U.S. retail sales drop 1.5% in September

October 15, 2009
Retail sales in the United States fell a seasonally adjusted 1.5 percent in September, smaller than the fall of 2.1 percent economists had expected.

    The figure, released by the Commerce Department on Tuesday, was mainly affected by the fall of auto sales since the end of the government's popular "cash for clunkers" program, which lifted auto sales in the past several months.

    Car sales plunged 10.4 percent last month but, excluding autos,retail sales rose 0.5 percent. That's better than the 0.2 percent increase analysts expected.

    The 1.5 percent drop in retail sales in September followed a 2.2 percent surge in August, which was revised down from an initial estimate of 2.7 percent.

    The Commerce Department said retail sales in September were still 5.7 percent below the same month in 2008.

    Economists expect the U.S. economy will grow about 3 percent in the third quarter this year. However, they worry that the recovery might not be sustained if consumers remain reluctant to spend.

    Consumer spending, which accounts for about 70 percent of economic activity, is the broad measure of U.S. economic activity.

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U.S. to strengthen trade relations with India

October 14, 2009
The U.S. government is ready to strengthen bilateral trade relations with India and make progress for the World Trade Organization's Doha round agenda, U.S Trade Representative Ron Kirk said Tuesday.

    Kirk and Indian Commerce Minister Anand Sharma met Tuesday in Washington to discuss a range of issues for the U.S.-India Trade Policy Forum (TPF) meeting in India scheduled for Oct. 26.

    "India is one of the largest and one of the most important trade partner for the U.S.. In 2008, the total volume of goods and service being traded between India and the U.S. totaled 41 billion dollars." Kirk said. "I know that is an impressive number, we believe it can and should be higher."

    "By improved market access to India, we can create new jobs here in America," Kirk added.

    The TPF is the main policy tool for the bilateral trade agenda, and the United States and India are working together to create greater opportunities for trade and investment.

    Since Indian Prime Minister Manmohan Singh's visit to the United States in July 2005, during which a number of trade and economic initiatives were announced, the office of the U.S. Trade Representative (USTR) has engaged with India on trade and investment matters through a number of venues.

    An interagency collaboration, the USTR-led TPF is the principal trade dialogue between the United States and India. It has five Focus Groups: Agriculture, Investment, Innovation & Creativity (intellectual property rights), Services, and Tariff & Non-Tariff Barriers.

    Besides bilateral trade relationship, Kirk and Sharma acknowledged the productive Doha Round discussions that took place last week in Paris.

    Kirk said the two sides have shared desire of commitment to make progress of the Doha development agenda and will talk about cooperation to put the WTO's Doha round talks on a more successful path to conclusion.

    Latest data show that India was the United States' 17th largest goods export market and the 18th largest supplier of goods imports in 2008.

    The U.S. goods trade deficit with India was 8 billion dollars in 2008.

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Oil prices near a new high for the year

October 14, 2009
OIL prices neared new highs for the year yesterday as the dollar slipped against other major currencies, demonstrating how much the weakened U.S. currency can affect consumers globally.

The U.S. dollar index, where the U.S. currency is measured against other major currencies, hit a 14-month low yesterday. Because crude is bought and sold in dollars, it essentially becomes cheaper for international investors who have flooded into energy markets despite a big surplus of oil.

Energy experts expect the government will report Thursday that crude supplies are still growing. That does not appear to be a deterrent for many investors because the dollar is so weak.

Benchmark crude for November delivery gained 88 cents to settle at US$74.15 on the New York Mercantile Exchange. At one point, prices reached US$74.47, just short of the US$75 reached on Aug. 25, when the driving season was still in full swing.

Prices have now risen for four straight days and a barrel costs 4 percent more than it did one week ago.

Natural gas, which is not sold only in dollars, tumbled 29.2 cents, nearly 6 percent, to US$4.588 per 1,000 cubic feet on Nymex.

OPEC said yesterday China and other developing countries would push global oil demand up slightly next year, but added that any recovery would be "slow and weak."

The Organization of Petroleum Exporting Countries supplies over 35 percent of the world's crude.

Iraq's oil minister said yesterday that three international oil producers have accepted the country's terms to develop two fields and submitted revised offers, a major breakthrough for Iraq's oil industry.

The country's first postwar bidding round flopped June 30 after most oil companies rejected terms from the Iraqi government. Only one contract was awarded out of the eight oil and gas fields offered.

In other Nymex trading, heating oil rose almost 3 cents to settle at US$1.9234 a gallon, and gasoline for November delivery gained about 3.3 cents to settle at US$1.8318 a gallon.

In London, Brent crude rose US$1.04 to settle at US$72.40 on the ICE Futures exchange.

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US stocks stumble to mixed close amid investor jitters

October 14, 2009

US stocks limped to a mixed close overnight as jitters about the upcoming wave of corporate earnings offset the positive impact of a big acquisition in the tech sector.

The Dow Jones Industrial Average dropped 14.74 points (0.15 per cent) to 9871.06 at the closing bell as the indexes alternated between modest gains and losses.

The Nasdaq composite edged up 0.75 points (0.04 per cent) to 2139.89, helped by news of Cisco System's deal to buy mobile infrastructure firm Starent Networks.The broad-market Standard & Poor's 500 index shed 3 points (0.28 per cent) to a close of 1073.19.

In the absence of major economic data, the focus was squarely on the corporate front and earnings.

The market gave a lukewarm response to earnings from Johnson & Johnson as the pharmaceutical giant topped estimates with a profit of $US3.3 billion ($3.64 billion) but "failed to impress with its sales," which fell 5.3 per cent, said Patrick O'Hare at Briefing.com.

"Some traders may have decided to take some profits ahead of the big wave of earnings reports that will hit the tape today and extend for the next month," noted Fred Dickson at DA Davidson & Co.

"A solid earnings reporting season is necessary to fuel the current bull market for stocks."

The market was awaiting earnings reports from computer chip giant Intel, a tech bellwether, due at the close of trade, and banking giant JPMorgan Chase early on Wednesday.

"Expectations are relatively high for both companies," said O'Hare.

"Negative surprises would throw a wrench in recovery arguments and invite closer scrutiny of valuation levels that could lead to some more concerted selling interest."

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Pressure for Reserve Bank of Australia to further lift interest rates mounts

October 13, 2009
The Reserve Bank of Australia (RBA) has recently raised the cash rate by 25 basis points to 3.25 percent which makes Australia the first G20 nation to lift its cash rate.

    On Oct. 8, Australian Bureau of Statistics (ABS) data showed the nation's unemployment rate dropped to 5.7 percent in September, from 5.8 percent a month before, as the economy added 40,600 new jobs.

    On the same day, the Australian dollar punched through 90 U.S. cents for the first time since August 2008 and the Australian share market was up by almost 2 percent.

    These indicators have proved the RBA's prediction of a surge in business confidence and flagged more rate hikes.

    However, prior to this, most of the economists expected the cash rate to remain at three percent until November this year and that the unemployment rate in September rose to six percent with an additional 10,000 jobless.

    RBA Governor Glenn Stevens said the Australian economy's growth in the next year was now forecast to rebound which meant higher interest rates were needed to ensure the expansion was sustainable.

    Stevens also said the three percent rate was "an emergency setting" and that the RBA would tighten once the emergency has passed.

    While the G20 nations are struggling with high unemployment rates in the global economic recession, Australia is preparing for its next move.

    Some economists predict the RBA would lift interest rates twice by the end of the year to 3.5 percent. UBS strategist Matthew Johnson estimated if the unemployment rate had peaked, then the RBA would lift interest rates to around four percent soon.

    Deutsche Bank economist Phil O'Donaghoe said if Australia get through the recession with a peak unemployment rate of below six percent that would be remarkable, as it would be a better than expected result than the Australian government forecast of 8.5 percent unemployment in the May budget. Also, it would be better than the U.S. 9.8 percent jobless rate in September and the nearly10 percent unemployment forecast in the Euro zone by the International Monetary Fund.

    With the current economic scenario and tightened currency policy, should the Australian government continue with the huge stimulus package?

    Labor's doyen economic adviser Ross Garnaut has warned that there was danger of using "huge amounts" of public money to bail out private companies at the direction of bureaucrats.

    Professor Garnaut says the government's increase in its first-home buyers subsidy reversed a crisis-induced housing correction but its phase-out, scheduled from now until the end of the year, could be "damaging".

    He argues Australia's macroeconomic policy response to the global financial crisis has relied relatively heavily on one of the biggest and earliest budget expansions of any high-income country and less on lower interest rates.

    On the other hand, Minister for Employment Participation Mark Arbib warned the Australian economy is not yet out of recession despite a decline in the unemployment rate.

    He said the global economy is still full of uncertainties, in particular one of Australia's close partners the United States is still facing a high unemployment problem.

    Next month, a series of economic targets and expectations including CCI (consumer confidence index) and CPI (consumer price index) for the third quarter of this year will be released. Usually higher RBA interest rate, lower the consumer confidence index, but economists predict there would be a nice surprise for the October index. If so, the RBA will be under pressure to lift their rates further.

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Boom in international trade fails workers in developing world: UN report

October 13, 2009
The surge in world trade in recent years has failed to improve the working conditions and living standards for the majority of workers in poor countries, according to the findings of a new United Nations labor agency study released on Monday.

    A high incidence of informal employment has curbed any benefit workers in the developing world have felt from the boom in trade, the joint International Labor Organization (ILO) and World Trade Organization (WTO) study found, UN spokesperson Michele Montas told a news briefing here on Monday.

    "The study says that trade opening needs proper domestic policies to create good jobs," Montas said. "It adds that the high incidence of informal employment in the developing world suppresses countries' ability to benefit from trade opening by creating poverty traps for workers in job transition."

    WTO Director-general Pascal Lamy noted that trade "has contributed to growth and development worldwide, but this has not automatically translated in an improvement in the quality of employment."

    In the developing world, job creation has largely taken place in the informal economy, which ranges from 30 percent of the workforce in Latin America to more than 80 percent in some sub-Saharan and South Asian countries.

    Informal employment involves private, unregistered enterprises which are not subject to national law or regulation, offer no social protection and involve self-employed individuals, or members of the same household.

    The study said that the informal economy has remained high and even increased in some countries, especially in Asia, leaving most workers with limited job security, low incomes and little benefit from globalization.

    The study confirms that by promoting fair working conditions together with national labor market, trade and financial policies, developing countries would be much better placed to benefit from trade openings, said ILO Director-general Juan Somavia.

    Somavia highlighted the recent Group of 20 industrialized nations (G20) call to implement "recovery plans that support decent work, help preserve employment, and prioritize job growth ... and to continue to provide income, social protection, and training support for the unemployed and those most at risk of unemployment."

    Reducing informality can release additional productive forces, enhance diversification and strengthen the capacity to trade internationally, according to the report, entitled "Globalization and Informal Jobs in Developing Countries."

    In addition, entrepreneurship and risk-taking is reduced when informality is high, partly as a result of badly designed tax systems, weak social protection and poor business regulation, it said, adding that informality also prevents countries from fully benefiting from trade reforms by creating poverty traps for workers in job transition.

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Oil, fuel prices jump as dollar, temperatures fall

October 13, 2009
ENERGY prices rose yesterday as an October chill across much of the United States sent thermometers plummeting along with the weakening U.S. currency.

"The early blast of winter is giving oil a bit of a boost," said PFGBest analyst Phil Flynn.

Benchmark crude for November delivery gained US$1.50 to settle at US$73.27 on the New York Mercantile Exchange. The last time crude closed above US$73 was in late August with the U.S. driving season in full swing.

Heating oil rose 4.16 cents to settle at US$1.8944 a gallon and natural gas jumped 11 cents to settle at US$4.88 per 1,000 cubic feet.

Even though there are enormous supplies of all three due to the recession and there is little chance of a shortage in the near term, crude prices have risen 5 percent in three trading days.

It is the weakened U.S. currency that continues to lure global investors who can buy oil for a bargain because it is priced in the dollar. There are billions of dollars entering energy markets despite huge surpluses, especially in natural gas.

The U.S. dollar index, which tracks the dollar against other major currencies, is down 14 percent since early March, and crude has jumped by about US$20 per barrel in the same time.

There are also hopes that energy demand will rise as the economy recovers. Early quarterly reports from major corporations supported that optimism somewhat.

Aluminum maker Alcoa Inc. last week opened the earnings season with a surprisingly strong profit report. Top banks JPMorgan Chase & Co., Goldman Sachs Group Inc., Citigroup Inc. and Bank of America Corp. report this week along with Google Inc., Southwest Airlines Co., Intel Corp., IBM Corp., General Electric Co., and Johnson & Johnson.

In other Nymex trading, gasoline for November delivery gained 3.1 cents to finish at US$1.799 a gallon. In London, Brent crude rose US$1.36 to settle at US$71.36. on the ICE Futures exchange.

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Cooler winter to cost U.S. southerners 9% more in energy bills

October 13, 2009
CPS Energy, the largest U.S. municipally owned energy company in San Antonio, Texas, on Monday expected a chilly winter ahead and expensive energy bills for its customers in the coming winter.

    The 2009-2010 winter utility bills will increase over last winter because of projected cooler weather that will cause greater use of energy, particularly natural gas for heating, the company said in a news release.

    "Average natural gas prices are expected to increase to 6.31 dollars per thousand cubic feet (MCF) from last year's price of 5.78 dollars per MCF," said Sylvia Arnold, CPS Energy director of customer services.

    Her conclusion is based on the following elements:

    Firstly, officials and experts of Greater San Antonio are forecasting a longer and chillier temperatures in the coming winter in U.S. South.

    Secondly, natural gas prices will continue to rise in fall through to winter.

    Thirdly, many CPS Energy customers rely on natural gas to heat their homes, and gas use will contribute significantly to their overall winter energy bills.

    In light of these projections, CPS Energy estimates the average monthly residential gas and electric bill for November through February at 135.50 dollars per month, 14.57 dollars, or 9 percent, more than last year's average bill of 120.93 dollars, said the news release.

    CPS Energy serves approximately 700,000 electric customers and more than 320,000 natural gas customers in and around San Antonio, the seventh-largest city in the United States.

    It estimates gas use for the average residential customer will be 50 CCF (hundred cubic feet) per month compared to last year's average of 43 CCF, and average electric use will be 953 kilowatt-hours (KWH) per month against 916 KWH per month last winter.

    CPS Energy also stands number one in wind-energy capacity among municipally owned utilities across the country and ranks number one in Texas in solar-generated electricity under contract.

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Japan rejects US firm's beef

October 12, 2009
JAPAN suspended beef shipments from an American meat packer on Saturday over its failure to remove cattle parts banned under a bilateral agreement, as Japanese officials raised concerns about American safeguards against mad cow disease.
Japanese quarantine inspectors found bovine spinal columns in one of 732 boxes shipped from Tyson Fresh Meats Inc, which arrived in Japan in late September, the Ministry of Agriculture, Forestry and Fisheries said. The box contained 16 kilograms of chilled short loin with spinal bones, which were not released commercially, said ministry official Goshi Nakata.
The suspension only affects Tyson's factory in Lexington, Nebraska, one of 46 meat-packing plants approved to export beef to Japan.
It was the second suspension for the Lexington factory, Nakata said. Japan slapped a four-month ban on beef shipments from the same plant in February 2007 after finding two boxes of beef lacking verifications to show they came from cattle that met Japan's safety standards.
"It's extremely regrettable," said Agriculture Minister Hirotaka Akamatsu, who has just returned from meetings in Washington with United States trade and farm officials. "We need to closely examine if it was just a careless mistake or there is a systematic problem."
Japan's new ruling Democratic Party has proposed a tough response to any violation to a bilateral safety agreement, including a blanket ban on US beef shipments.
The Japanese ministry has asked the US Department of Agriculture to investigate how the box containing the banned parts ended up in Japan.
Japan will await results of a US investigation to determine the penalty for the Tyson factory, the agriculture ministry said.
Gary Mickelson, a spokesman for Tyson, called the delivery of that box a mix-up.
The problem surfaced just one day after US Trade Representative Ron Kirk urged Akamatsu to lower Japan's strict safety standards in line with international standards.
Washington has repeatedly criticized Japan for its tough import restrictions, which authorities say have no scientific basis.
Under the trade agreement, US exporters must remove spinal columns, brain tissue and other parts considered linked to mad cow disease.

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US economy grew 3.2% in Q3 - survey

October 12, 2009
THE United States economy likely grew at its strongest rate in two years during the third quarter, rebounding from a steep downturn that began in December 2007, according to a survey of top economists released on last Saturday.
Private economists polled on October 5-6 for the Blue Chip Economic Indicators October survey estimated gross domestic product grew at an annualized rate of 3.2 percent in the quarter, up 0.2 percentage points from what they estimated a month earlier.
GDP shrank in the second quarter at a 0.7 percent annualized rate.
Third-quarter growth was fueled by a rebound in personal consumption expenditures and the first increase in residential investment since the final quarter of 2005, the Blue Chip survey said.
The projected third-quarter growth would be the strongest since a 3.6 percent annualized rate of GDP increase in the third quarter of 2007, according to Commerce Department figures.
A forecast for a 2.4 percent growth rate in the fourth quarter was unchanged from last month mostly due to economists' belief that the "cash for clunkers" incentive program, which expired in August, pulled demand for vehicles forward into the third quarter, the survey showed.

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U.S. trade deficit shrinks to $30.7 bln in August

October 11, 2009
The U.S. trade deficit decreased3.6 percent to 30.7 billion dollars in August, the first decline in four months, the Commerce Department reported last Friday.

The deficit was much better than the 33.6 billion dollar gap that economists had been expecting.

For August, exports of goods and services climbed 0.2 percent to 128.2 billion dollars, led by a 496 million dollar gain in sales of cars and parts. Exports were at their highest level since reaching 132.9 billion dollars in December.

Meanwhile, imports in August dropped 0.6 percent to 158.9 billion dollars mainly due to a 5.7 decrease in petroleum imports.

For all of this year, economists expect the trade deficit to shrink significantly as the recession depresses demand for imported products.

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Geithner backs re-evaluation of G-7 function

October 11, 2009

U.S. Treasury Secretary Timothy Geithner suggested that the Group of Seven forum should re-examine its role in global financial affairs to stay relevant. Geithner expressed his views in a recent interview.

Geithner appeared critical of the way the G-7 works, saying that it should be more focused on "substance" rather than "communique."

His assessment comes at a time when the Group of 20, which includes new economic powers China and India, is taking the lead from the G-7 in taking steps to reduce the fallout from the global economic crisis that hit last year.

Geithner's evaluation could spur a transformation of G-7 meetings of finance ministers and central bank governors into more informal discussion groups, returning to the original identity of the G-7 back in the 1970s.

Geithner was interviewed Oct. 4 following the G-7 meeting in Istanbul. During the closed-door session, Geithner expressed his concern to colleagues that G-7 meetings are too focused on preparing a final communique, rather than promoting candid discussion among nations, according to officials involved in the discussion.

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Faster recovery in oil demand

October 10, 2009
WORLD oil demand will recover at a faster pace than previously expected next year on a more optimistic economic outlook, the International Energy Agency said yesterday.

In a monthly report released yesterday, the agency, which advises 28 industrialized economies, raised its global oil demand forecast for 2010 to 86.05 million barrels per day, up 350,000 bpd from its previous projection, reflecting more optimistic economic projections from the International Monetary Fund and stronger data for the Americas and Asia.

"Demand is nudging higher," David Fyfe, head of the IEA's Oil Industry and Markets Division, told Reuters.

"On the assumption that we are not in a double-dip situation economically speaking, we would still expect a pick-up in demand next year."

Oil stocks in the Organization of Economic Cooperation and Development countries fell to the equivalent of 60.7 days of forward demand cover at the end of August, down from 61.4 days at the end of July, it said.

The Organization of Petroleum Exporting Countries pumped more oil in September than in August -- complying with promised output curbs down to 62 percent from 66 percent, the IEA said.

OPEC decided to leave its official output target unchanged at a meeting in September, but lower supply from the group could still tighten the market, the IEA said.

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Oil prices nearly flat as dollar strengthens

October 10, 2009
OIL prices were esentially flat to end the week after Federal Reserve Chairman Ben Bernanke said this week that interest rates will have to be raised when the US economy recovers in order to avoid inflation.

It has been the weak dollar that has attracted billions in investments in energy markets this year because oil is priced in the US dollar, essentially making crude cheaper globally.

The dollar bounced back yesterday following Bernanke's comments, and crude prices rose only 8 cents after they had rallied strongly Thursday wheat he US currency hit a 14-month low against the euro.

Benchmark crude for November delivery settled at US$71.77 on the New York Mercantile Exchange.

The Paris-based International Energy Agency raised its expectations for oil demand in 2010, but not by much. The IEA said demand will increase by 1.7 percent, largely from rebounding economies in the Americas and in Asia.

Major corporations and consumers have pared back on energy use as they ride out the recession. Americans, the biggest energy consumers in the world, have cut way back on driving for the past year.

Yet it has been the falling dollar that has driven oil prices higher for months.

Bernanke said Thursday at a fed conference that interest rates will remain near a record low for an extended period.

"At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road," Bernanke said.

Oil has traded in a narrow range this week and prices have moved between US$60 and US$75 since spring as demand for crude remains tepid even with signs that the economy has moved out of recession.

For the moment, oil markets have reached an equilibrium that has both producers and consumers happy, said Jim Ritterbusch of Ritterbusch and Associates.

Producers say they need at least US$70 per barrel to continue exploring for more oil. With US prices at the pump hovering around US$2.50 per gallon, few Americans are complaining. Natural gas prices are also very low, meaning an easy winter for most homeowners.

In other Nymex trading, heating oil rose by less than a penny to US$1.8528 and gasoline fell by 1.117 to settle at US$1.768 a gallon. Natural gas for November delivery lost 19.3 cents to settle at US$4.77 per 1,000 cubic feet.

In London, Brent crude rose 23 cents to settle at US$70 per barrel on the ICE Futures exchange.

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Bankruptcy judge approves Sun-Times Media sale to Tyree group

A U.S. bankruptcy judge on last Thursday approved the sale of Sun-Times Media Group to a group of Chicago businessmen led by James Tyree.

    According to sources of Sun-Times Media Group, the sale is expected to close by the end of October.

    Tyree's group, STMG Holdings LLC, offered about 25 million U.S. dollars, 5 million dollars in cash and about 20 million dollars in liabilities, to purchase the publisher of the Chicago Sun-Times and its 50-plus sister papers.

    The bid came with a request for steep pay cuts and other concessions from 16 unions, 14 of which have approved the contract changes.

    The closing remains contingent upon approvals by the two other bargaining units, which are expected to be reached in the coming days, the company said.

    "We're very pleased and very excited with this result," said Sun-Times Media Group interim CEO Jeremy Halbreich. "It could not have happened without the dedication and hard work of our employees."

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World Bank report calls for urgent deal on climate change

October 4, 2009
The issue of climate change must be urgently addressed as it threatens economic growth of all countries, the World Bank said Sunday in its World Development Report 2010.

    Developing countries would be the most vulnerable to the climate change as they would bear some 75 to 80 percent of the costs of damages caused by the changing climate, the report said.

    "Even 2 degree centigrade warming above preindustrial temperatures -- the minimum the world is likely to experience -- could result in permanent reductions in GDP of 4 to 5 percent for Africa and South Asia," the report said.

    Most developing countries lack sufficient financial and technical capacities to manage increasing climate risk, and they also depend more directly on climate-sensitive natural resources for income and well-being, it said.

    The report concluded that an equitable and effective global climate deal is needed, which would recognize the varying needs and constraints of developing countries and assist them with the finance and technology to meet the increased challenges to development.

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IMF: European economic recovery to be slow, fragile

October 4, 2009
The current European economic recession is showing signs of bottoming out, but the recovery is likely to be slow and fragile, the International Monetary Fund (IMF) said Saturday in its October 2009 Regional Economic Outlook (REO) for Europe.

    Helped by rebounding confidence and a tentative pick up in global trade, the contraction in Europe appears to have ended at mid-2009 and is expected to give way to a moderate recovery in 2010 and more solid growth returning only afterwards, the report said.

    "The long recession shows signs of finally bottoming out, but the recovery will likely be slow and fragile because the pickup in demand from Asia can hardly substitute for the pre-crisis appetite for imports of U.S. consumers," said Marek Belka, director of the IMF' s European Department.

    "Europe cannot count on exports alone to drive the recovery," Belka added.

    The regional report said financial sector difficulties, weak investment, and long spells of unemployment are likely to hold back potential growth in Europe over the next few years, but the magnitude of their impact is uncertain.

    In the latest World Economic Outlook, the economic growth in most European countries is expected to walk out of the negative territory next year, and the European Union would achieve a 0.5 percent growth from minus 4.2 percent in 2009.

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U.S. economy stabilizing as crisis subsides: IMF

October 1, 2009
The U.S. economy is showing increasing signs of stabilization, the International Monetary Fund(IMF) said here Thursday.

    According to IMF's latest World Economic Outlook (WEO) report, the U.S. economy is projected to contract by 2.7 percent in 2009 and will see a sluggish 1.5 percent growth in 2010.

    "Output declined substantially during the first half of 2009 and the unemployment rate rose to a level not seen since the early1980s," IMF said in the semi-annual report, adding that growth is expected to turn positive in the second half of 2009.

    "Unprecedented monetary, financial and fiscal policy interventions are helping stabilize consumer spending and housing and financial markets, which points to renewed moderate growth in the second half of 2009," the report said.

    However, the report at the same time admitted that although financial conditions have improved significantly in recent months, markets remain stressed, which will weigh on investment and consumption.

    Combined with the impact of rising unemployment, the temporary nature of the fiscal stimulus and subdued growth in trading partner economies, growth will remain sluggish, reaching 1.5 percent for 2010 as a whole, added the report.

    The IMF also stressed that the strength and sustainability of U.S. recovery will depend on meeting three key policy challenges, namely continued stabilization of the economy and financial system, an appropriately timed and orderly unwinding of public support for the financial system and development of a strategy to shrink the Federal Reserve's balance sheet, addressing the long-term imbalances in public, household and financial balance sheets.

    The WEO presents the IMF's analysis and projections of economic developments at the global level, in major country groups and in many individual countries. It focuses on major economic policy issues as well as on the analysis of economic developments and prospects.

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IMF highlights challenges ahead for global economy: Australian treasurer

October 1, 2009
Australian Treasurer Wayne Swan said on Thursday the International Monetary Fund's (IMF) latest economics forecasts highlighted the "considerable challenges" facing the global economy.

    In its latest World Economic Outlook, the IMF lifted its 2009 forecast for Australian gross domestic product (GDP) to growth of 0.7 percent, from its previous estimate for a contraction of 0.5 percent.

    Australia is the only advanced economy expected to grow this year.

    In 2010, the IMF sees local economy expanding by 2 percent, compared to its previous estimate for growth of 1.3 percent.

    "Our economy has outperformed all advanced economies during the global recession, with stronger growth and lower debt and deficits than the major advanced economies," Swan said in a statement.

    The global institution also raised its projections for world growth, but warned risks to the outlook remained on the downside.

    "As the global policy support is gradually phased down over time and the inventory rebuilding progressively loses its momentum, private demand will need to gain momentum to sustain the recovery," he added.

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Testing time for rally in US stocks

October 1, 2009
The rally in US stocks, which stumbled in recent days on worries about the economic recovery and continued government stimulus, will be tested this week by crucial data on growth and jobs.

Investors are set to pore over September non-farm payrolls, the final reading of second-quarter gross domestic product and several other big economic reports.

The data comes amid signs the rally in stocks, which has lifted the Standard & Poor's 500 index some 54 percent since early March, could be fizzling out.

The market suffered three straight days of losses last week and the S&P put in its biggest weekly drop since early July, with data on Friday showing new orders for long-lasting US manufactured goods falling by their biggest margin in seven months.

This week the focus likely will be on Friday's monthly US government jobs data. The 9.7 percent US unemployment rate is a major concern for investors because of the impact on the economy and, in particular, consumer spending.

"It's a big deal every time, because it's really one of the most sensitive indicators," said Cummins Catherwood, managing director at Boenning and Scattergood in West Conshohocken, Pennsylvania.

"This is right where the rubber meets the road: Do I have a job or don't I?" he said.

End-of-quarter positioning also could provide some lift to stocks, as fund managers move money out of bonds and into equities, analysts said.

Investors also will watch Federal Reserve Chairman Ben Bernanke, who is scheduled to speak on financial regulatory reform before a House of Representatives panel on Thursday.

For last week, the S&P 500 fell 2.2 percent, the Dow Jones industrial average dropped 1.6 percent and the NASDAQ declined 2 percent.

On Thursday, stocks slid as world central banks said they would scale back infusions of US dollars into their banking systems. That came a day after stocks sold off following the Fed's decision to slow purchases of mortgage debt.

But the S&P 500 is still on track for gains of about 14 percent this quarter and that would follow gains of 15 percent in the previous quarter.

"People are still underweight in equities and, after a big surge, they're going to try to be playing catch-up," said Fred Dickson, market strategist at DA Davidson & Co in Lake Oswego, Oregon.

For Friday's report, a poll of economists by Reuters showed a loss of 180,000 non-farm jobs, which would be an improvement from a decline of 216,000 jobs in August. But the unemployment rate is seen rising to 9.8 percent.

Dickson said an increase in overtime hours should also be watched as that could suggest a positive trend.

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