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."
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Distributed by MCT Information Services
