News & Current Affairs

August 28, 2008

US GDP rebounds with 3.3% growth

US GDP rebounds with 3.3% growth

A US shopper

Tax rebates have encouraged consumers to spend more

The US economy grew at a revised 3.3% annually in the second quarter of 2008, the Commerce Department said, much higher than its first estimate of 1.9%.

The rebound was linked to strong US exports, helped by the weak dollar, while government tax rebates also boosted consumer spending.

GDP grew at a rate of 0.9% in the first quarter, after a 0.2% contraction in the last three months of 2007.

The Federal Reserve has warned the economy will remain weak this year.

“While we’re not out of the woods yet, maybe we’re beginning to see some sunlight,” said John Wilson, equity strategist at Morgan Keegan.

“At some point, the market will begin to look through the trough and gauge the strength of the coming upturn.”

‘No recession’

The data showed that exports grew at an annualized rate of 13.2%, higher than the government’s initial estimate of 9.2%.

Imports fell at a rate of 7.6% as the US economic slowdown reduced demands for goods made overseas.

The improved trade balance added 3.1 percentage points to second-quarter GDP, the biggest since 1980.

The slowdown in the housing market was evident, as builders cut back and businesses reduced their spending.

Consumer spending, boosted by the government’s $600 tax rebate payments, rose by 1.7%, slightly higher than the previous quarter’s 1.5%.

Some observers said that the figures lent support to the argument that the US was not heading for a recession.

“For a recession the economy is certainly growing very quickly,” said Avery Shenfeld, senior economist at CIBC World Markets.

“A lot of that growth is driven off exports and pessimists might say that can’t continue during slowing growth overseas.

“But I would say this happened precisely during the period of slowing growth overseas … this is still an economy that faces slow times but not a recession.”

16-year low

However recent data on the US housing market suggests a grim outlook for the sector.

US house prices were down a record 15.4% in the April to June quarter compared with a year ago, according to a closely-watched report released earlier this week.

The decline was recorded by the latest S&P/Case-Shiller survey of US national home prices.

The report said the fact that the falls were nationwide was the latest sign the US housing downturn is continuing.

Separate government data said sales of new homes were at an annual rate of 515,000 units in July, up slightly from June, but still near a 16-year low, and half the rate of new home sales one year ago.

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August 26, 2008

German shopper mood remains weak

German shopper mood remains weak

Shoppers in Berlin

German consumers are not in an optimistic mood

German consumer confidence has fallen to a fresh five-year low, as recession and high inflation fears continue to sour the mood among shoppers.

The news came from market research firm GFK, whose forward-looking consumer confidence index has dipped to 1.5 points for September from August’s 2.1.

Further gloom was offered by restated official data which confirmed that the economy contracted from April to June.

Germany’s economic output fell 0.5% quarter-on-quarter in the period.

If this contraction was to continue between July and September, then Germany would formally be in recession.

‘Depressed mood’

Fueled by high energy and food costs, German inflation is continuing at its highest level since 1993, hitting household spending.

German companies are further being hit by high raw material costs, and in addition to lower domestic consumer spending, concerns remain the impact of a global economic slowdown.

The high value of the euro has also been a problem over the past year, although the dollar has rallied in recent weeks, offering some respite to German exporters.

“In addition to the continued price hikes for energy and fast moving consumer goods, expectations of weaker economic development are depressing the consumer mood in particular,” said the GFK report.

GFK surveys around 2,000 consumers for its monthly consumer confidence guide.

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