US nears stimulus vote as woes deepen

February 13, 2009
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, WASHINGTON, Feb 13 – US lawmakers girded for a key vote on massive economic stimulus amid news of rising jobless claims by American workers, more countries entering recession and deeper troubles for corporate profits.

Facing US President Barack Obama\’s self-imposed February 16 deadline, the Senate and House of Representatives set votes on Friday on an unprecedented 789-billion-dollar plan to arrest an economic tailspin.

Lawmakers and aides said the package, winnowed down from the Senate\’s 838-billion-dollar bill and the House\’s 819-billion-dollar version, broke down into 35 percent tax cuts and the rest in new government spending.

Fresh data showed US jobless claims remained at a high level in the past week, with 620,000 new filings, in a sign of severe stress on the economy and labor market.

The Labor Department said the number of initial claims for unemployment benefits in the week to February 7 fell slightly from a revised 631,000 in the prior week that was the highest level since October 1982.

A separate report showed US retail sales, a key engine of the economy, staged a surprise 1.0 percent rebound in January after falling for six months in a row.

The January rebound signaled a welcome glimmer of positive news on the US economy, in particular in the current context of falling prices.

"The headline relief today is welcome but it is unlikely to last," said Ian Shepherdson, chief US economist at High Frequency Economics.

Shepherdson said it was "impossible to square" the data with other numbers on auto and chain store sales, "so we expect either downward revisions or offsetting sharp declines in February."

"The underlying trend in core is still clearly downwards," he added.

In Europe, official data showed Spain, Europe\’s fifth-biggest economy, entered recession in the fourth quarter for the first time in 15 years and the French government acknowedged a recession is inevitable this year.

Spain\’s gross domestic product (GDP) contracted by 1.0 percent during the last three months of 2008 from the previous quarter and was down by 0.7 percent from the 2007 fourth quarter, national statistics institute INE said.

In France, GDP will "shrink by at least 1.0 percent in 2009," a source close to Finance Minister Christine Lagarde told AFP.

"It could be minus 1.0 or minus 1.1 or minus 1.2 percent," the source added. The ministry had previously forecast an expansion this year of between 0.2 and 0.5 percent.

Earlier Thursday statisticians at the French national statistics body INSEE, citing provisional figures, said growth contracted 1.2 percent in the fourth quarter.

The reported quarterly performance was the worst since the 1974 when the country was suffering from an economic crisis stemming from oil market disruptions.

The French gross domestic product figures are scheduled to be officially released early Friday but were revealed Thursday by INSEE statisticians who are protesting plans for their transfer from Paris to Metz in eastern France.

Meanwhile factory output in the recession-hit eurozone was reported by the European Union\’s data agency to have fallen by 2.6 percent in December and by 12 percent for 2008 as a whole, the biggest slumps since those records began in 1990.

"It seems certain that eurozone manufacturers will continue to find life very difficult over the coming months," warned Howard Archer, chief European economist at IHS Global Insight.

In further fallout from the crisis, Russian lawmakers said they would cut the defense budget by 15 percent and Ukraine\’s finance minister resigned in political infighting as a deep recession grips the former Soviet republic.

The International Monetary Fund said it remained in talks on the release of a second portion of a loan to Ukraine but that the resignation of Ukraine\’s finance minister underlines the need for "strong crisis management."

The gloomy outlook was spelled out in the latest batch of dismal corporate results from around the world, with many companies bracing for worse times ahead after reporting net losses or sharp falls in profit in 2008.

Japanese electronics giant Pioneer Corporation said it would cut 10,000 jobs and quit the television business as it prepared for record-high net losses of some 1.4 billion dollars for the current financial year to March.

French carmaker Renault, which is due to receive a controversial three-billion-euro loan from the French state on condition that it does not cut jobs in France, said its net profits had plunged 78 percent in 2008.

British aero engine maker Rolls-Royce reported a net loss of 1.34 billion pounds (1.90 billion dollars, 1.48 billion euros) in 2008, while Swedish-Swiss engineering giant ABB saw annual net profit slip 17 percent last year.

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