
“We think economic growth is going to stay around this level which means rates could be cut another 50 basis points by early 2006,“ said George Buckley, UK economist at Deutsche Bank.

Microsoft unveiled the name of its next generation operating system, called Windows Vista, as Don Lionetti demonstrates in this photo on Friday in Atlanta, USA. (AFP Photo)

SEATTLE, USA,
July 23--Microsoft is looking past Windows and taking a long view its future by naming its next-generation operating system “Vista,“ officials from the US software behemoth said Friday.
Microsoft officials told AFP they would reveal details of the new platform on August 3, when it is to be given to 100,000 Microsoft devotees for “beta“ testing.
“We live in a world of ’more’,“ Microsoft said in a written release. “More information, more ways to communicate, more things to do, more opportunities and, at the same time, more responsibilities.“
“At the end of the day, what you’re after is a way to break through all the clutter to focus on what you want to focus on,“ the statement continued, noting people are increasingly turning to their computers get things done.
“What you’re trying to get is your own personal vista, whether that is trying to organize photos, find a file, or connect and collaborate with a number of people electronically.“
Feedback from the beta testing will be used to create a more refined version. The company reportedly expects a polished version of Vista to be released late in 2006, missing its original target date by about a year.
Vista will replace the Windows XP operating system released in late 2001.
“That’s the role that Windows has always played--empowering people to use technology to do and accomplish what they want,“ the Microsoft release maintained. “But the world has evolved, and there’s a lot more out there so we have to make some investments and make sure that we continue to play that role.

BEIJING, July 23--Beijing Saturday protested new US restrictions on textile imports from China a day after it revalued its yuan currency in a move likely to make Chinese exports more expensive, AFP reported.
“The Chinese government is firmly opposed and strongly dissatisfied“ with the US decision to limit imports of Chinese woolen trousers, Ministry of Commerce spokesman Chong Quan said in a statement on the ministry website.
Chong said that a decision Friday by the US Committee for the Implementation of Textile Agreements to impose the new restrictions broke free trade rules and threatened to raise the matter with the World Trade Organization.
The US was granted special safeguard measures in China’s 2001 WTO accession protocol to protect the US market from a fresh surge of Chinese textile imports.
“The US decision lacks sufficient facts and goes against the principle and orientation of the WTO agreement on textile and garments, as well as the spirit of free trade that the WTO advocates,“ Chong said.
“The Chinese government reserves the right to take further actions within the framework of the WTO,“ he said.
The US has already re-imposed import quotas on seven categories of Chinese textile exports, expected to halt imports of up to $2.5 billion worth of Chinese goods.
The move comes after global textile quotas were abolished on January 1 as part of WTO efforts to liberalize trade. The move also comes after the United States praised China for revaluating its currency, the Chinese yuan, on Thursday.
The currency changes are likely to make Chinese goods more expensive in Western markets, and in the long run could prove more effective than quotas in limiting the impact of Chinese textile exports.
China has also urged the United States to negotiate new limits instead of unilaterally implementing the WTO safeguards.

BAKU, Azerbaijan, July 23--The International Monetary Fund urged the oil-rich former Soviet republic of Azerbaijan on Friday to take measures to cut inflation and to slash fuel subsidies, AFP reported.
“The major short-term macroeconomic challenge is to bring down core inflation to single digits,“ IMF deputy managing director Agustin Carstens said after meeting Azeri President Ilham Aliyev and other top officials in Baku.
Carstens said he was encouraged by a steady drop in inflation to 13 percent over the past few months, but stressed more needed to be done to put the Caspian country on the right track.
Inflation particularly hurt the poor and could undermine medium-term growth prospects, Carstens said.
Though Azerbaijan is flush with revenues from oil exports, nearly half its population lives in poverty.
The government’s main priority should be to harness the flow of oil in a way that would “reduce that poverty on a sustainable basis,“ Carstens said.
In a written statement, the IMF urged Azerbaijan to reduce energy subsidies in order “to free resources targeting social assistance and other productive expenditure“.
Azerbaijan has been slow to cut fuel subsidies as the issue is sensitive politically. Retail gasoline as well as other fuel prices remain far below international market rates.

ZURICH, Switzerland, July 23--Swiss police searched several sites in Zurich and Zug this week at the request of German authorities investigating a money laundering network believed to be fed from former Russian state-owned companies, a judicial source said Friday, AFP reported.
Documents were seized and passed on to public prosecutors in Zurich and Frankfurt, where officials are probing a group suspected of laundering funds over the past several years, the source added.
Six companies were concerned by the operation, financial and fiduciary businesses as well as lawyers’ offices.
Simultaneous searches were carried out in Germany and other countries.
German authorities suspect that money was embezzled from former Russian state-owned companies and transferred via a front company based in Frankfurt to buy stakes in other Russian groups.

LONDON, July 23--Chinese carmaker Nanjing Automotive has secured ownership of MG Rover for an unknown sum, after a three-way bidding battle spread over three months. It was one of two Chinese companies trying to buy the assets of MG Rover, the other being Shanghai Automotive.
Although Nanjing was the smaller firm it secured a deal with administrators PriceWaterhouseCoopers (PwC) on Friday.
“Nanjing will now begin to take control of the assets and develop its plans for the future,“ said Tony Lomas of PwC. The news is a blow for UK businessman David James, whose Kimber group had put in two bids to buy parts of Rover.
Earlier this week James, the company-recovery specialist who helped revive the Millennium Dome, told the BBC the combined value of his bid would be about 40 million pounds.
Joint administrator Lomas said Nanjing intended to relocate the engine plant and some car production plant to China but to “retain some car production plant in the UK“. He added that Nanjing, China’s oldest carmaker, also planned to develop an R&D and technical facility in the UK.
Nanjing Corporation intends to begin to hire staff to assist it in implementing and developing its strategy. It is still not known how many workers Nanjing will employ. But according to the BBC’s Nils Blythe if Nanjing’s proposed long-term plans come to fruition it could create 2,000 jobs in the UK.
For a transitional period a rump workforce will continue to be employed by MG Rover Group and engine maker Powertrain.
They will assist the administrators as they have for the last three-and-a-half months, following the demise of Rover in early April when it ran out of money after a proposed tie-up with SAIC collapsed.

PARIS, July 23--The Russian economy is likely to grow by 5.9 percent this year and 5.8 percent in 2006, Russian Finance Minister Alexei Kudrin said on Friday, increasing slightly previously forecast figures.
He also said that curbing double-digit inflation in the country would be his main priority for the next three years, conceding that the government would miss its inflation target for 2005. “We no longer expect growth of gross domestic product this year to be 5.8 percent, but 5.9 percent,“ he said.
“And next year we forecast growth of 5.8 percent compared with 5.6 percent announced previously,“ the minister said, quoted by the Interfax news agency.
Inflation was set to reach 10.0-11.0 percent this year, far above a government target of 8.5 percent at the beginning of the year, and higher than a revised target of 10.0 percent.
“Our main test for the next three years will be to lower inflation. Our target is not only to bring inflation down below 11.0 percent, but also to reduce it to 4.0-5.5 percent in 2008,“ he said.

A customer counts ringgit bills in denominations of 1, 50 and 100 at the service window of a money changer in Kula Lumpur, Malaysia on Friday. (AFP Photo)

KUALA LUMPUR, Malaysia, July 23--International ratings agency Standard and Poor’s on Friday said Malaysia’s revaluation of the ringgit would help reduce inflation by curbing recent speculative buying of the currency, AFP reported.
“The central bank’s quick and decisive move on the ringgit peg shortly after the revaluation of the Chinese renminbi is a positive reflection of the country’s monetary management and should introduce increased monetary flexibility,“ said S and P credit analyst Ping Chew.
“Moving from a position of strength should mitigate short-term volatility associated with a change in the currency regime and improve Bank Negara’s ability to combat inflation and find the appropriate interest rate mix to support domestic growth,“ he said in a statement.
S and P said that speculators who bought up the ringgit in anticipation of a revaluation had helped fuel inflation, which is running at a six-year high.
“The inflows have largely prevented the central bank from increasing interest rates, in turn because it would provide an added incentive for further speculation,“ the agency said.
“Despite short-term volatility, the move on the ringgit should help break this cycle and allow Bank Negara a freer hand in conducting monetary policy.“
Malaysia late Thursday announced the dumping of the seven-year-old peg that valued the ringgit at 3.8 to the dollar, and said it would now operate under a managed float against a basket of unnamed currencies.
Its move came only minutes after China revalued the yuan at 8.11 to the dollar from 8.28 previously, which the US and European Union had complained was undervalued.

WOLFSBURG, Germany, July 23--The German automaker Volkswagen has said it will pay almost two million euros ($2.4 million) to the Indian state of Andhra Pradesh to settle claims arising from alleged illicit actions by a former VW Executive, AFP reported.
“The company is assuming responsibility for the damage caused by the suspected illegal dealings of the former head of human resources at Skoda, Helmut Schuster,“ VW said in a statement issued late Thursday. Skoda is a VW auto unit based in the Czech Republic.
VW added that Schuster had acted in India without the company’s authority.
Schuster, whom German prosecutors are investigating for alleged breach of trust, resigned from VW last month amid allegations that two million euros in bribes were paid by Andhra Pradesh authorities to affirm the German company’s commitment to investing in their state.
The cash was paid into a company called Vashishta Wahan, which the authorities said was described to them as VW’s Indian arm.
VW said Vashishta Wahan was set up as a project company and would have been responsible for building a factory in India for VW, but added that the VW board had not yet made a decision to invest in the country.
“With respect to the payments to Vashishta Wahan arranged by the state of Andhra Pradesh, the Volkswagen Group will assume responsibility.“
“Volkswagen does not hold and never has held an interest in Vashishta Wahan,“ the company added.
VW “remains interested in entering the Indian market,“ it said.