Where is the US economy headed?

Worldwide share jitters continue

Global stocks were down on Friday, ending two straight days of solid rises as concerns returned about the state of the worldwide financial sector.
While the main Dow Jones index was down 154 points to 12,225 in mid afternoon trading on Wall Street, European shares had earlier finished lower.

London's FSTE closed down 6.8 points to 5,869, while Frankfurt's Dax lost 4.3 points and Paris' Cac fell 37 points.

Analysts said sentiment was hit by reports a hedge fund was in trouble.

Reports said that one of the main US hedge funds was in financial difficulty, but no names have been suggested.

US economic plan

Global stocks had risen earlier on Friday as investors welcomed the previous day's announcement of a US government plan to spend $150bn (£76bn) reviving the country's economy.


Strong earnings from Microsoft and building equipment firm Caterpillar had also helped to lift the mood, with Japan's main Nikkei index closing up 4%.

On Monday, stock markets from Japan to the UK were heavily sold on growing fears that the US would fall into a recession and drag down other key economies too.

In many markets, the falls were the worst since the 11 September 2001 attacks on the US.

The resulting turmoil prompted the Fed, the US central bank, to cut US rates to 3.5% from 4.25%.

Analysts now expect more volatility in the short term.

"We expect sharp gains and losses in the next few days and weeks," said Heinz-Gerd Sonnenschein, a strategist at Postbank in Germany.

"The US has done many things to stabilise the market, but all the bad news is not yet out there."

you can say that again ! hbg

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7208316.stm

Published: 2008/01/25 19:03:41 GMT

cicerone imposter on Sun Nov 28, 2004 5:38 pm

Without having read the link you provided, I can say with some confidence that Krispy Kreme is headed for bankruptcy within the year

cicerone imposter on Sun Nov 28, 2004 5:38 pm

Without having read the link you provided, I can say with some confidence that Krispy Kreme is headed for bankruptcy within the year

Deep recession feared in U.S.
Falling business sentiment fuels gloomy outlooks

Jacqueline Thorpe, Financial Post
Published: Monday, February 25, 2008

Jeff Haynes/AFP/Getty Images
Economists are no longer talking about a U.S. recession but a deep recession after figures yesterday showed business sentiment continued to plummet in early February.

Forecasts for a more severe retreat came as CIBC World Markets forecast U.S. house prices would end up sliding 20% before the dust has settled on the American housing meltdown. CIBC estimated 50% of U.S. homeowners who took out below-prime mortgages in 2006 will end up in a negative-equity position -- owing more than their house is worth.

"There seems to be a sense of a very deep-seated collapse in the economy," said Michael Englund, chief economist at Action Economics.

The Philadelphia Federal Reserve's index of manufacturing activity in the U.S. Northeast dropped to -24.0 in February from January's already terrible reading of -20.9. Analysts had been expecting a bounce to about -10 after that sharp drop in January.

"As far as this indicator is concerned, a recession, and a severe one at that, is already underway," said Paul Ash-worth, of Capital Economics.

"The headline index is now consistent with a deep recession, if sustained at this level," said Ian Shepherdson, chief economist at High Frequency Economics, in a note.

The index is based on a survey of manufacturing firms by the Federal Reserve Bank of Philadelphia and their plans for general activity, shipments, new orders, employment and hours worked. It is one of the earliest monthly readings on the U.S. economy and has had a solid track record at predicting national manufacturing and future trends in actual output.

The collapse in the outlook for activity six months out was particularly worrisome, Merrill Lynch said. It posted the steepest decline in the 40-year history of this report, suggesting the United States is facing a recession on par with the early 1990s' downturn rather than the milder 2001 contraction.

Mr. Englund said that although the index measures only sentiment -- gauging what businesses say they will do rather than actual output -- it prompted him to reduce his forecast for first-quarter growth to 0.5% from 0.8%.

He said both consumer and business confidence turned dramatically south as the U.S. Federal Reserve slashed interest rates by 75 basis points in an emergency rate cut in late January.

"The sheer panic tone to the Fed may have actually fed a sense of panic, which is the very thing they were trying to quell with interest-rate reductions, " he said.

While private-sector interest rates were dropping nicely at the turn of the year, rising inflation expectations amid soaring commodity prices have forced rates higher again.

Applications for U.S. mortgages plunged by 11.5% last week as borrowing costs on 30-year fixed-rate mortgages rose by 37 basis points to 6.09%, the highest since late December.

The rise in borrowing costs will be a further constraint on the U.S. housing industry, which is only half-way through its "worst … housing meltdown in the postwar era," said Benjamin Tal, senior economist at CIBC World Markets, in a report.

He estimates 30% of below-prime mortgages taken out in 2006, including subprime and other exotic mortgages, are already in a negative-equity position and that could climb to 50%, prompting the urge to walk away from homes.

U.S. producer prices soared in January
New data show prices rising at fastest pace in over 16 years
BREAKING NEWS
The Associated Press
updated 9:15 a.m. ET, Tues., Feb. 26, 2008
WASHINGTON - Inflation at the wholesale level soared in January by the fastest pace in 16 years, pushed higher by rising costs for food, energy and medicine.

The Labor Department said Tuesday that wholesale prices rose 1 percent last month, more than double the 0.4 percent increase that economists had been expecting.

The worse-than-expected performance was certain to capture attention at the Federal Reserve, which has chosen to combat a threatened recession by aggressively cutting interest rates in the belief that weaker economic growth will keep a lid on prices.

But the combination of rising inflation and weaker growth raises the threat of "stagflation," the economic malady that plagued the country through the 1970s, when a series of oil shocks left households battered by the twin problems of stagnant growth and rising prices.

The 1 percent jump in wholesale prices followed a 0.3 percent decline in December and was the biggest one-month increase since a 2.6 percent increase in November. That gain had been driven by sharply higher energy costs.

With the January jump, wholesale prices have risen over the past 12 months by 7.5 percent, the fastest increase since the fall of 1981, when the country was in a deep recession.

The big jump in wholesale prices followed a worse-than-expected increase in consumer prices, which rose by 0.4 percent last month as consumers got hit by higher costs in the same areas of food, energy and health care.


The wholesale report said that energy prices jumped 1.5 percent, reflecting a 2.9 percent rise in gasoline and an even bigger 8.5 percent jump in the cost of home heating oil.

Food prices, which have been surging because of increased demand stemming from ethanol production, rose by 1.7 percent last month, the biggest monthly increase in three years. Prices for beef, bakery products and eggs were all up sharply.

Core wholesale inflation, which excludes food and energy, posted a 0.4 percent increase, the biggest increase in 11 months. This gain was led by a 1.5 percent spike in the cost of prescription and non-prescription drugs.

© 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Since the majority of food costs do not go for products from the farm, it is hard to blame the inrease on ethanol production.

I would look at higher fuel prices for manufacturing and transport before I blamed ethanol when it comes to food.

Core wholesale inflation, which excludes food and energy, posted a 0.4 percent increase, the biggest increase in 11 months. This gain was led by a 1.5 percent spike in the cost of prescription and non-prescription drugs.

from xingu's post :

Quote:

Core wholesale inflation, which excludes food and energy, posted a 0.4 percent increase, the biggest increase in 11 months. This gain was led by a 1.5 percent spike in the cost of prescription and non-prescription drugs.

CORE WHOLESALE INFLATION INCREASED BY 0.4 % .
so if you all stop eating , driving your cars , heating or cooling your houses , you have nothing to complain about :wink: .
JOKE , JOKE , JOKE
hbg