The U.S Commerce Department reported Friday that the economy contracted by 1%, much smaller pace in the second quarter of the year, suggesting that the trough of the recession has been reached.
The rate of contraction for the first quarter was revised down to a 6.4% drop compared with the prior estimate of a 5.5% decline, this is the first time since the Great Depression that the economy contracted for four consecutive quarters.
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Showing posts with label Recession. Show all posts
Showing posts with label Recession. Show all posts
Green shoots or Yellow Weeds ?
The US unemployment report released on Thursday last week has raised doubts on the hopes of a quick economic recovery in the developed world, US Job market continues to be extremely weak with Job losses at over 460,000 in June. The Unemployment rate has hit 9.5%, US government expects it to reach 10% in few months. Although Unemployment is considered to be a lagging Indicator it is hard to see how a recovery even if it comes will be sustainable with reduced consumer spending as unemployment will have a significant effect on consumer confidence & spending. The stress tests conducted earlier to check the health of lending Institutions and Banks had factored in unemployment rate of 10.3% as worst case scenario which now seems surpass able. Mean while the Unemployment rate in Europe zone has hit a 10 year high of 9.5% as well, ECB expects economic recovery only in mid 2010.
Not everyone agree to the “Green shoots” argument in the first place, Billionaire Investor Warren Buffet earlier in an interview said he is yet to see any green shoots and expects economic activity to be weak for some time to come. Noted Economist and Nobel Laureate Paul Krugman says that Obama Administration needs to work on getting the stimulus plan bigger to avoid a repeat of 1930’s type of scenario, He also adds that risk of deflation still looms. US Vice President Joe Biden admitted that they misread the state of the Economy when putting together the stimulus package.
The second half recovery as expected by optimists now seems to be an uncertain thing, some Economists even say a recovery when it comes will be very weak that with high unemployment rate it would still feel like a recession.
In a statement released earlier Indian finance ministry stated that there are signs of turnaround in Indian economy although exports continued to decline, it was also noted that the extent of recovery will depend on the revival of US economy. It is hard to get back to 8-9% growth with a weak export market. The Budget failed to impress the stock markets with indices falling over 5%. The stock markets and commodities were rallying on the hopes of an Economic recovery during the second half of the year, now with uncertainty over the turnaround, and a fundamental lagging behind it is likely that markets will be under pressure till there is a clear picture in the macroeconomic front.
Prakash , sharemarketidea@yahoo.com
Not everyone agree to the “Green shoots” argument in the first place, Billionaire Investor Warren Buffet earlier in an interview said he is yet to see any green shoots and expects economic activity to be weak for some time to come. Noted Economist and Nobel Laureate Paul Krugman says that Obama Administration needs to work on getting the stimulus plan bigger to avoid a repeat of 1930’s type of scenario, He also adds that risk of deflation still looms. US Vice President Joe Biden admitted that they misread the state of the Economy when putting together the stimulus package.
The second half recovery as expected by optimists now seems to be an uncertain thing, some Economists even say a recovery when it comes will be very weak that with high unemployment rate it would still feel like a recession.
In a statement released earlier Indian finance ministry stated that there are signs of turnaround in Indian economy although exports continued to decline, it was also noted that the extent of recovery will depend on the revival of US economy. It is hard to get back to 8-9% growth with a weak export market. The Budget failed to impress the stock markets with indices falling over 5%. The stock markets and commodities were rallying on the hopes of an Economic recovery during the second half of the year, now with uncertainty over the turnaround, and a fundamental lagging behind it is likely that markets will be under pressure till there is a clear picture in the macroeconomic front.
Prakash , sharemarketidea@yahoo.com
US Unemployment Rate at 9.5%
Employers cut 467,000 jobs in June, far more than expected, while the unemployment rate rose to 9.5 percent, the government said on Thursday in a report that showed a labor market continuing to struggle with a deep recession.
The June job losses were more than 100,000 greater than the 363,000 consensus of Wall Street economists polled by Reuters and broke a four-month trend of moderation in job losses.
First-time claims for state unemployment benefits declined in the latest week, almost completely reversing the gain from the prior week, the Labor Department reported Thursday. The number of initial claims in the week ending June 27 fell 16,000 to 614,000, quite close to the consensus of Wall Street economists. Claims in the previous week were revised to an increase of 18,000 to 630,000 compared with the initial estimate of a increase of 15,000 to 627,000. This increase had surprised analysts. The four-week average of initial claims fell 2,750 to 615,250
Jim Rogers : Don't Short the Markets
"I’m afraid they're printing so much money that stocks could go to 20,000 or 30,000," Rogers said. "Of course it would be in worthless money, but it could happen and you could lose a lot of money being short."
Rogers feels that a currency crisis looms in near future , He called the US dollar a "terribly flawed currency," adding that it could be the starting point for the next currency crisis.
He is bullish on commodities and says investors should turn toward commodities. This sector will lead the recovery if the global economy improves, and if it doesn't, they'll still be the best place because of inflation.
U.S. Job Losses Slow Down, Unemployment rate hits 9.4%
Bloomberg : The U.S. lost fewer jobs than forecast in May, reinforcing signs that the deepest recession in half a century is starting to abate. 
Payrolls fell by 345,000, the least in eight months, after a revised 504,000 loss in April, the Labor Department said today in Washington. The jobless rate increased to 9.4 percent, the highest since 1983, in part as more people joined the labor force to look for work.
Treasury 10-year note yields rose to the highest since November as a report showed U.S. employers cut the least jobs in eight months during May, bolstering expectations that the worst of the recession may be over.
