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View Full Version : Eyes on U.S. GDP as world economies limp to Christmas


Renegade
12-23-2008, 07:35 AM
Tue Dec 23, 2008 6:22am EST

By Mike Peacock

LONDON (Reuters) - The world's economies limped toward Christmas on Tuesday, with Britain contracting more sharply than first thought, New Zealand's recession deepening and a sharp U.S. decline due to be confirmed later.

U.S. GDP figures at 8:30 a.m. EST are forecast to show an unrevised 0.5 percent slide by the world's biggest economy, more evidence that global stimulus measures, bank bail outs and interest rates heading for zero may not prevent the worst downturn in decades.

The British economy shrank by 0.6 percent in the third quarter, revised data showed, the worst quarterly decline since 1990 and worse also than the earlier 0.5 percent estimate.

"This means the recession is deepening and consumers are saving more. That is a pretty clear sign that we're going to get a bigger fall in output in Q4," said Brian Hilliard, chief UK economist at Societe Generale.

New Zealand's economy declined by a seasonally adjusted 0.4 percent in the third quarter, the biggest drop in eight years, following a 0.2 percent fall in Q2.

And Spain's economy contracted during the fourth quarter, putting it into recession for the first time in 15 years, according to a government report cited by a Spanish newspaper.

The Spanish Economy Ministry's synthetic activity indicator ISA), which closely tracks gross domestic product, shrank 1.5 percent between October and December, El Mundo said.

Italian consumer confidence fell for a third month running in December but French consumer spending rose unexpectedly by 0.3 percent in November, driven by purchases of household goods and despite a continued slump in car sales, data showed.

Analysts were not taking that as much of a ray of hope.

"At the moment, (French) consumer spending is the only thing that's holding up amid the crisis, because everything else is going down," said Alexander Law, chief economist at Xerfi.

Nonetheless, European stocks gained 0.7 percent, breaking a four-day losing run as investors bought banks, which have endured a battering this year.

U.S. stock futures pointed to a weak start on Wall Street.

Oil prices extended their sharp fall to drop further below $40 a barrel, weakened anew by growing signs of dwindling world oil demand.

FURTHER JOB CUTS

Governments around the world have ramped up spending to try to cushion the economic blow of the worst financial crisis in 80 years, underscored by a record $38 billion two-year note auction by the U.S. government on Monday.

The auction drew bids worth more than twice that amount, showing the government is so far having no trouble attracting buyers for its debt, even as yields drop below 1 percent.

Even more stimulus is on the way when U.S. President-elect Barack Obama takes office next month. His staff is discussing how much money Congress should authorize for a package that is likely to be well over $600 billion.

It cannot come a moment too soon.

Companies around the globe are facing evaporating demand, which has prompted many of them to slash jobs and investment.

U.S. heavy equipment maker Caterpillar Inc said on Monday it would cut white-collar pay by as much as half and offer buyouts to some employees as it looks to cut costs during what it characterized as "uncertain times.

Textron Inc, the world's largest maker of corporate jets, said it will eliminate 2,200 jobs worldwide.

The world's top carmaker, Toyota Motor Co on Monday forecast its first-ever group operating loss -- 150 billion yen ($1.7 billion) for the year to end-March -- citing a relentless sales slide and a crippling rise in the yen.

China resorted to moral suasion to urge its companies to hold on to as many workers as possible and vowed to support important industries, as it faces the prospect of increasing unrest in the face of rising unemployment.

"Companies must not lay off workers easily," Premier Wen Jiabao said during a visit to carmaker Changan Group in the southwestern city of Chongqing, the official China Daily said.

"The automobile industry has a long industrial chain and it is an industry the government should strongly support," he said.

(Editing by Jon Boyle)
http://www.reuters.com/article/newsOne/idUSTRE4B70ME20081223?sp=true