The recessionary data released yesterday from the United States indeed led stocks to decline despite the rise in stocks earlier in the session as investors were optimistic after news emerged that President Obama will ask the U.S. Congress for an amount up to $750 billion for the new budget, in which an amount will be assigned to help financial institutions withstand the ongoing recession and the worst financial crisis since the Great Depression.
Meanwhile Europe continues to feel the pressure from the ongoing financial crisis as the Euro Zone continues to fall deeper in recession, the Euro Zone will release today their consumer price index for the month of January, where expectations signal that CPI declined 0.8 percent after falling 0.1% the prior month.
CPI is expected to have risen by an annualized 1.1 percent down from the prior estimate of 1.6 percent as energy prices fell and as the ongoing recession continued to suppress prices, while core CPI is expected to have remained steady at an annualized rate of 1.8 percent.
The ongoing recession is still expected to deepen further over the upcoming few months at least as falling global demand, lower domestic spending, rising unemployment and tightened credit conditions continue to hurt the 16-nation economic growth.
The unemployment rate is expected to have surged in January to 8.1 percent up from the prior estimate of 8.0 percent, the unemployment rate has been rising steadily over the last few months, and that should continue to weigh down on economic growth in the euro area, especially as the area's largest economy continues to suffer the aftermath of the ongoing financial crisis.
Meanwhile other major economies within the Euro zone continue to feel the misery of the financial crisis, as France, Italy, and Spain all continue to fall deeper and deeper into the depth of recession, which means that the area's largest four economies including Germany will continue to sink the Euro Zone economy to the ground.
Moving on to the United States, where the unemployment benefits that were released yesterday signaled that the labor market continues to weaken, as initial jobless claims rose the most since 1982, and accordingly the unemployment rate is expected to continue rising over the upcoming months and might indeed shoot well above 8 percent.
On the other hand the ongoing slump in the housing sector also continues to weigh down on economic growth in the world's largest economy, as the worst slump since the Great Depression remains one of the major drags to economic growth, where rising foreclosures, falling home values and further tightening in credit conditions are all leading consumers to retrench their spending and accordingly the economy continues to shrink!
The U.S. Commerce Department will release today the Preliminary estimate for Gross Domestic Product for the fourth quarter of last year, analysts expect GDP to have contracted during the fourth quarter by an annualized 5.4 percent after a reported 3.8 percent contraction in the GDP Advanced estimate for the same quarter.
The U.S. economy is still expected to weaken further over the first half of this year according to the latest estimates released from the Federal Reserve Bank, which expects that the economy might start to recover during the second half of this year given that stability can return to both financial markets and financial institutions.
Core personal consumption expenditures the Fed's favorite indicator for inflation is expected to have risen during the last three months of 2008 by 0.6 percent inline with the prior estimate, however personal consumption is expected to have dropped by 3.7 percent after an estimated drop by 3.5 percent.
Also today the Chicago purchasing managers index for the month of February is expected to signal further deterioration, as it's expected to fall to 33.0 from the prior estimate of 33.3, while the university of Michigan consumer confidence index is also expected to retreat further in February to 56.0 from the Preliminary estimate of 56.2.
Declining spending remains the major drag on economic growth especially since it represents almost 2/3 of total GDP in the United States, where both consumers and businesses are suffering the misery due to the ongoing freeze in credit markets, which sent the financial system into a new financial ice age ever since Black September, which saw the failure of Fannie Mae, Freddie Mac, AIG, and Lehman Brothers!!!
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