G.O.O.D

Source: Reuters

WASHINGTON (Reuters) - U.S. consumers cut spending for a fifth straight month during November and their incomes shrank, according to a government report on Wednesday that pointed to deepening recessionary pressures.

The Commerce Department said spending contracted by 0.6 percent after falling even more steeply by 1 percent in October. Incomes contracted by 0.2 percent after a slight 0.1 percent gain in October, reflecting the strain that rising unemployment is putting on Americans’ ability to spend.

Wall Street economists surveyed by Reuters had expected an even steeper 0.7 percent fall in spending last month but had forecast that incomes would be flat rather than that they would shrink.

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Source: Reuters

The financial crisis is shattering global confidence, with three quarters of households cutting spending and consumers in emerging countries feeling especially squeezed, a survey showed on Tuesday.

While countries like China, India and Russia have helped fuel world growth in recent years, the survey of 22 states in November found consumer optimism in such emerging economic powers in “precipitous decline.”

“There’s a lot of doubt right now where growth is going to come from,” Clifford Young of Ipsos Global Public Affairs, the international market research and polling company that carried out the online survey, told Reuters in a telephone interview.

He said the survey, which included a whole range of rich, and emerging states, “put in check a lot of strategies of global companies that were banking on emerging markets. In addition it puts in check any notion of ‘decoupling.’”

Despite boasting a year ago that they were “decoupled” from the problems gripping developed markets, emerging stock markets are hovering near their lowest point in four years.

What started as a meltdown in the U.S. market for high-risk mortgages has engulfed the world, freezing access to credit, sparking bank collapses and requiring the bailout of whole industries and some entire countries.

“We expected things to be bad but it’s most striking in the two big emerging markets India and China,” Young said of the poll. “It’s not good news in the short to medium term.”

The poll found that global consumer optimism had nearly halved. Only 31 percent described the economic situation as very good or somewhat good in November compared with 55 percent who said the same thing in April 2007.

The largest falls in optimism, using this method, were in China, which plunged to 46 percent from 90 percent 18 months ago, and India, which dropped to 65 percent from 88 percent.

Many leading emerging markets export commodities. Flush with cash from soaring prices until six months ago, domestic demand helped to underpin growth. But now, the lag effect of falling demand and prices for oil, grains and industrial metals is being felt in these nations too.

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Source: Hindustan Times

The world could go through its worst recession since the Great Depression as a massive financial crisis has slashed global investment and sharp drops in commodity prices severely hurt poor-country exports, the World Bank warned on Tuesday.

The global development bank slashed its previous estimates for global growth to 2.5 per cent in 2008 and 0.9 per cent in 2009, well below the 3 per cent rate typically considered the dividing line between global growth and contraction. “The financial crisis is now likely to result in the most serious recession since the 1930s,” said the World Bank’s chief economist Justin Lin, as the group released its annual report on the global economy.

The current economic slowdown was notable for both its length and breadth across all regions of the world, leading to a contraction in the most wealthy nations and a sharp slowdown in emerging countries, the bank said.

The bank’s analysis pointed to a number of indicators of a dramatic slowdown. Global trade volumes will contract for the first time since 1982. Worldwide investment will fall 50 per cent in 2009, compared to 2007. The financial crisis has cut access to loans in advanced and developing countries, pulling investment out of poorer nations and reducing consumer spending.

Lin urged all countries with the ability to increase government spending to use it to boost domestic demand.

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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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Spending on durable goods like new cars and home appliances requires, for most sheeple, a little something called credit!

Source:  Yahoo! Finance

Commerce Secretary Carlos Gutierrez told Bloomberg TV that the economy was going through a tough time, adding that “We are going to have a couple of difficult quarters.”

The White House blamed the poor third quarter numbers on the credit crisis.

“There’s no question the financial crisis was a major shock to the economy, and that’s being reflected in the economic data. We believe a big reason for this was the freezing in credit markets this Fall,” said White House spokesman Tony Fratto.

“That’s why we’ve been so focused on unfreezing our credit markets and stabilizing our financial system.”

Continuing job losses, a severe credit crunch, falling home prices and a wobbling stock market have put consumers under severe stress. Analysts reckon the Fed could trim the fed funds target rate by another 50 basis points to 0.50 percent next month.

Consumer spending that fuels two-thirds of U.S. economic activity fell at a 3.7 percent rate in the third quarter rather than 3.1 percent as previously estimated, the sharpest rate of decline since the second quarter of 1980.

Spending on durable goods like new cars and home appliances that are intended to last three years or more plummeted at a 15.2 percent rate instead of 14.1 percent as previously estimated, the steepest fall since the start of 1987.

The revised GDP report offered a first look at corporate profits during the third quarter. They dropped at a 0.4 percent rate after falling 5.4 percent in the second quarter, the department said.

Business investment fell at a revised 1.5 percent rate in the third quarter rather than 1 percent as previously estimated. It was the first reduction in business investment since the end of 2006 and signals that companies are wary about prospects for future sales.

Pointing to the deteriorating economic climate, prices of U.S. single-family homes in September plunged a record 17.4 percent from a year earlier, the Standard & Poor’s/Case-Shiller Home Price Indices showed.

In yet another sign of the times, the largest U.S. homebuilder D.R. Horton posted a fourth-quarter loss of $799.9 million, or $2.53 per share, compared with a loss of $50.1 million, or 16 cents per share, a year ago.

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