World faces slowdown in 2009
NEW YORK (Reuters) - Another day, another batch of warning signs indicating the world will enter 2009 in the throes of a sharp economic slowdown, with governments scrambling to find ways to boost lending and spur growth.
Oil and gold prices dipped on Tuesday, pressured by the gloomy global economic outlook which outweighed tensions in the Middle East due to Israel's assault on the Gaza Strip.
Tuesday brought more dismal economic news in the United States, with single-family home prices down 18 percent in October from a year earlier and consumer confidence plunging to a record low due to severe job cuts.
U.S. retailers are also suffering. The International Council of Shopping Centers said the U.S. holiday shopping season was the worst since at least 1970 due to the recession, heavy discounting and harsh winter weather.
"Really at this point we are not going to be seeing anything fundamentally positive from the U.S. for the time being," said Michael Woolfolk, senior currency strategist at the Bank of New York Mellon.
But U.S. stock indexes ended more than two percent higher, cheered by news that the government expanded its bailout of the auto industry, pumping $5 billion into General Motors' auto and mortgage financing arm GMAC. [ID:nn30345938]
GMAC and its parent GM, the biggest U.S. automaker, announced programs to make it easier for car and truck buyers to get financing, a day after the U.S. government funding was announced.
The U.S. government agreed on December 19 to rescue GM and Chrysler LLC with up to $17.4 billion in loans to help stave off a collapse that would have cost hundreds of thousands of jobs in an economy already deep in recession.
The pressure on companies was highlighted by data from Reuters Loan Pricing Corp showing U.S. loan issuance in 2008 tumbled 55 percent to the lowest since 1994.
2009 GROWTH SEEN WEAK
New data on Tuesday also showed lending to euro zone companies and households stagnated in November to the weakest result on record, bolstering expectations the European Central Bank will keep cutting rates to ward off a deeper recession.
"Problems in financial markets are affecting the real economy across the world and global growth is expected to be very weak in 2009," ECB Governing Council member John Hurley said in the Irish Times.
He did not give a global figure but the ECB has already cut its forecast for the euro zone, predicting a 1.0 percent fall in gross domestic product next year.
Retail spending in the euro zone fell for the seventh straight month in December, French unemployment jumped sharply, and the head of the German exporters' association, BGA, forecast exports will fall next year for the first time since 1993.
European stocks were on track for a 46 percent loss in the full year when trading ends on Wednesday, while on Wall Street, the benchmark S&P 500 is down about 40 percent, making 2008 one of its worst years ever. Continued...
