NEW YORK (Reuters) - Disappointing first-quarter earnings from General Electric Co GE.N and a drop in U.S. consumer confidence to its lowest in more than a quarter century in early April provided the latest signs the U.S. economy may be in a recession.
General Electric, the second-largest U.S. company by market capitalization, on Friday posted an unexpected 6 percent drop in first-quarter profit.
Profit at its financial services arm, which accounted for more than a third of GE’s total revenue in the quarter, fell about 20 percent -- the biggest shock yet to American industry from the credit crisis. Weakness in health care and industrial divisions also weighed on results.
“It’s confirmation that we’re in a recession,” Jerome Heppelmann, portfolio manager at Liberty Ridge Capital in Berwyn, Pennsylvania, said of GE’s results.
The news sent GE shares down more than 11 percent on the New York Stock Exchange, the sharpest drop in two decades, and dragged down global markets.
Meanwhile, a survey released on Friday showed U.S. consumer confidence dived deeper into recessionary territory on heightened worries over inflation and jobs.
The Reuters/University of Michigan Surveys of Consumers said its preliminary index of confidence fell to 63.2 in April from 69.5 in March, well below economists’ median expectation of a 69.0 reading.
The April result was the lowest since March 1982’s level of 62.0, when the “stagflationary” period of low growth and high inflation was still fresh in the memory of many Americans.
“It’s really bad,” said Carl Lantz, interest rate strategist at Credit Suisse in New York. “We are definitely in recession territory. It confirms what we already know now, that we are in a consumer-led recession, and it’s going to be a pretty protracted one.”
In more bad news for the economy, the Labor Department said U.S. import prices rose a more-than-expected 2.8 percent in March as petroleum prices jumped 9.1 percent.
U.S. export prices rose 1.5 percent during the month, also more than expected and the largest monthly gain on record, as prices for farm and food products continued to rise.
Stronger inflation could limit the Federal Reserve’s ability to cut interest rates during the current economic slowdown. Nonetheless, the dollar fell against the euro and the Japanese yen as investors fled the U.S. currency.
Import prices have risen 14.8 percent over the last 12 months, the largest year-to-year gain since the Labor Department began publishing the data.
Reporting by Nick Olivari; Editing by Dan Grebler
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