News Column

Fed Admits US Downturn Is Not Over

Jan 31, 2013

Hugo Duncan

Federal Reserve

The Federal Reserve last night sounded the alarm over the United States economy as the outlook for the global recovery darkened.

America's central bank said growth has "paused in recent months" just hours after official figures showed output fell in the final quarter of the year.

The Fed indicated that the downturn was likely to be temporary but said that unemployment "remains elevated."

It pledged to continue pumping pounds sterling 54bn of emergency funds into the US economy every month in a bid to boost growth and jobs.

The update came after disappointing figures in the US and Europe dented hopes that economies in the Western world are on the mend. Output in the US fell at an annual rate of 0.1pc in the final quarter of 2012 -- the first decline since the last recession ended in 2009.

The slump -- caused in part by the row over the fiscal cliff, huge falls in defence spending, and the devastation caused by Superstorm Sandy -- stunned analysts who were expecting growth of 1.1pc.

Separate figures in Europe showed the Spanish economy declined 0.7pc in the final three months of 2012 the sixth quarterly decline in a row -- while Belgian GDP fell 0.1pc. It confirmed that the Western world endured a miserable end to 2012.

Official figures last week showed UK GDP contracted 0.3pc in the fourth quarter -- leaving the country on the brink of a triple-dip recession.

The flurry of bad news -- and in particular the downturn in the US -- sent stock markets into reverse. The FTSE 100 index fell 16.08 points in London to 6323.11 having added 7.5pc since New Year.

"Financial markets and many businesses have become more optimistic about the global economic outlook," said Andrew Kenningham, senior global economist at Capital Economics.

But he added: "Low consumer confidence and sluggish household spending may keep this recovery unusually weak for some time to come, despite the improvements in sentiment elsewhere."


Distributed by MCT Information Services

Source: (c) 2013 Daily Mail (London)

Story Tools Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters