A report released today shows that the United States economy is beginning to see a slowdown in its recovery following ongoing concerns over Europe and parts of Asia, sparking concerns that a global recession is on the cards.
Industrial output fell by 0.1% in May, versus April’s 1% gain and Wall Street forecasts of a small increase, according to official figures. Manufacturing output was down 0.4%, following a 0.7% rise in April, while mining increased by 0.9%, more than reversing April’s 0.6% fall. Utilities were 0.8% ahead, against April’s 5.3% jump.
The consumer confidence report compiled by Thomson Reuters/University of Michigan shows that the American people have started to lose faith in the economic recovery. The overall index on consumer sentiment fell from 79.3 in May down to 74.1 in June. It was predicted to come in at 77.5 and makes it the weakest figure since December at 69.9.
“Income losses were reported by nearly one-third of all households in early June and the news reaching consumers about job prospects turned negative for the first time since late 2011,” survey director Richard Curtin said in a statement.
“In addition, a small but rising number of consumers reported their concerns about the fallout from Europe, the most that mentioned the potential domestic impact from an international crisis since the Asian flu in 1998,” he said.
The report is not expected to impact the US dollar too much as investors are more concerned with the upcoming Greek elections of the 17th. They continue to seek safe haven currencies as they continue to flee the single currency and after the Spanish government revealed that it would be needing an 80billion euro bailout for its banks the dollar will remain relatively stable against the Euro posting only minor losses.
The European situation and fall in US production has also seen increases for the Japanese Yen as investors use it for a safe haven. The Asian currency got a further boost after the federal bank of Japan revealed that it would not be implementing any further monetary easing measures.
“It’s difficult for the Bank of Japan to take fresh action ahead of Greece’s elections Sunday and the US Federal Reserve’s policy meeting, The Bank of Japan hopes to see developments after these events. If financial markets get upset, then it would take additional easing measures next month,” said; Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute in Tokyo, told AFP.
In the UK, the chancellor and governor of the Bank of England announced that a further £100billion is to be made available to the nation’s banks. It’s a move that is designed to prepare and shield against any blowback from the Greek election results at the weekend.
Sir Mervyn King, the Bank of England Governor, said that the “industrialised world have thrown everything bar the kitchen sink” at the global economic meltdown but that even “bolder action” was now required.
The news has seen the Pound make steady progress against the single currency, beginning the day at 1.231 and rising to 1.238., also gaining against the Dollar.
The Pound to Euro exchange rate is currently trading at 1.238
The Pound to US Dollar exchange rate is currently trading at 1.564
The Euro to Australian Dollar exchange rate is currently trading at 1.255
The Euro to US Dollar exchange rate is currently trading at 1.263
The Euro to Pound exchange rate is currently trading at 0.807
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