General Motors lost billions, new home sales plunged to a record low, first time jobless numbers soared when they were supposed to slide and durable goods orders fell sharply in January, pointing to a deepening of the US recession as the watchlist of troubled American banks soared to a 14-year high. It was just another day at recession central, aka the United States of America. Perversely, oil prices continued to rise, touching $US45 a barrel, before finishing a touch lower; copper prices jumped 3% even though new home sales are falling; other commodities edged higher; US 10-year interest rates topped 3% for the first time in months and Wall Street was initially positive, but ended negative as it greeted the first Obama budget with a groan. Once again, the Janus-like nature of American business and economic reality has revealed itself. In Britain, Royal Bank of Scotland revealed a record loss of 24.1 billion pounds and sought more financial help from the UK Government. That dwarfed the massive $US30.9 billion full year loss at General Motors, which warned that it expected its auditors to study whether there was “substantial doubt” it could continue as a going concern. GM lost $US9.9 billion in the third quarter, with the first tranche of government aid of $US13.4 billion. Its cash reserves are close to the minimum needed to stay in business: no wonder it has its hand out for another $US16 billion. It is a shot duck without it. Ford cut its estimate for America’s 2009 car sales by a million units to 10.5 million, joining GM in the gloom. President Obama revealed the shape of his first budget: $US3.6 trillion in spending, a deficit of $US1.75 trillion. Higher taxes on the rich, abandoning student loans, over $US680 billion on health care. Heroic numbers, but months of Congressional frustration ahead. The deficit of $US1.75 trillion, will be a massive 12.3% of US gross domestic product and the highest share since the Second World War. But the big worry was a dramatic drop in new orders for durable goods (long-lasting manufactured goods): it fell for a sixth month in a row to a six-year low in January. It shows that demand from business and export markets for some of America’s high margined manufactured goods like planes, etc is still falling. It’s the same problem hurting the German, Japanese, South Korea and Taiwanese economies. The Commerce Department said durable goods orders fell 5.2% in January, the lowest level since December 2002, more than double the 2.5% expected by the market. The slump in orders will put more downward pressure on employment in coming months. Just when some US commentators were calling an easing to the job cuts, out came Government figures showing they were wrong. The US Government said the number of Americans filing initial claims for unemployment insurance rose sharply, and those living on unemployment benefits hit a record high in the week ending 21 February. Tonight we get the second update on US 4th quarter GDP: it won’t be nice, with most commentators saying the first figure of a 3.8% contraction will worsen to around 5% or more.
The United States of economic oblivion
General Motors lost billions, the jobless and durable goods orders fell sharply in January and the bank watch-list expanded -- just another day at recession ground zero, writes Glenn Dyer.