Finance Matters

Posts Tagged ‘growth’

The Commerce Department has revealed the world’s largest economy grew by 1.3% on an annual basis in the April to June period – higher than an initial estimate of 1%.

The figure was also slightly higher than analysts’ expectations of 1.2% and follows a 0.4% growth rate in the first quarter of the year.

The upward revision was attributed to higher exports and strong spending and is the final figure for the second quarter.

For the first six months of the year, the economy expanded by 0.9% – this represented the lowest rate of growth in over two years.

Third quarter growth figures will be available next month and analysts are predicting an annualised growth rate of around 2%.

The US economy is struggling on the back of high unemployment and a depressed housing market.

Earlier this week, Federal Reserve Chairman, Ben Bernanke, warned that the US economy is facing a national crisis due to its high unemployment rate, which currently stands at 9.1%.

Earlier this month, the US Labor Department revealed the economy added no new jobs last month, which was a surprise after markets had expected 70,000 new jobs.

This represented the first time since 1945 that there has been a zero payrolls figure after 17,000 jobs were added in the private sector last month but these were cancelled out by 17,000 jobs lost in the public sector.

Mr Bernanke is urging the Government to assist the long-term unemployment and suggested that Congress should take more action to address the issue.

Earlier this month, President Barack Obama addressed the nation about a plan for job creation. He unveiled a $450 billion (£282 billion) package aimed at boosting the economy and reducing the federal deficit.

The bill includes tax cuts to workers and small businesses to boost job creation.

Mr Obama has previously said job creation is a top priority; continued high unemployment could threaten his prospects for re-election next year.

In the meantime, Mr Bernanke urged policymakers to introduce “housing policies” to boost the property market, which is currently struggling and many have suggested it is holding back the recovery.

Demand for housing in the US remains weak, despite mortgage rates hovering at record lows and falling house prices – the latter due to millions of home repossessions.

The Munich-based Ifo think tank has today revealed confidence among German firms fell for the third consecutive month in September.

The closely-watched Business Climate Index dipped to 107.5 this month from August’s reading of 108.7 – this represented the lowest level since June 2010.

However, the fall was not as bad as the 106.5 economists had expected.

The fall was attributed to the ongoing debt crisis in the euro zone which could impact on the wider economy.

Ifo surveys around 7,000 German manufacturing, construction, wholesale and retail companies each month.

Commenting on the data, Ifo President Hans-Werner Sinn said: “The business expectations for the coming half year once more deteriorated markedly.”

However, one analyst said the figures suggest that Germany will not fall into a recession.

Meanwhile, a sub-index on expectations also edged lower to 117.9 from 118.1 in August – but again this was less than forecast.

Germany, which has been regarded as Europe’s powerhouse, has been driving the recovery of the euro zone but a recent slew of weak data has forced many to re-evaluate its assessment of the economy.

Statistics office Destatis recently revealed German exports fell more than expected in July.

According to Destatis, exports fell by 1.8% in July on a monthly basis compared with a 1.2% drop in June. Economists had forecast a 0.1% fall for the month.

The sharp fall in exports will be of grave concern for the country’s Government. Export demand helped to bring Germany out of recession in the second quarter of 2009 – much sooner than many of its counterparts throughout the world.

Last week, the European Commission slashed its growth forecasts for the euro zone and warned that the 17-member nation may come “close to standstill at year-end.”

Furthermore, the Washington-based International Monetary Fund recently lowered its growth forecasts for both Germany and the euro zone this year and next.

It expects Germany’s economy to grow 2.7% this year and 1.3% in 2012.

Figures today have revealed Ireland’s economy continued to see growth in the April to June period.

According to the Central Statistics Office, the economy grew by a better than expected 1.6% in the three-month period and this follows a revised 1.9% growth rate in the first quarter.

This represents the first time since 2006 that Ireland’s economy has grown for two consecutive quarters.

Meanwhile, today’s figures shocked analysts who had expected growth of just 0.25%.

Furthermore, the figures surpassed those from Europe’s powerhouses, Germany and France.

The latest figures will be regarded as encouraging for the former “Celtic Tiger” economy which suffered a prolonged recession and was one of the last euro zone nations to emerge from recession.

The economy slipped into recession during the first half of 2008 – becoming the first nation of the euro zone to do so.

The country’s economic turmoil resulted in a bailout package last year worth €85 billion.

However, analysts say the figures suggest the economy is in the early stages of recovering from its property and debt crisis.

Since the credit crunch four years ago, the country’s public finances have been battered by having to prop up the banking sector, as well as the collapse in its property market.

Ireland experienced a property boom in the late 1990s, with multinationals arriving to take advantage of one of the lowest corporate tax rates in the euro zone.

However, the country’s banking system came close to meltdown after the slump in the country’s property market resulted in a fall in the value of investments linked to it.

Several of the country’s banks have been nationalised, while property prices have fallen by more than 50%, in some cases.

Finally, like fellow bailed-out nations Greece and Portugal, Ireland has been forced to introduce tough austerity measures in order to reduce its spiralling budget deficit.

The Office for National Statistics (ONS) has today revealed UK public sector net borrowing rose last month.

According to the ONS, public sector net borrowing came in at a higher than expected £15.9 billion in August – a rise of £1.9 billion from a year ago and represented the highest for the month of August since records began in 1993.

Since the start of the financial year in April, public sector net borrowing totals £52 billion – just 7% less than a year earlier.

Overall, public sector net debt stands at 61.4% of UK GDP (total economic output) – up from 55.3% this time last year.

The Government’s independent Office for Budget Responsibility (OBR) is expecting public sector net borrowing to come in at £122 billion for the current tax year – lower than the £143 billion borrowed in the previous tax year.

However, today’s figures will put further pressure on Chancellor George Osborne’s tough austerity measures but the Treasury maintains that spending plans are on track.

A spokesperson for the Treasury said: “These are challenging times, but despite economic growth being lower than the OBR’s forecast earlier this year, tax receipts have continued to grow and spending so far this year has grown at the rate the OBR forecast in the Budget.

“These figures also include a welcome and substantial downward revision to borrowing so far this year and to overall borrowing last year.”

The OBR estimates that the UK economy will grow by an optimistic 1.7% this year – however, this estimate was made in March and is widely considered out of date.

Yesterday, the International Monetary Fund (IMF) said the global economy has entered a “dangerous new phase” and slashed its growth forecast for the UK.

In its World Economic Outlook bi-annual report, the IMF said the UK economy will grow by 1.1% in 2011 compared with its last forecast of 1.7% in April.

Minutes of the Bank of England’s September 7-8 meeting have been released today and have revealed all nine members of the Monetary Policy Committee (MPC) voted to keep interest rates at the historic low of 0.5%.

This was the second consecutive month that the Committee voted unanimously to keep rates at the record low after Martin Weale and Spencer Dale have been lone voices on the Committee by voting to hike rates to combat stubbornly high inflation.

Inflation rose to an annual rate of 4.5% last month from July’s reading of 4.4% and was attributed to utility companies hiking their prices.

Inflation continues to be more than double its 2% target and has been above this level since December 2009 but should return to target by 2013, according to the central bank.

In the meantime, Adam Posen, again, called for an injection of £50 billion via the quantitative easing (QE) scheme to boost the economy.

However, the minutes suggest that the majority of the MPC are considering a fresh round of QE, as soon as next month.

The minutes said: “For most members, the decision of whether to embark on further monetary easing at this meeting was finely balanced since the weakness and stresses of the past month had significantly strengthened the case for an immediate resumption of asset purchases.

“For some members, a continuation of the conditions seen over the past month would probably be sufficient to justify an expansion of the asset purchase programme at a subsequent meeting,” it added.

There have been fears that the UK could enter a double-dip recession after a recent series of bad news from the economy and the ongoing debt crisis in the euro zone.

Yesterday, the International Monetary Fund (IMF) said the global economy has entered a “dangerous new phase” and slashed its growth forecast for the UK.

In its World Economic Outlook bi-annual report, the IMF said the UK economy will grow by 1.1% in 2011 compared with its last forecast of 1.7% in April.

Many other leading organisations have downgraded their growth prospects for the UK economy and this will fuel speculation that the Bank will inject further funds into the economy to prevent it slipping into recession.