----- Original Message ----- From: Mark Jones <[EMAIL PROTECTED]> To: crl <[EMAIL PROTECTED]> Sent: Friday, January 05, 2001 7:09 AM Subject: [CrashList] FT: US economy shows further signs of slowing By Peronet Despeignes in Washington, Ed Crooks in London and Tony Barber in Frankfurt Published: January 4 2001 14:25GMT | Last Updated: January 5 2001 00:09GMT The euphoria following the surprise interest rate cut from the Federal Reserve faded on Thursday as more indications appeared of the growing weakness of the US economy. The International Monetary Fund contributed to the gloom by saying it planned to reduce "meaningfully" its forecast for global growth. Stock markets held on to their gains of the previous day, but made no further progress. In early afternoon trading both the Dow Jones index and the Nasdaq were slightly lower. The dollar slipped back against the euro, which rose back above 95c during the day. Futures markets moved to price in a further 1.25 percentage point cut in the Federal funds rate from its current 6 per cent by next August. Further signs of the US economic slowdown came in a surge in corporate layoffs and in demand for unemployment benefits, and a sharp drop in a principal indicator of activity in the nation's service sector. The National Association of Purchasing Management said its index of service-sector activity slid to its lowest level in a year, from 58.5 to 53. The indicator suggests that growth in the service sector, which has so far offset the contraction in manufacturing, persists but at a much slower pace than a few months ago. The Chicago-based international outplacement firm Challenger, Gray & Christmas said its monthly estimate of layoffs among top US corporations tripled from 44,152 in November to 133,713 in December, with the bulk of the rise coming from retailers and auto companies And the Labor Department said initial weekly claims on unemployment insurance rose to 375,000 in the week ending December 30: their highest level since July 1998. The figures showed the sharpest increases in and around the Midwest, the industrial heartland of the US. Unemployment insurance claims have risen fastest more quickly than in any seven-month period since the 1990-1991 recession, although the official unemployment rate has risen only slightly. Some economists have speculated that the urgency shown by the Fed in making a surprise rate cut ahead of the scheduled open market committee meeting on January 30-31 may have been because policymakers had early access to the December unemployment figures, which are due for release on Friday. Michael Mussa, the IMF's chief economist, said he thought the chance of a sharp global slowdown was remote. But he said he thought the IMF's latest forecasts, made last year, were now over-optimistic. He said: "The data in recent weeks suggest some general slowing across the global economy, most pronounced in the US and Japan, and signs of slowing among the large economies of Europe", he said. The European Central Bank on Thursday kept its main interest rate unchanged at 4.75 per cent, in line with market expectations. The ECB is concerned about the potential inflationary impact of last year's high oil prices and the euro's weakness, and wants to monitor forthcoming wage settlements in the euro-zone carefully. But economists said the ECB might cut rates as early as February or March, especially if policymakers accept the Fed's analysis that the US is at risk of falling into a sharp downturn. _______________________________________________ Crashlist website: http://website.lineone.net/~resource_base
