18 January 2008 20:32 [Source: ICIS news]
Kevin Swift, chief economist at the American Chemistry Council (ACC), said that “this week witnessed a crescendo of recession cries”.
“Indeed, the economic reports were generally on the feeble side and many of the elements of a self-reinforcing downturn are in place,” he said.
Swift cited the generally weak retail sales report for the just-ended US holiday season, noting that sales were “disappointing and it appears that consumers are cautious if not retreating”.
However, he noted too that “It is important to note that gift cards given for the holidays may not be used until January or even later and that those sales are not recorded until a purchase is made”.
“As a result, there may be improving activity in January,” he said.
Consumer confidence and trends are important to the overall economy because personal spending accounts for as much as 70% of US commercial activity.
Swift also called attention to continuing troubles in the
“Housing continues to be in freefall as housing starts exceeded analysts’ already low expectations and are at the lowest level in 16 years,” he noted.
“The industrial production report indicated that the economy is near ‘stalling speed’,” he said, adding that “the Philadelphia Fed regional survey indicates that softness in manufacturing deepened this month”.
“Add in falling home values, weakening employment, and a breakdown in confidence, [and] the ingredients for a broad downturn are in place,” Swift said.
The leading economic indicators issued earlier on Friday by the Conference Board “certainly point to softer activity during the next several quarters”.
On the up side, however, Swift noted that “two legs supporting the economy have been relatively good: income gains and strong exports”.
Also on Friday, President George Bush called for a broad stimulus programme that could funnel some $130bn (€88bn) in personal income tax rebates and business tax credits into the economy this year.
In addition, Federal Reserve Board Chairman Ben Bernanke has all but promised a new interest rate cut when the Fed’s policy panel meets at the end of this month.
($1.00 = €0.68)
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