G.O.O.D

Source: guardian.co.uk

Unemployment in Britain has surged at its fastest rate since 1991, taking the total number of people claiming jobless benefits to over 1 million for the first time in seven years, adding to the increasingly bleak outlook for the economy.
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On the broader International Labour Organisation measure, unemployment increased by 137,000 in the three months to October to reach 1.86 million - the highest level since 1999. Many experts believe it will top the 2 million mark over Christmas. The unemployment rate climbed to 6%, up 0.4 percentage points from the previous three months.

“The figures look absolutely horrible,” said Amit Kara at UBS. “We are looking for a forecast of 3 million in 2010 or higher - rising every month next year and into 2010. We are in for a period of prolonged pain.”

George Buckley at Deutsche Bank echoed his comments. “I think what’s interesting is the scale of job losses this early in the cycle. Unemployment is normally a lagging indicator so to see so many job losses this early in the cycle is extremely worrying.”
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Unemployment is likely to rise above 3 million in the current recession, the Bank of England’s labour market expert, David Blanchflower, warns today. In previous UK recessions, unemployment soared to more than 3 million.

“I expect unemployment to continue to rise to through 2009 and into 2010, probably to over 3 million,” Blanchflower, a member of the Bank of England’s monetary policy committee, says in an article for the Royal Economic Society’s January newsletter, a copy of which was obtained by the Guardian. “Where is the light at the end of the tunnel? I can’t see any,” he says.
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Technorati Tags: Unemployment, International Labour Organisation

Source: guardian.co.uk

Britain’s economy may be deeper in recession than previously thought after official data showed that industrial output plummeted at the fastest rate in nearly six years in October, with previous months also weaker than estimated.

The figures, described as a “horror story” by one economist, raised expectations in the City that interest rates will have to be cut aggressively again and that they could fall close to zero next year.

The Bank of England has already slashed borrowing costs by three percentage points since October to 2%, a 57-year low, in a desperate - and some say belated - attempt to kickstart the economy.

The pound fell against the euro and the dollar following the news, dropping by over 1% to $1.4742. The euro rose to 87.25p, closer to its recent record high of 87.38p.

Industrial production, which comprises manufacturing, mining and utilities, fell by 1.7% in October from the month before, the Office for National Statistics reported this morning. The fall was more than three times the size predicted by City economists and the biggest drop since January 2003. It took output down 5.2% from a year ago, the steepest annual decline since April 1991.

The ONS also revised down output in previous months and said, other things being equal, that would mean GDP contracted by 0.6% in the third quarter of 2008 instead of the 0.5% fall initially reported. Britain will officially be in recession once the fourth-quarter GDP figures, which are expected to show a sharp contraction, are published in late January.

Industrial production was down 1.4% in the third quarter from July to September, worsening to a decline of 1.8% in the three months to October.

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Technorati Tags: recession, Bank of England, UK

Jean-Claude Trichet

Source: Bloomberg.com: Germany

European Central Bank President Jean- Claude Trichet said the euro region’s economy will shrink next year for the first time since 2003 after the bank delivered the biggest interest rate cut in its 10-year history.

“Global and euro-area demand are likely to be dampened for a protracted period of time,” Trichet said at a press conference in Brussels today. The ECB lowered its benchmark by three quarters of a percentage point to 2.5 percent.

The ECB’s decision came after the Bank of England today cut its key rate by one percentage point to 2 percent and Sweden’s central bank lowered borrowing costs by the most since 1992. The Federal Reserve’s benchmark rate now matches a five-decade low as central banks rush to respond to the global recession.

“The level of uncertainty remains exceptionally high,” Trichet said. The euro was little changed after his comments and traded at $1.2634 at 3:16 p.m. in Brussels.

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Source: Reuters

Sweden cut interest rates by a record 175 basis points on Thursday, prompting speculation of dramatic cuts elsewhere in Europe to try to stop a global slump spreading faster than policymakers had anticipated.

Japanese companies slashed spending, showing the economy was in a deeper recession than the government estimated, after U.S. data showed private sector employers axed jobs at the fastest pace in seven years.

“With indicators pointing to an intensifying global adjustment in employment and business spending, our forecast of the deepest four-quarter GDP slide in the developed world since World War Two appears to be on track,” JPMorgan economists said.

In a deeper than expected cut, Sweden’s central bank chopped its key interest rate by a record 175 basis points to 2.0 percent to prevent the economy sliding further into recession.

The Riksbank said it expected rates to remain at that level over the coming year. There was an “unexpectedly rapid and clear deterioration in economic activity since October,” it said.

The Reserve Bank of New Zealand sliced interest rates by a record 150 basis points to a five-year low of 5.0 percent and said it would probably have to cut rates again.

Indonesia also made a surprise cut in its key interest rate, by 25 basis points to 9.25 percent, the first since December 2007 as the government sought to protect the economy.

Britain and the European Central Bank were due to announce rate cuts later on Thursday and with Britain heading into recession, the Bank of England could slash rates to their lowest in more than half a century.

A rapid deterioration in business conditions has raised fears Britain could be heading for a much deeper downturn than anybody expected.

“They need to do something aggressive again,” said George Buckley, chief UK economist at Deutsche Bank,.

Analysts expect a 50 basis point reduction from the European Central Bank and twice as much from the Bank of England.

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Source: Reuters

A tentative rebound in global stocks spluttered on Wednesday while euro zone government bond yields hit a three-year low as gloomy economic news highlighted the case for more aggressive interest rate cuts in Europe this week.

The euro stayed on the backfoot and oil held near a 3-1/2 year low a day before the European Central Bank, Bank of England and Sweden’s Riksbank are all widely expected to cut borrowing costs.

Supporting those expectations, economic reports on Wednesday showed the euro zone’s services economy fell deeper into recession in November than initially thought and inflationary pressures eased.

“This is a horrible survey across the board, showing that the euro zone service sector is being hit ever harder by the financial crisis, muted consumer spending and markedly weaker activity in key export markets,” said Howard Archer, economist at IHS Global Insight.

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Technorati Tags: European Central Bank, Bank of England, Riksbank

Source: MarketWatch

The Bank of England slashed its key rate to 3% from 4.5% Thursday, in an unexpectedly large move. Markets had largely factored in a cut as large as 75 basis points, while most economists had expected half-point cut. The move by the bank’s nine-member rate-setting Monetary Policy Committee follows a decision last month to join in a global round of rate cuts by major central banks. That decision saw the bank rate decline by 50 basis points, or half a percentage point, to 4.5%.

Technorati Tags: Bank of England