Хронология из DJN Market Talk

2008.11.26 02:00:14   This Is Dow Jones In New York        

2008.11.26 03:00:15   Holiday Advisory: US Celebrates Thanksgiving Thursday

 

2008.11.26 05:05:03   Australia PM: Projections For US 4Q Growth "Not Good"    

2008.11.26 05:04:46   Australia PM: Global Economic Downturn Is Accelerating      

2008.11.26 05:14:14   Australia PM: Outlook For Business Investment Deteriorated

2008.11.26 04:18:53   Nikkei Down 1.3% Midday; Thin Trading Persists

2008.11.26 03:43:12   USD/JPY Off Lows; Flow Very Thin In Asia-Trader

2008.11.26 04:20:12   Greenland Says 'Yes' To Self-Rule: Final Results

2008.11.26 04:31:19   Fed's Bigger Balance Not Problem For Bonds, USD-UBS

2008.11.26 04:52:12   Citigroup Can Handle Future Losses Without Govt Help –CEO

2008.11.26 03:02:21   CORRECT: Nikkei 225 Stock Average Now Down 0.9%    

2008.11.26 03:06:10   US Cools Support For Formal NATO Path For Georgia, Ukraine

2008.11.26 02:01:37   Nikkei 225 Stock Average Opens Down 1.1% At 8229.72

2008.11.26 02:03:26   Lead December JGB Futures Open Up At 139.50 Vs 139.04 Tue

2008.11.26 02:06:51   Nymex Crude Market Awaits Wednesday Data

 

 

 

 

 

By Nesa Subrahmaniyan

 

Nov. 26 (Bloomberg) -- Crude oil rose as much as 0.8 percent to $51.18 a barrel in New York after falling more than $3 a barrel yesterday

Crude oil for January delivery traded at $51.11 at 8:53 a.m. Singapore time on the New York Mercantile Exchange. Futures have dropped 65 percent since reaching a record $147.27 on July 11. Yesterday, the contract declined $3.73, or 6.8 percent, to settle at $50.77 a barrel.

 

To contact the reporter on this story:

Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net.

 

 

By Ron Harui and Stanley White

 

Nov. 26 (Bloomberg) -- The yen rose against the euro on speculation declines in Asian stocks prompted investors to pare holdings of higher-yielding assets funded in Japan.

The currency also gained versus the Australian dollar and the British pound on concern that the Federal Reserve’s $800 billion plan to unfreeze credit markets won’t prevent a protracted global slump. The U.S. economy, the world’s biggest, shrank in the third quarter as consumer spending plunged the most in almost three decades, according to figures released yesterday.

“The yen should remain supported,” said Osao Iizuka, head of foreign-exchange trading at Sumitomo Trust & Banking Co. in Tokyo. “There was a bounce in sentiment after the Fed’s announcement of its latest measures. This has faded because there are still a lot of problems to work out.”

The yen rose to 123.82 per euro at 11:10 a.m. in Tokyo from 124.43 late yesterday in New York. It traded at 95.10 versus the dollar from 95.22. The euro fell to $1.3017 from $1.3064. The pound declined to $1.5393 from $1.5472. The yen may rise to 94.80 per dollar today, Iizuka said.

Against the yen, Australia’s dollar fell to 61.49 from 61.82 in New York late yesterday. The pound dropped 0.6 percent to 146.52 yen.

The MSCI Asia Pacific Index of regional shares slid 0.4 percent, while the Nikkei 225 Stock Average fell 1.3 percent.

Japan’s benchmark interest rate of 0.3 percent compares with 5.25 percent in Australia and 3 percent in the U.K.

In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. The risk is that currency market moves erase those profits.

Implied volatility on one-month euro-yen options rose to 34.74 percent today from 34.25 percent yesterday, indicating greater exchange-rate fluctuation risk that may erode profit on carry trades.

‘Fed’s Balance Sheet’

The Fed will purchase as much as $600 billion in debt issued or backed by government-chartered housing-finance companies. It will also set up a program of $200 billion to support consumer and small-business loans, the Fed said in statements yesterday in Washington.

The U.S. currency may weaken should the Fed lose money on the debt and asset-backed securities it plans to buy. The dollar reached a 2 1/2-year high against an index of the currencies of six major U.S. trading partners last week as investors sought refuge from deepening credit losses.

“We may see the Fed’s balance sheet deteriorate because it’s taking on all these assets,” said Akio Shimizu, chief manager of foreign-exchange trading in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan’s largest publicly listed lender. “This is a latent risk for the dollar that could weaken it over the long term.”

OECD Cuts Forecast

The Organization for Economic Cooperation and Development cut its forecast for global growth in 2009. The economies of the organization’s 30 members will contract 0.4 percent next year, after expanding 1.4 percent this year. Gross domestic product in the U.S. shrank at a 0.5 percent annual rate from July through September, the most since the 2001 recession, according to revised figures from the Commerce Department in Washington.

The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, traded at 85.005 from 85.000 yesterday, when it fell 1.3 percent. The index rose to 88.463 on Nov. 21, the highest level since April 2006.

The euro fell, snapping a three-day winning stretch versus the dollar, after a technical chart that some traders use to predict price movements signaled its 4.2 percent gain in the past five days was excessive.

Euro’s Rise ‘Overdone’

“The euro’s surge over the last few days seems overdone, so we may see some selling of the currency,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker.

Europe’s single currency may decline to $1.2950 and 123.30 yen today, Ishikawa said.

The euro’s 14-day stochastic oscillator versus the dollar was around 91, according to data compiled by Bloomberg. A level above 80 suggests a reversal may occur.

 

To contact the reporter on this story:

Ron Harui in Singapore at rharui@bloomberg.net;

Stanley White in Tokyo at swhite28@bloomberg.net

 

 

 

2008.11.26 02:27:37   JPY Rising Broadly; Nikkei Falls "Unexpected"

2008.11.26 02:27:48   Kospi +2.2%; Likely To Hover Around 1000

2008.11.26 02:32:55   Nikkei Dn 1.4%; Rising Yen Hurting Sentiment

2008.11.26 02:57:07   Nikkei 225 Stock Average Down More Than 2%

2008.11.26 01:45:37   Lead Nikkei Futures Open Down 65 Points At 8260 On SGX

2008.11.26 01:18:57   US Tsys Lower In Asia; 10-Yr Yld Cap Likely 3.5%

 

 

 

 

 

 

By Wes Goodman

 

Nov. 26 (Bloomberg) -- Treasuries were little changed, with yields near record lows, before a U.S. report that economists estimate will show consumer spending dropped in October by the most since the September 2001 terrorist attacks.

Government securities returned 4.7 percent so far in November, their biggest monthly gain since 1985, according to Merrill Lynch & Co.'s U.S. Treasury Master index, as a seizure in credit markets caused stocks to tumble. The deepening U.S. economic contraction prompted the Federal Reserve to commit up to $800 billion yesterday in a second stimulus plan, aiming to unfreeze credit for homeowners, consumers and businesses.

``The economy is still in a recession and the stock market is still at a low point,'' said Kevin Yang, who oversees $1 billion of Treasuries at Shinkong Life Insurance Co. in Taipei, Taiwan's second-largest life insurer. ``I plan to buy if yields rise.''

The yield on the 10-year note was 3.12 percent as of 9:35 a.m. in Tokyo, according to BGCantor Market Data. The 3.75 percent security maturing in November 2018 traded at a price of 105 12/32.

The rate declined to 2.99 percent on Nov. 20, the lowest since Fed records of the figure started in 1962. Yang said he may buy if the yield climbs to 3.3 percent.

Personal spending, the biggest part of the economy, fell 1 percent after sliding 0.3 percent in September, according to the median forecast in a Bloomberg News survey of economists before the Commerce Department figure. Orders for durable goods, sales of new houses and consumer confidence also fell, other reports may show.

Treasuries rallied yesterday because the Federal Reserve's plan includes purchases of as much as $600 billion in mortgages, spurring demand for government debt as a replacement for bonds backed by home loans that may be retired early.

 

To contact the reporter on this story:

Wes Goodman in Singapore at wgoodman@bloomberg.net.

 

 

 

2008.11.26 01:25:47   SnP/ASX 200 Down 0.7% As Banks Fall

2008.11.26 00:02:43   EUR/USD Will Struggle To Touch 1.3100 – BNZ

2008.11.26 00:00:11   Key Interest Rates At 5 PM EST; 10-Yr Note Yld 3.095%

2008.11.25 23:42:10   Treasury: 23 More Bks Received Cap Injections As Of Nov 21

2008.11.25 23:35:14   EUR/USD Targets 1.3227 Over Next Few Days - ANZ

2008.11.25 23:17:15   FOREX VIEW: US Rescue Packages Could Undercut Dollar's Gains

2008.11.25 23:23:49   WORLD FOREX: Euro, UK Pound Rally Vs Dollar On New Fed Plan

2008.11.25 23:26:18   Bank Of Canada Nov. 25/08 Closing Rates: US Dlr At C$1.2250

2008.11.25 23:02:41   Key Interest Rates At 4 PM EST; 10-Yr Note Yld 3.099%   

2008.11.25 23:02:45   Treasurys Rally On Weak Data, Fresh Fed Aid Plan

2008.11.25 23:03:47   DJIA Closes Up 36 (0.4%) At 8479; Latest Fed Plan Helps

2008.11.25 23:04:31   DJIA Closes Up 36 At 8480; First 3-Session Gain Since Aug

2008.11.25 23:06:32   Nasdaq Ends Down 7 (0.5%) At 1465; H-P, Cisco Weigh    

2008.11.25 23:09:12   SnP 500 Ends Up 6 (0.6) At 857; 1st 3-Session Gain Since Sept

2008.11.25 22:43:27   It's Still A Fed-Driven Market

 

 

 

 

 

 

By Scott Lanman and Dawn Kopecki

 

Nov. 25 (Bloomberg) -- The Federal Reserve took two new steps to unfreeze credit for homebuyers, consumers and small businesses, committing up to $800 billion.

The central bank will purchase as much as $600 billion of debt issued or backed by government-chartered housing-finance companies. It will also set up a $200 billion program to support consumer and small-business loans, the Fed said in statements today in Washington.

With today’s announcement, the central bank is starting to use some of the unorthodox policy tools that Chairman Ben S. Bernanke outlined as a Fed governor six years ago. Policy makers hope the initiatives will bring down the interest rates on mortgages and consumer loans, offsetting the withdrawal of private-sector financing.

“They’re trying to put funds into the system, trying to unfreeze these markets,” said William Poole, the former St. Louis Fed president, in an interview with Bloomberg Television. “Clearly, the Fed and the Treasury are beginning to take a large amount of credit risk.”

The Fed will purchase up to $100 billion in direct debt of Fannie Mae, Freddie Mac and Federal Home Loan Banks after the yield premiums on those securities jumped. It will also buy up to $500 billion of mortgage-backed securities issued by Fannie, Freddie and Ginnie Mae, a government agency that insures bonds.

Fannie and Freddie have about $1.7 trillion of corporate debt outstanding and $4.1 trillion of mortgage-backed securities.

Mortgage Rates

Rates on home loans haven’t fallen even after the Fed cut its key interest rate and yields on benchmark Treasuries tumbled. Average 30-year mortgage rates were 5.98 percent yesterday, little changed from the 2007 average of 5.95 percent, according to bankrate.com.

In that time, the Fed has cut its target rate for overnight loans between banks by 4.25 percentage points, to 1 percent. Bernanke said in a November 2002 speech that as the rate approached zero, the central bank could consider buying mortgage bonds or U.S. Treasuries to finance government spending.

Fannie and Freddie bonds rallied after the announcement. The yield premium on Fannie Mae’s five-year debt over similar- maturity Treasuries tumbled 0.34 percentage point, to 1.02 percentage point, by 2 p.m. in New York, according to data compiled by Bloomberg. Treasuries rallied, with yields on two- year notes tumbling 0.13 point to 1.15 percent, while the 10-year yield dropped 0.25 point to 3.08 percent.

“It’s very important that lending continue to be available” because “the economy is turning down pretty dramatically,” Treasury Secretary Henry Paulson said at a press conference in Washington. He also said $200 billion is just the “starting point” for the Fed’s program to buttress consumer and small-business loans.

Quantitative Easing

The Fed won’t be removing cash from other parts of the financial system to make up for the purchases, government officials told reporters on a conference call. They rejected any comparison with Japan’s so-called quantitative easing effort to combat deflation, saying that the Fed’s objective is to buttress credit markets rather than ramp up money.

“The aim of credit policy is focused on narrowing credit spreads, as opposed to expanding the money supply,” said Mark Gertler, a New York University economics professor who has collaborated with Bernanke on research. “The hallmark of this crisis is unusually high credit spreads which are dampening borrowing and spending across the economy.”

Under the Term Asset-Backed Securities Loan Facility, the Fed will lend up to $200 billion to holders of AAA rated asset- backed securities backed by “newly and recently originated” loans. Those include education-, car- and credit-card loans, and borrowing guaranteed by the Small Business Administration. The Fed hopes to have the TALF running by February.

Buyer Exodus

Private-sector ABS buyers have either disappeared or have shrunk their balance sheets, contributing to the market’s disruption, officials said. Traditional buyers included the structured investment vehicles, set up by Citigroup Inc. and other banks, that have been wound down in the crisis.

Even asset-backed securities that the government already stands behind have been hammered by the exodus of investors.

Bonds backed by payments on government-backed student loans made by the Federal Family Education Loan Program, or FFELP, are trading at 300 basis points more than the three-month London interbank offered rate, according to JPMorgan Chase & Co. data. The premium was 60 basis points in January.

“It can certainly improve credit conditions for consumers,” said Derrick Wulf, who helps manage $70 billion in mostly fixed-income assets at Dwight Asset Management Co. in Burlington, Vermont.

Beyond Banks

The asset-backed securities program is similar to the Fed’s effort to bring down the cost of financing for commercial paper, the short-term debt companies issue to finance payrolls and other expenses, because it goes beyond banks.

“What the Fed has been trying to do is get a sense of what works and what doesn’t work,” Wulf said. “One of the things that has worked is the commercial paper facility.”

“The cheaper that they could issue their debt, the more aggressively they should be able to buy mortgages in the secondary market,” said Alan Bosworth, director of agency trading at Vining Sparks in Memphis, Tennessee.

The Fed may hold the Fannie and Freddie debt and securities until they mature or sell them, with plans to be determined, government officials said on a conference call with reporters.

Treasury Buying

A separate Treasury program for buying debt linked with home loans has already quadrupled, from about $7 billion, a government official said on condition of anonymity.

The Treasury will provide $20 billion of “credit protection” to the Fed for the TALF, using funds from the $700 billion financial-rescue package. The Treasury said in a statement that the facility may expand over time and cover other assets, such as commercial and private residential mortgage- backed debt.

Under the TALF, the New York Fed will auction a fixed amount of loans each month for a one-year term. Assets will be held in a special-purpose vehicle. The program will stop making new loans at the end of next year unless the Fed Board of Governors extends the program.

Lenders providing credit under the TALF “must have agreed to comply with, or already be subject to,” executive- compensation restrictions in the October bailout law, the statement said.

Separately, in a sign of disagreement among Fed officials, seven of the 12 district banks opposed lowering the rate on direct loans to banks before the Oct. 28-29 policy meeting, the central bank said in meeting minutes released today.

Timing of Purchases

The Fed will start buying the direct debt of government- sponsored enterprises -- Fannie, Freddie and a dozen federal home loan banks -- through primary dealers in government debt from next week. The purchases of mortgage-backed securities will be done through asset managers, and officials aim to begin the effort by year-end.

Purchases of both types of debt “are expected to take place over several quarters,” the Fed said.

Treasury staffers are in regular communication with President-elect Barack Obama’s team, officials said. New York Fed President Timothy Geithner, Obama’s pick to be Treasury secretary, was involved in today’s plans, though not in a capacity with the new administration, officials said.

 

To contact the reporter on this story:

Scott Lanman in Washington at slanman@bloomberg.net;

Dawn Kopecki in Washington at dkopecki@bloomberg.net

 

 

 

By Timothy R. Homan and Shobhana Chandra

Nov. 25 (Bloomberg) -- The decline in U.S. house prices accelerated in September and the economy shrank in the third quarter at a faster pace than first estimated as the grip of the credit crunch tightened.

The SnP/Case-Shiller home-price index fell 17.4 percent from a year earlier. The Commerce Department said gross domestic product dropped an annual 0.5 percent as household spending slid the most since 1980. While consumer confidence rose this month, the Conference Board’s gauge remained near the lowest on record.

“The economy is turning down pretty dramatically,” Treasury Secretary Henry Paulson said at a press conference in Washington to outline new government efforts to unfreeze credit. “It’s very important that lending continue to be available.”

Today’s reports underscore concerns that the economy is at risk of a contractionary spiral as lenders cut back credit, causing spending to fall and companies to slash investments and payrolls. The Treasury and Federal Reserve today began two new programs to bring down interest rates on mortgages and consumer loans, committing at least $800 billion.

Stocks climbed on the Fed’s plans, with the Standard & Poor’s 500 Stock Index rising 0.7 percent to close at 857.39, posting its first three-day gain since September. Treasuries rose after the central bank’s proposal to buy up to $600 billion of debt issued or backed by housing-finance companies spurred some investors to buy government securities as a hedge.

Economists anticipate that the drop in GDP worsened in the current quarter because of the deepening credit crunch. The collapse of Lehman Brothers Holdings Inc. in September triggered a renewed bout of turmoil, forcing the Fed to step up as a lender of last resort.

‘Ugly’ Quarter

“It’s the fourth-quarter numbers that are really going to look ugly,” Joel Naroff, president of Naroff Economic Advisors Inc. and most accurate forecaster in a 2008 Bloomberg News survey of economists, said in a Bloomberg Television interview.

Home prices decreased 1.8 percent in September from the prior month, the biggest one-month drop since March, the SnP/Case-Shiller report showed.

SnP/Case-Shiller also released quarterly figures for nationwide home prices. That measure showed a 16.6 percent drop in the three months through September from the same time last year, compared with a 15.1 percent drop in the second quarter.

Economists forecast the 20-city index would fall 16.9 percent from a year earlier, according to the median of 28 estimates in a Bloomberg News survey. Projections ranged from declines of 16 percent to 17.2 percent.

Broad Decline

Compared with a year earlier, all areas in the 20-city survey showed a decrease in prices in September, led by a 31.9 percent drop in Phoenix and a 31.3 percent decline in Las Vegas.

A separate government report confirmed the decline in property values accelerated. Home prices fell 1.3 percent in September from the previous month, the biggest one-month drop since records began in 1991, the Federal Housing Finance Agency said today.

The GDP report showed consumer spending, which accounts for more than two-thirds of the economy, dropped at a revised 3.7 percent annual rate in the third quarter, more than the 3.1 percent decrease estimated by Commerce last month.

Wage figures showed a smaller gain than previously estimated in the second quarter, reflecting the weakening job market. Salaries grew $13.3 billion, $37.3 billion less than Commerce had projected.

Retailers ranging from Best Buy Co. to Nordstrom Inc. are cutting revenue forecasts ahead of what may be the worst holiday shopping season in years.

‘Difficult Times’

“In 42 years of retailing, we’ve never seen such difficult times for the consumer,” Brian Dunn, Best Buy’s president and chief operating officer, said in a statement last week. “People are making dramatic changes in how much they spend, and we’re not immune from those forces.”

The Conference Board’s index of consumer confidence climbed to 44.9, the second-lowest reading since 1974, from a record low 38.8 the prior month, the private New York-based research group said today.

The improvement reflected expectations that the economic situation wouldn’t get much worse. The gauge of the outlook for the next six months increased to 46.7 from 35.7. The Conference Board’s measure of present conditions dropped to 42.2, the lowest since June 1993, from 43.5.

“The consumer is hunkered down,” said Brian Bethune, chief U.S. financial economist at IHS Global Insight in Lexington, Massachusetts. “We are still expecting a contraction in consumer spending in the fourth quarter.”

Americans may pull back further after employers fired 240,000 workers in October and the unemployment rate jumped to the highest level since 1994.

Xerox Corp., the world’s largest maker of high-speed color printers, is eliminating 3,000 jobs and trimming manufacturing costs to save $200 million next year. Chief Executive Officer Anne Mulcahy yesterday said at a conference that Xerox isn’t projecting “any quick economic turnaround” in 2009.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net; Shobhana Chandra in Washington at schandra1@bloomberg.net

Last Updated: November 25, 2008 16:27 EST

 

 

 

By Bob Willis

 

Nov. 25 (Bloomberg) -- U.S. consumer confidence unexpectedly rose in November from a record low as falling gasoline prices helped alleviate concerns about rising unemployment and tumbling financial markets.

The Conference Board’s index of consumer confidence climbed to 44.9, the second-lowest reading since 1974, from 38.8 the prior month. A separate report showed home prices continued to drop in September, further undermining consumer spending.

Consumers are retrenching amid increasing job losses, falling stock and home prices and the worst credit crunch in seven decades. Still, falling gasoline prices and the end of the political uncertainty that preceded the presidential election this month may have comforted consumers, economists said.

“The consumer is hunkered down,” said Brian Bethune, chief U.S. financial economist at IHS Global Insight in Lexington, Massachusetts. “We are still expecting a contraction in consumer spending in the fourth quarter.”

Consumer confidence was projected to remain unchanged from an originally reported 38 in October, according to the median estimate in a Bloomberg News survey of 67 economists. The revised October figure was still the lowest level since monthly record- keeping began in 1967. Forecasts ranged from 30 to 45.

Earlier today, a report showed the SnP/Case-Shiller home- price index of 20 U.S. metropolitan areas dropped 17.4 percent in September from a year earlier, the most since year-over-year records began in 2001.

Record Foreclosures

The economy contracted at a 0.5 percent annual pace from July through September, more than initially estimated, the Commerce Department also reported today. Consumer spending dropped at the fastest pace since 1980.

Stocks maintained earlier gains after the Federal Reserve took new steps to unfreeze credit for homeowners, consumers and small businesses. The central banks committed as much as $800 billion to the new initiatives.

The housing slump, which triggered the credit crisis and global slowdown, will probably extend into a fourth year. Foreclosures are running at a record rate, increasing the number of properties for sale and pushing down home prices. That impedes consumer spending as homeowners have a harder time borrowing against their homes.

Outlook Improves

The improvement in confidence this month reflected expectations that the economic situation wouldn’t get much worse than it already was. The gauge of the outlook for the next six months increased to 46.7 from 35.7. The Conference Board’s measure of present conditions dropped to 42.2, the lowest since June 1993, from 43.5.

“Despite the improvement in the expectations index this month, consumers remain extremely pessimistic and the possibility that economic growth will improve in the first half of 2009 remains highly unlikely,” Lynn Franco, director of the Conference Board’s consumer survey, said in a statement.

The share of consumers who said jobs are plentiful fell to 8.8 percent from 9 percent last month, today’s report showed. The proportion of people who said jobs are hard to get increased to 37.2 percent from 36.6 percent.

The proportion of people who expect their incomes to rise over the next six months climbed to 13.3 percent from 11.1 percent. The share expecting more jobs increased to 9.2 percent from 7.3 percent.

Gasoline Prices

Lower gasoline prices are one key bright spot for consumers. Average prices for regular unleaded gasoline at the pump fell to $1.89 a gallon yesterday from an average $3.10 in October.

Consumers may also find comfort from the end of the political uncertainty prior to the presidential election this month, said Mike Schenk, a senior economist at the Credit Union National Association. “Change is something many welcome, no matter who they supported,” he said.

Still, the backdrop for the economy is grim. The jobless rate, at 6.5 percent in October, is the highest since 1994, and could rise as high as 9 percent by the end of 2009, according to estimates from Goldman Sachs Group Inc.

The possibility of a collapse at General Motors Corp., Ford Motor Co. or Chrysler Holding LLC poses a prospect of more layoffs.

The economy lost jobs for 10 consecutive months through October, bringing the total drop in payrolls to 1.2 million this year, Labor Department figures showed this month. Some economists anticipate job losses accelerated in November.

Plummeting Stocks

Plummeting stocks also battered household finances. The Standard & Poor’s 500 index closed Nov. 20 at its lowest level in 11 years.

Retailers ranging from Best Buy Co. to Nordstrom Inc. are cutting revenue forecasts ahead of what may be the worst holiday shopping season in six years. The International Council of Shopping Centers has forecast the November-December holiday season will be the worst since 2002.

“In 42 years of retailing, we’ve never seen such difficult times for the consumer,” Brian Dunn, Best Buy’s president and chief operating officer, said in a statement last week. “People are making dramatic changes in how much they spend, and we’re not immune from those forces.”

To contact the reporters on this story: Bob Willis in Washington at bwillis@bloomberg.net

Last Updated: November 25, 2008 10:24 EST

 

 

 

By Shobhana Chandra

 

Nov. 25 (Bloomberg) -- The U.S. economy shrank in the third quarter faster than previously estimated as consumer spending plunged by the most in almost three decades.

Gross domestic product contracted at a 0.5 percent annual pace from July through September, the most since the 2001 recession, according to revised figures from the Commerce Department today in Washington. The government’s advance estimate issued last month showed a 0.3 percent decline.

The world’s largest economy has sunk into an even deeper recession this quarter as the credit crunch, the worsening housing market, and mounting job losses cause consumers and businesses to retrench. President-elect Barack Obama yesterday warned that the U.S. may lose “millions of jobs” should the federal government not quickly enact an economic-stimulus package.

“We’ve got a big downdraft coming on,” John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, said before the report. “The recession is certainly looking longer and deeper. It’s just getting very tough for consumers.”

U.S. stock-index futures rallied after the Federal Reserve committed up to $800 billion in new funding to unfreeze credit for homebuyers, consumers and small businesses.

Today’s GDP report is the second of three estimates. The figures matched the median estimate of 71 economists surveyed by Bloomberg News. Forecasts ranged from declines of 0.1 percent to 0.9 percent.

The economy grew at a 2.8 percent pace in the previous three months.

Less Spending

Corporate profits, including estimates for the value of inventories and adjustments for capital investments, dropped 0.9 percent from the previous three months, hurt by $46.2 billion in insurance payments and losses caused by Hurricane Ike. It was the seventh decline in the last eight quarters.

Consumer spending, which accounts for more than two-thirds of the economy, dropped at a revised 3.7 percent annual rate, more than the 3.1 percent decrease estimated by the government last month. It was the first decline since 1991 and the biggest since 1980, after President Jimmy Carter imposed credit controls.

Americans may pull back further after employers fired 240,000 workers in October and the unemployment rate jumped to the highest level since 1994.

Wage figures showed a smaller gain than previously estimated in the second quarter, reflecting the weakening job market. Salaries grew $13.3 billion in the second quarter, $37.3 billion less than Commerce’s earlier forecast.

More Firings

Today’s revisions may cause some economists to lower their GDP forecast for the last three months of 2008. Companies cut inventories at a slower pace than previously estimated, indicating more production cuts may be on the way as spending weakens.

Xerox Corp., the world’s largest maker of high-speed color printers, is eliminating 3,000 jobs and trimming manufacturing costs to save $200 million next year. Chief Executive Officer Anne Mulcahy yesterday said at a conference that Xerox isn’t projecting “any quick economic turnaround” in 2009.

Residential construction fell at a 17.6 percent pace, less than the prior estimate. Home starts and permits for future construction both dropped to record lows in October, according to Commerce figures, indicating the housing recession will extend into a fourth year. Home resales also fell in October and prices plunged by the most on record, a private report showed yesterday.

Trade Gap

A narrowing trade gap helped prevent an even deeper slump last quarter. Still, the economy may not be able to depend on continued assistance in coming months. American exports will decline as the International Monetary Fund predicts downturns next year in the U.S., Japan and the euro region, the first simultaneous recession since the end of World War II.

The National Bureau of Economic Research, the Cambridge, Massachusetts-based official arbiter of U.S. economic cycles, has yet to call a recession.

The group bases its assessment on indicators including GDP, employment, sales, incomes and industrial production, and usually takes six to 18 months to make a determination. According to the NBER, the last recession lasted from March to November 2001.

Jeffrey Frankel, a member of the NBER panel, in a Nov. 10 Bloomberg Television interview said the U.S. is entering “the steep part” of what could be the worst recession since World War II. Martin Feldstein and Robert Hall, fellow members of the committee, have said the economy is in a recession.

President-elect Obama, who named key members of his economic team yesterday, vowed to push for a large economic- stimulus package, though he declined to say how big it would be.

To contact the report on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

Last Updated: November 25, 2008 08:44 EST