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US economy shrinks 0.3%, Japan unveils stimulus
(Agencies)
Updated: 2008-10-31 08:08 WASHINGTON – New data Thursday showed the US economy shrank in the third quarter, with consumers and businesses retrenching from the global financial storm, as Japan unveiled a 277 billion dollar stimulus package.
Financial markets extended gains amid interest rate cuts in the United States, China, and the regions of Hong Kong and Taiwan and agreements for the US Federal Reserve to lend to central banks in key emerging economies. But a lot of news remained glum. A survey showed underlying confidence among consumers and businesses in the European Union had declined to a 15-year-low. US financial group American Express unveiled 10,000 job cuts worldwide and equipment maker Motorola said it would slash 3,000 positions, with both firms citing weak economic conditions. The leaders of Europe's two largest economies, German Chancellor Angela Merkel and British Prime Minister Gordon Brown, meanwhile were meeting to determine how to respond jointly to the global financial crisis. In the United States, the possibility of recession came into view with news that the economy contracted at a 0.3 percent annualized pace in the third quarter. The drop in gross domestic product (GDP) was the first negative figure since the fourth quarter of 2007, the Commerce Department reported. Some analysts said the drop could be just the start of a deep and painful recession in the world's biggest economy. "A heftier decline in real GDP is likely in the fourth quarter, which will confirm that the US economy is in recession," said Dawn Desjardins, economist at RBC Capital Markets. "Today's GDP report is weak, but it is not unexpected," White House spokeswoman Dana Perino said. In Japan, the world's second-biggest economy, the government unveiled a 26.9 trillion yen (277 billion dollar, 208 billion euro) package to cope with what Prime Minister Taro Aso called a "once-in-a-century event." The measures included tax cuts, benefits sent directly to households and loans for small businesses, he told a news conference. "In this kind of situation, we need to relieve people's insecurities. We should not be fearful of the violent storm, nor should we just stand and let the typhoon blow us away." Japan's Nikkei stock index closed up 9.96 percent, extending its rebound into a third day, while stocks in South Korea leapt 11.95 percent and Hong Kong shares closed 12.8 percent higher. There were also jumps in all Europe's major markets, but not as strong. The London FTSE 100 index of leading shares gained 1.16 percent and the Paris the CAC 40 rose 0.15 percent. The Frankfurt DAX added 1.26 percent. All three markets had shown heftier rises earlier in the day. On Wall Street, the Dow Jones Industrial Average was up 2.2 percent ahead of the close in another choppy session. In France, Budget Minister Eric Woerth told a radio station that "there is an extraordinarily strong slowing of the economy and we have to fight that above all." French President Nicolas Sarkozy has put forward a string of proposals to stimulate growth, including the creation of 100,000 new public sector jobs and a national sovereign wealth fund to shelter leading companies from the turmoil. Germany is to unveil its own package next week after Merkel promised a "targeted, courageous and sustainable" scheme to help avert a deep recession. The country's biggest bank, Deutsche Bank, reported a 75 percent slump in net profit as it unveiled its third-quarter results after the financial crisis forced it to take new write-downs of 1.2 billion euros. In Britain, a survey by Nationwide bank showed house prices fell a record 14.6 percent in October from a year ago. The looming recession was taking a heavy toll on European business and consumer confidence, which plunged in October to the lowest level since 1993, according to figures from the European Commission. Standard & Poor's said Thursday it had cut Bulgaria's debt ratings owing to concern over external imbalances and a looming economic slowdown. "The outlook is negative, indicating that the balance of risks is on the downside," said S&P's credit analyst Marko Mrsnik. Bulgarian Finance Minister Plamen Oresharski said the move was "not unexpected" given that other countries in the region had seen their ratings lowered recently. But amid all the gloom, Nobel economics laureate Robert Mundell said the worst of the world economic crisis is over. "The real economy has not collapsed. The worst is behind us," he said in South Korea. |
