EU-DIGEST

Gloom pervades AICPA business survey by - by Alan M.Wolf

In a survey of 1,606 financial officials conducted by the American Institute of Certified Public Accountants and the University of North Carolina's Kenan-Flagler Business School showed that only 9 percent expect the economy to begin to improve before the second half of 2009. And 48 percent see no improvement until 2010 or later. They blame the credit crisis, increasing unemployment and declines in consumer spending and consumer confidence.

"CPAs are trained to be objective and analytical and are not prone to hype and emotion, so when they foresee our economic problems extending well into 2009 and beyond, it is a troubling forecast," said Arleen Thomas, AICPA senior vice president, in a prepared statement.

Labels: recession, Survey, US Economic Meltdown

IMF report says turmoil to hit U.S. harder than Europe

The International Monetary Fund anticipates a "sharp downturn in the U.S." while the eurozone faces nothing worse than an economic slowdown. The author of the IMF report making that prediction, Charles Collyns, said the size of the U.S. banking crisis will double or triple the severity of decline in the country. "When the banking system suffers major damage, as in the current episode, the likelihood of a severe and protracted downturn in activity increases," he said.

Labels: EU Economy, IMF, recession, US Economy

World Economy - Bank of America strategist sees coming slump in global consumption

Joseph Quinlan, chief market strategist for Bank of America's investment strategies group, issued a report Tuesday predicting global private consumption expenditures -- approaching $32 trillion in 2007 -- posting anemic growth this year of between 2 percent and 4 percent.

"In the past few months, higher food and energy prices have undermined consumer confidence not only in Detroit, but also in Dusseldorf, Delhi and Dalian," Quinlan said in a report to clients Tuesday. "A global slump in personal consumption is unfolding, portending rockier times for the world economy and U.S. multinationals catering to global consumers."

Labels: Private consumption, recession, US Economic Meltdown, World Economy

Juncker: Euro-Zone Not At Risk Of Recession

he euro-zone economy is not at risk of recession, and foreign exchange markets should focus on the U.S. economy's medium term prospects, Luxembourg Prime Minister Jean-Claude Juncker said Thursday. As government leaders began a two-day meeting here, the euro continued to strengthen to a fresh record high against the dollar Thursday. Juncker is head of the Euro Group of finance ministers from the 15 countries that use the euro. Juncker repeated the Euro Group's view that excessive volatility in foreign exchange markets is unwelcome because it can cause economic damage, regardless of the actual levels of the currencies involved.

Labels: EU, recession

EU-Digest: special report on the US economy - data collected from recent media reports

Nine large banks in the US have been asked by the Government Office of the Controller of the Currency to provide detailed information on mortgage delinquencies every month to a federal regulator. It is requiring this information initially from Citigroup Inc.; Bank of America Corp; Wells Fargo&co; JPMorgan Chase & Co;US Bancorp; National City Corp; HSBC PLC and First Horizon National Corp. The agency said it is looking at all loans, not just sub-prime loans made to borrowers with poor credit. Information will also include detailed reports on loan modifications, credit scores, foreclosures and delinquencies. Fannie (FNM), the largest buyer and backer of U.S. home loans, said Wednesday it lost nearly $3.6 billion in the fourth quarter of 2007, and $2.1 billion for the year, amid mounting home-loan delinquencies and soured bets on interest rates. "This loss exceeded our expectations and represents a significant deterioration of surplus regulatory capital," Moody's said in a statement. Moody's said it expects Fannie to have sizable losses in the first half of 2008 and possibly a net loss for the year due to the continued deterioration in the residential mortgage sector.FNM also said it has received a subpoena from New York's attorney general seeking information about the types of loans the company offers. Some financial resources are now also indicating that several smaller banks with limited capital reserves could be going under as a result of mortgage delinquencies and bad loans.

On Tuesday: a government report showed wholesale prices climbed 7.4 percent in the past year. That was the biggest annual leap since 1981. People have started cutting back on their spending as they are stung by rising prices and shriveling wages. Businesses, also socked by rising costs and declining demand from customers are clamping down on their hiring and capital investment. Some economists, like Mark Zandi, chief economist at Moody Economy believe the economy already fell in a recession in December.

Can we expect the powerful globe-spanning multi-national US corporate giants to come to the rescue of the U.S. economy and if necessary the world economy? Don't count on it. The top 150 U.S-based non financial multinationals, which include Hewlett-Packard (HPQ) , Pfizer (PFE) , eBay (EBAY), and Sara Lee (SLE), had more than $500 billion in cash and short-term investments at the end of 2007, but they are not spending it in the US. Multi-national corporations probably do not need to worry about this political rhetoric. It is pretty sure, neither one of them, or whoever eventually wins the election for President is unlikely to keep their promise to the voters to renegotiate NAFTA. Politicians never bite the hands which feed them.

Figures collected by the Bureau of Economic Analysis suggest the multinational sector has in some ways been a drag on the U.S. economy since 2000. From 2000 to 2005, the last year for which full data are available, U.S multinationals cut more than 2 million jobs in the US, even as employment in the rest of the private sector grew and there is no sign the trend has significantly reversed. U.S. multinationals have been decoupling from the U.S. economy in the past decade. They still have their headquarters in America, they're still listed on U.S. stock exchanges, and most of their shareholders are still American. But their expansion has been mainly overseas.The US as a whole is not benefiting from the much heralded Global marketplace. Multi-National companies have been given the freedom by the political establishment to shift their tax payments to low tax countries driving up their net profits, which in most cases they are not investing at their original home base. Since 2001, gas prices are up 109 percent, and home heating prices are up 222 percent. Over the same time period, oil company profits are up 313 percent. In fact, the big five Multi-National oil companies recently reported record profits for 2007, with ExxonMobil earning $40.6 billion — the largest corporate profit in American historyAn economics professor at the Harvard Business School said: "Greed seems to be common denominator of the slippery multi-national corporate community."

Today, March one, the price of crude oil stands at: 101.79 per barrel and one euro equals US$ 1.51.52. The average price of gas at the pump is US$ 3.39 per gallon.

Labels: Multi-National Corporations; World Trade, Oil, recession, US Economy

For the complete report from the Financial Timesclick on this link

America’s economy risks mother of all meltdowns - by Martin Wolf

Recently, Professor Roubini’s scenarios have been dire enough to make the flesh creep. But his thinking deserves to be taken seriously. He first predicted a US recession in July 2006*. At that time, his view was extremely controversial. It is so no longer. Now he states that there is “a rising probability of a ‘catastrophic’ financial and economic outcome”**. The characteristics of this scenario are, he argues: “A vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe.”

Labels: recession, US Economy

US Financial Collapse in 2008: Where’s the juiciest bear food? - by Martin Hutchinson

Overall, 2008 looks to be a good year for bears. The US Federal Reserve has been walking a tightrope since August between the precipices of a collapsing financial system and resurgent inflation.

With a 3.2% November Producer Price Index rise (7.2% over the previous year) announced on Thursday and a 0.8% Consumer Price Index rise (4.3% over the previous year) announced on Friday, it can now be officially confirmed that the tightrope has vanished into thin air. The United States over the next 12 months will experience both a collapse in its financial sector and a violent resurgence in inflation, and there’s nothing whatever the Fed can do about it, no interest rate trajectory that will not worsen one problem more than it alleviates the other.

Labels: recession, US Economy, World Economy

Greenspan predicts recession in US - by Peter Ryan

As the credit crisis continues to bite around the world, two eminent economists have predicted the United States will most likely fall into a recession next year. The former chairman of the US Federal Reserve, Dr Alan Greenspan, says a recession is a 50 per cent chance while the chairman of the global investment bank Morgan Stanley, Stephen Roach, is tipping an even greater risk.

The gloomy predictions from Dr Greenspan and Mr Roach confirm a bumpy start to the new year with evidence mounting each day that the carnage from the global credit crunch will not just be felt in the US and Europe, but also in Australia.

Labels: recession, US

US Recession? U.S. Economy: Manufacturing Grows at Slower Pace - - by Courtney Schlisserman

Manufacturing in the U.S. grew in November at the slowest pace in 10 months as the housing slump pushes the economy toward recession. The Institute for Supply Management's factory index fell to 50.8, matching economists' forecasts, from 50.9 the previous month, the Tempe, Arizona-based group said today. Fifty is the dividing line between contraction and expansion.

Labels: Dollar, recession, US Economy

Dollar-Rebound May Be Imminent, Should U.S. Slowdown Hit Global Economy ?

According to analysts, the dollar may be set for a rebound after having hit record lows against the Euro and other major currencies recently. The decline of the greenback has been unrelenting this year with the U.S. currency down 5 percent against the British pound, 7 percent versus the yen, a whopping 10 percent against the single currency, and 14 percent versus the Canadian dollar. Maurice Obstfeld of the University of California at Berkley and Kenneth Rogoff of Harvard University tabulated in 2005, that the dollar would need to decline as much as 30 percent against the Federal Reserve's trade-weighted basket of currencies to balance the U.S. trade deficit, now tagged at more than 6 percent of the nation's economic output.

According to that theory, the dollar would have to drop another 20 percent, before it hits rock bottom. But some analysts say currency markets are difficult to predict, and there is an argument to be made that the dollar could bottom-out in the near future.

Labels: Dollar, recession, US

U.S. Economy: Recession, Depression, Or Collapse? By Shepherd Bliss

"For Consumers, the Hits Keep Coming” a recent banner headline in a New York Times-owned daily newspaper here in Northern California reports. The article misses the main points. If we continue to understand ourselves as primarily passive consumers, rather than as active citizens, the US economy will enter at least a recession, probably a depression, and possibly a collapse. Even our republic is at risk. Rampant consumption, our addiction to growth, and our failure to accept limits to growth damage us. The headline beneath the banner—“Cleanup Response Criticized”—reveals one of the saddest results. We are not adequately cleaning up the San Francisco Bay after a recent oil spill. Many other aspects of our environment need cleaning up. Without a healthy natural environment and climate conducive to humans, no economy can endure. Over-consumption drives the increasingly extreme and chaotic climate. We need to quickly evolve from our destructive individual consumption patterns that damage not only the economy but the Earth itself. We need to consider their many negative impacts and work together as active citizens concerned with the whole economy and the environment on which it is dependent."

Labels: recession, US Economy

U.S. subprime problems could spread, IMF chief says - by Jonathan Hurdle

Rising defaults on subprime mortgages for riskier borrowers in the United States could affect other areas of the U.S. economy, the head of the International Monetary Fund warned on Friday. IMF Managing Director Rodrigo Rato said in a speech at the University of Pennsylvania the problems in subprime mortgage markets were one of three risky developments in financial markets, which could eventually affect the global economy.

The implosion of the subprime market means that some half a million Americans are likely to be unable to obtain mortgage financing over the next two years, according to the National Association of Realtors.

Labels: recession, subprime, US Economy