America picks up the pace of recovery amid hopes for rising employment

Economic growth in the United States surged in the final three months of last year at its fastest rate for six years, lifting hopes that employers could begin to hire staff.
The 5.7 per cent rise in estimated gross domestic product (GDP) from the Commerce Department, better than expected, was followed by other positive economic data, but nevertheless it was insufficient to give a significant lift to markets, which have begun to fall since hitting a ten-month high last week.
The Institute for Supply Management-Chicago said that its business barometer had risen to 61.5 in January, the highest in four years, from 58.7 in December.
In a further boost to recovery hopes, the Reuters/University of Michigan Survey of Consumers’ consumer confidence for January rose above expectations to 74.4, from 72.5 in December.

For the full year of 2009, GDP fell by 2.4 per cent, marking the biggest full-year decline since the 10.9 per cent recorded in 1946. The change from the first quarter of 2009, when GDP fell at an annual rate of 6.4 percent, was the largest three-quarter swing in growth rates since 1981.
The fourth-quarter surge suggests that a sustainable recovery is building. It follows an increase of 2.2 per cent in September, when the world’s biggest economy left recession after four quarters of contraction and the worst downturn since the Great Depression of the 1930s.
The Commerce Department said that growth had been driven in large part by a 3.4 percentage point contribution from inventories, as businesses cut back less aggressively on their stock and fewer companies liquidated their inventories to address poor demand.
Nigel Gault, chief US economist at IHS Global Insight, said that the best news in the data was on exports (up 18.1 per cent) and business spending (up 13.3 per cent). “The improving trend in capital goods orders suggests more gains in equipment spending ahead. If firms are feeling confident enough to raise their equipment spending, they’re probably confident enough to start hiring again,” he said.
However, he said that an inventory swing of the size seen at the end of 2009 could occur only once. “Growth is likely to be subdued by historical standards, in the 2.5 to 3.0 per cent region for 2010,” he said.
Christina Romer, chair of President Obama’s Council of Economic Advisers, said that the data represented “the most positive news to date on the economy.” However, she said that the focus must remain on getting Americans back to work.
The number of unemployed people now stands at 15.3 million, giving an unemployment rate of 10 per cent, compared with 7.7 million and 5 per cent at the start of the recession in December 2007.
President Obama vowed in his State of the Union address on Wednesday to make job creation his top priority. Although government figures out this week showed a fall in the number of Americans filing for initial unemployment insurance to 470,000 last week from 478,000 a week earlier, Americans remain concerned about job prospects.
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Weak growth adds to Bank’s dilemma on quantitative easing

Published: 10:32PM GMT 26 Jan 2010

Alistair Darling, not surprisingly, managed to take some comfort in the
figures declaring that “there are many reasons to be confident”.

The markets displayed anything but confidence: the pound fell and gilt futures
jumped as traders concluded that prospects for an interest rate rise before
the end of the year were fading. Bad news for beleaguered savers, which have
already been hit hard by the Monetary Policy Committee’s (MPC) attempts to
kickstart the economy.

Ahead
of yesterday’s announcement even the most bearish economist had been
forecasting a 0.2pc rise – according to Bloomberg – with most
expecting GDP to have risen by 0.4pc.

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Britain emerges from recession, but only just

By Martin Evans


Published: 10:39AM GMT 26 Jan 2010

After almost two years of consecutive contraction, data released by the Office
for National Statistics, confirmed that the UK economy had finally begun to
expand.

But the 0.1 per cent growth in Gross Domestic Product (GDP) was much smaller
than the 0.4 per cent widely expected, fuelling fears that a further “double
dip” slip back into recession could be around the corner.

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Which metals will outshine gold?

By Charlotte Banks

Published: 2:15PM GMT 21 Jan 2010

Last year proved to be a good one for hard commodities around the globe.
Demand from emerging markets such as China held up better than expected in
light of demand contraction in the West.

Gold maintained its apparent ability to defy gravity, helped by a fall in the
dollar. Mark Dampier, head of research at Hargreaves Lansdown, says he is
likely to continue buying gold “as an insurance policy“, despite
the lack of industrial use for the metal.

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Recession battered Italy’s industrial output back 25 YEARS to levels last seen in 1984

By
Daily Mail Reporter
Last updated at 1:24 PM on 28th December 2009

Italy’s industrial production fell by around a quarter during the global economic downturn, cutting its output to levels last seen 25 years ago, the Bank of Italy said in a study.The country’s industrial production had suffered far more than the euro zone’s two largest economies, France and Germany.While French and German industrial output fell back to levels last seen 12 and 13 quarters ago, in Italy production retreated the equivalent of 100 quarters, the Bank said.

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BoE voted 9-0 to keep interest rates and money printing steady in December

Reuters

Published: 9:36AM GMT 23 Dec 2009

Minutes
to the December 9-10 meeting, published on Wednesday, showed
policymakers felt little had changed since November when they expanded
quantitative easing by £25bn - cash pumped into the economy by buying
assets, mostly gilts.

The November decision, however, had been split. Chief economist Spencer Dale
had favoured no QE expansion while external member David Miles wanted a
£40bn increase.

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Pre-Budget Report: 30 years to wipe out mountain of debt

By
Sam Fleming
Last updated at 8:47 AM on 10th December 2009

It will take 30 years for Britain’s massive national debt to return to levels before the economic crisis, alarming Treasury forecasts showed yesterday. Even on the Chancellor’s rosy economic predictions, the national debt is heading towards an unprecedented £1.5trillion, according to the Pre-Budget Report. The debt  -  the total borrowing the Government has accumulated over many years  -  will peak at around 80 per cent of gross domestic product and not return to levels seen in 2007-08 until as late as 2040. 
Grim forecast: Alistair Darling leaves Parliament after delivering his speech
A national debt of £1.5trillion works out as more than £51,000 for every taxpayer in the country. Next year alone Treasury interest payments will be £44.4billion, more than the entire budget of the Ministry of Defence. This year’s budget deficit will rocket towards a record £178billion, even worse than Mr Darling assumed in April. The deficit is an annual figure for the gap between government spending and tax receipts.

The total is more than 30 times the level in 1997 when Labour took power. It amounts to £488million a day. In 2010-11 the deficit will exceed the Chancellor’s earlier forecasts by £3billion. There will be no improvement on his prior projections until 2012. The dire outlook came as Mr Darling admitted we are stuck in the longest and deepest recession for decades and  -  to howls of derision from opposition benches  -  told MPs he was launching a recovery package from ‘a position of strength’. 
‘Position of strength’: The Chancellor’s recovery package outlined in the Commons was met by howls from Conservative MPs on opposition benches
The economy will contract by a worse-than-expected 4.75 per cent this year, official figures showed, in the deepest contraction since 1921. This will play havoc with the public finances, pushing UK deficits to the highest of any major country. Yet even this dire outlook may prove too optimistic. Economists and opposition politicians pointed out that Mr Darling’s borrowing estimates are based on economic growth returning to a robust 3.5 per cent by 2011  -  and remaining at that pace thereafter. Economist James Knightley of ING said: ‘If growth disappoints, and we believe it will, then the borrowing numbers will be much higher, necessitating even more aggressive fiscal retrenchment at a later date. ’This of course will further hammer down the UK’s growth prospects.’ Opposition politicians were also scathing about the national finances. Shadow Chancellor George Osborne said Mr Darling’s plans are simply not ‘credible,’ adding: ‘No one will believe a word they say on the economy again.’
This year’s 4.75 per cent contraction will be far worse than the 3.5 per cent prediction in April’s Budget. In 2010 the economy will return to growth, expanding 1.25 per cent, before leaping to 3.5 per cent. But last night the respected National Institute of Economic and Social Research questioned that latter figure. ’We regard the Chancellor’s projections of tax revenue as excessively optimistic both because we do not expect growth to be as rapid as he does, and because we are less optimistic about tax revenues,’ it said. While Mr Darling argued that increases to National Insurance and a spending squeeze will put him on track to halve the deficit by 2014, experts are deeply sceptical. Robert Chote of the Institute for Fiscal Studies said: ‘If the economy doesn’t recover as quickly as the Chancellor is hoping, tax revenues will be more depressed and they will have to spend more on social security, and that would push up government borrowing somewhat more.

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Recession ‘is even worse than feared’: Chancellor predicts steepest slump ever

By
Sam Fleming
Last updated at 8:15 AM on 27th November 2009

Admission: Alistair Darling is expected to confirm the recession is even deeper than feared next month
The recession is proving even deeper than feared, Alistair Darling will admit in next month’s Pre-Budget report. The Chancellor will forecast the steepest annual slump since modern records began. But he is likely to put a brave face on the outlook by declaring that Britain has finally returned to growth in the fourth quarter of the year. Last night Treasury sources indicated that Mr Darling will sharply
downgrade his economic predictions in the December 9 statement,
forecasting a slump of 4.75 per cent for 2009. That would
rival the worst year of the Great Depression of the 1930s, highlighting
the terrible toll the banking crisis has taken. In the Budget the Chancellor forecast a 3.5 per cent contraction for this year. The
difference will wreak havoc with the public finances, which already
show a Government hugely in debt and borrowing at record levels. The return to growth should allow the economy to record further modest growth of about 1.25 per cent in 2010, broadly in line with the Treasury’s March forecasts. But it is still well behind rivals such as Germany, France and Japan, which have already emerged from recession. Yesterday Mr Darling gave a strong hint about the economic outlook, pointing out that independent analysts are predicting a 4.7 per cent fall in British gross domestic product this year.

‘At the time of the Budget, my forecast for growth in 2009 was in line with the average of external forecasters,’ he said. ‘Since then, new data has shown that most economies, ours included, suffered a severe shock in the first quarter of this year. ‘To account for this, the majority of external forecasters are revising their predictions for this year and next. ‘Today the average of external forecasts for 2009 is much lower than in April. However, as I said at the time of the Budget, I still expect growth to return around the turn of the year.’ Part of the reason for Britain’s longer, deeper recession is the economy’s heavy reliance on financial services and property investment. The Office for National Statistics said that the Government borrowed £11.4billion in October  -  the most ever for that month  -  thanks to record declines in tax revenues. The deficit was 88 times the shortfall for the same period last year. The Chancellor predicted he would rack up a £175billion deficit this year, with only a modest improvement the following year. However, a return to growth would allow him to keep any downgrades to this forecast relatively modest. But with independent forecasts suggesting a final deficit closer to £200billion for this year, he still faces an enormous task. The Government is putting forward a bill to halve the deficit within four years, but it remains under intense pressure from to do more, in particular from Bank of England governor Mervyn King.

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Bank of England starts debate on lending surcharges

By Angela Monaghan

Published: 12:01AM GMT 21 Nov 2009

In a discussion paper the Bank said these “capital surcharges” would
be a new macroprudential tool designed to restrain excessive risk-taking
during boom times, and would be a form of self-insurance for the banks. The
idea is that charges could prompt banks to conserve capital by slowing
lending during the good times.

The surcharges would be on top of capital ratio requirements, and would be
increased during credit booms, and decreased during downturns. One option
would be to apply a higher charge to those classes of lending deemed the
most risky.

“Increasing capital requirements in a credit boom would generate greater
systemic self-insurance for the system as a whole and, at the margin, act as
a restraint on overly exuberant lending,” the Bank said in the
discussion paper.

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Surprise jobless figures boost economic outlook

The rise in British unemployment slowed abruptly in the three months to
September to 2.46 million as the number of people landing jobs rose for the
first time in more than a year.

New figures today, from the Office for National Statistics (ONS), showed that
unemployment climbed by just 30,000 in the quarter to September — the
smallest quarterly rise since spring last year.

There had been expectations that total unemployment would reach 2.5 million.

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