Oct 29 - Nov 04, 2001
Bush's $100bn booster package
The US House of Representatives has narrowly passed a plan to
inject $100bn into the country's flagging economy through further tax cuts.
But the bill is likely to face strong opposition in the
Democrat-controlled Senate, which favours fewer tax cuts and more public
"It's clear the House bill cannot pass the Senate as it
is," commented one Senator.
The White House said it would continue to work with Congress
on a final product.
Bush approval Treasury Secretary Paul O'Neill will meet
senators of both parties to hammer out a compromise.
President George W Bush has already given his seal of
approval to the House plan.
The House legislation, which would cost an estimated $99.5bn
in 2002 and more than $159bn over 10 years, includes four key items sought by
President Bush: repeal of the corporate alternative minimum tax.
A new round of tax rebate cheques of up to $600 for
lower-income workers a cut in the 27% income tax rate to 25% in 2002 instead of
2006 greater tax write-offs for business equipment purchases.
The plan has been criticised by Democrats for not being
generous enough to ordinary Americans and not doing enough to help people who
lose their jobs.
Democrats favour fewer tax cuts and a $55bn public spending
programme. The final legislation could take some weeks to formulate.
Fed sees US economy struggling
Few areas of the US economy escaped the fallout from the 11
September terrorist attacks, according to the Federal Reserve's latest survey of
The Fed found that the already ailing US economy was brought
to a virtual standstill by events in New York and Washington.
Air travel was temporarily suspended and most Americans
stayed at home to watch television news reports.
This was followed by widespread lay-offs, cancelled
manufacturing orders and a fall in retail sales.
The weakness continued into October, with some areas of the
economy recovering quicker than others, the Fed found.
The report, compiled from information gathered by the central
bank's 12 regional banks, will be used by the Fed when it meets on 6 November to
decide its next move on interest rates.
The findings, compiled in the so-called Beige Book, which
takes its name from the colour of its cover, are likely to add to pressure for a
10th successive rate cut.
UK 'will avoid recession'
The UK is likely to boast the fastest growing economy in the
G7 group of industrialised nations next year, says a report by the National
Institute of Economic and Social Research (NIESR).
This flies in the face of recent predictions by the
Confederation of British Industry (CBI), which is calling for a further cut in
interest rates to stimulate growth.
The Governor of the Bank of England, Sir Edward George, has
also said it is "too early" to rule out a UK recession.
However, the NIESR predicts that the UK economy will grow by
a healthy 2.3% this year and 2.1% next year.
While inflation will be a little below the Bank of England's
target of 2.5% in the fourth quarter of 2001, falling to 1.8% by the end of
"Unless the economic situation worsens further, there is
no need for Bank of England to make further cuts in interest rates," the
NIESR's quarterly report said.
"Fortuitously" last year's increases in public
spending would help "insulate" the UK against a recession, it said.
Figures due out later on Friday are expected to show UK GDP
growth is slowing but still nowhere near recession.
The Bank of England has cut interest rates six times this
year in an effort to stave off recession, reducing borrowing costs to their
lowest since the early 1960s.
The CBI recently called for a further half point cut to help
Britain's hard-pressed manufacturers.
But Nigel Pain, senior research fellow with NIESR, told BBC
Breakfast, that there was no need for any further cuts.
"We have growth of about 2% in the economy as a whole
next year, a little bit below trend, but a long way from actual declines in
output, which would signal a full-blown recession," he said.
This meant that the risk of a UK recession was almost
non-existent at the moment, although much would depend upon the world economy.
UK export outlook 'worst in 21 years'
Export prospects for UK manufacturers have deteriorated at
their fastest rate for 21 years, the Confederation of British Industry has
Just 6% of factories were predicting better export trade over
the year ahead, compared with 59% forecasting a gloomier outlook, a CBI survey
The figures left the ratio of pessimists compared with
optimists was at its highest level since July 1980.
The CBI, which undertook the survey between 20 September and
10 October, said the reflected the turmoil immediately following last month's
terror attacks on the US.
"Confidence can be unduly influenced in the short term
by dramatic events such as the terrorist attacks," the CBI said.
Germany 'on the brink of recession'
Germany has suffered a sharp fall in growth this year and the
recovery next year is likely to be very slight, a bi-annual report from the
country's top six economic institutes has warned.
Europe's largest economy "is on the brink of
recession", the report said, calling for tax cuts and lower interest rates
across the European Union in order to secure a recovery in 2002.
Growth in Germany is expected to slip to just 0.7% this year
from 3% in 2000, then next year it is expected to bounce back to 1.3%, according
to the institutes' predictions.
The 11 September terrorist attacks on the US got parts of the
blame for the economic slowdown.
In a direct challenge to the Berlin government, the wise men
have added their voice to German industry and oppostion demands for urgent
measures to stimulate Europe's biggest economy.
They warn that without loosening the government's tight
public finances, the risk of a recession will increase significantly.
Specifically, they say tax cuts planned for 2003 should be
brough forward by a year.
"Finance policy needs to reflect the economic
risk," the institutes insisted.
The planned 13.5 billion marks cuts ($6.2bn, £4.3bn, 6.9bn
euros) are part of a 60bn marks tax-relief package that has been approved for
the period 2001-2005.
There is much resistance from the government against an early
release of any tax-cut packages since this would delay efforts to balance its
federal budget by 2006.
ECB leaves rates on hold
The European Central Bank has left interest rates unchanged
at 3.75%, ignoring growing political pressure for cheaper borrowing costs in
order to save the eurozone from a full-blown recession.
The ECB has cut rates only three times this year, unlike the
US Federal Reserve which has made nine reductions to stimulate the economy
Analysts were evenly divided over whether rates would be cut
or left on hold after recent weakness in the euro and falls in eurozone
"The ECB probably believes that there is insufficient
data in the light of the September events to have moved just yet ... there may
be a chance of one perhaps at the next meeting," said Kelly Tonkin of
Japan's consumer prices fall
Consumer prices on Japan's high streets fell in September,
continuing a relentless two-year slide and prompting economics minister Heizo
Takenaka to say the country needs a tougher approach to halting deflation.
"There's an argument that falling prices are good for
consumers, but we have to acknowledge that it is clearly problematic for the
macroeconomy," he said.
"We have to put a high priority — and set a target on
— measures to stop price falls," the minister said.
The index fell 0.8% from its September 2000 level, official
New York welcomes XP launch
If attendees of the official launch ceremony in New York of
Microsoft's latest operating-system software were expecting a splashy affair,
they may have been a bit disappointed.
The recent terror attacks on the Twin Towers and the Pentagon
have caused American business to rethink the way it does business, including the
way in which it launches new products.
Gone is the bravado that characterised much of the promotion
around US products, replaced by softer adverts that speak to the vulnerability
felt by so many Americans.
Chevron: Profits have fallen 24% at Chevron, which
earlier this month formally completed its $39.5bn acquisition of Texaco.
The San Francisco-based oil firm said profits fell to $1.17bn
for the three-month period between July and September compared with $1.5bn a
American Airlines: US attacks AMR, the parent of the
world's largest carrier American Airlines, has reported a $414m net loss in the
third quarter, despite a half-billion-dollar bail-out package from the US
government after the September attacks.
Lucent: Lucent reported a third quarter loss of $8.8bn,
on sales of $5.2bn, including an $8bn one-off charge. That compared to losses of
$484m in the same quarter last year, on sales of $7.2bn.
Compaq: Compaq said it lost $120m in the quarter on sales
of $7.5bn, compared to profits of $557m on sales of $11.2bn in the same period
Exxon: Profits at the Texas-based company fell to $3.32bn
in the three months to the end of September, down from $4.29bn in the same
period a year earlier.
GSK pharmaceutical: GSK pharmaceutical sales grew by 13%
GlaxoSmithKline, Europe's biggest pharmaceuticals firm, has reported another
healthy rise in profits. Pre-tax profits for the third quarter rose 17% to
£1.35bn, in line with expectations.
World trade stagnates
China escapes the global slowdown in trade World trade will
come close to stagnation this year as the US economic slowdown has spread to
Western Europe and hit once-dynamic Asian emerging economies hard.
In its annual report, the World Trade Organisation (WTO) said
it expected growth in the volume of global trade to shrink to only 2% this year,
compared with 12% last year.
The WTO's gloomy forecast represents a retreat from its
prediction in May of 7% expansion in world trade this year.
Asian economies moribund
Mr Koizumi still enjoys unprecedented popularity Japan's
government and central bank are preparing to issue gloomy economic forecasts
reflecting the impact of the global slowdown and the US attacks.
"I understand full-year growth will fall considerably
below the 1.7% target," economics minister Heizo Takenaka told a
parliamentary financial committee ahead of publishing the new forecast on
Bank of Japan Governor Masaru Hayami told the same committee
the central bank's semi-annual economic report due on 30 October, would be much
bleaker than the one in April.
Meanwhile in South Korea, the central bank has warned the
economy would recover only in the second half of next year because of US-led
GM recalls 314,000 vehicles
The Chevrolet Venture is one of the models affected General
Motors is recalling 314,000 'minivans' in the United States after a fault was
discovered in door latches.
US and Bayer settle anthrax row
The United States government has secured a deal to cut the
cost of stockpiling the anti-anthrax drug Cipro.
The treatment is made by German pharmaceutical firm Bayer,
which has confirmed it will sign an agreement with the US authorities on
The two sides held talks on Tuesday amid pressure from the US
Congress to disregard Bayer's patent and buy ciprofloxacin, the generic name for
Cipro, cheaper elsewhere.
Bosses bemoan new EU rules
The EU fears companies don't consult their staff enough
French industrialists have written an open letter to Prime Minister Lionel
Jospin, complaining about the latest European directive on workers' rights.
The European Union's "Information and Consultation
Directive' requires employers to consult their staff before major decisions.
Trade unions have welcomed the legislation, but employers
argue it will hamper important decisions.
Chief executives from companies such as Peugeot, Totalfina
Elf and Galeries Lafayette were among the 50 executives who wrote to Prime
Insurance costs 'threaten US stability'
US Treasury Secretary Paul O'Neill has warned Congress that
the cost of insuring against future terrorist attacks poses a serious threat to
America's economic stability.
Companies must be given access to affordable terrorism risk
insurance, Mr O'Neill said.
And the government must be prepared to share the extra
financial burden on insurers.
In a statement to the Senate Banking Committee, Mr O'Neill
said the White House wanted to work with legislators to find a solution.
Copper bounces back
The US giant plans to cut production by 14% The price of
copper has bounced back from the 15-year lows seen earlier this week.
News that the world's second-largest copper producer, Phelps
Dodge, was to cut production propelled the copper price off its lows.
The news comes as the metals world congregates at London
Metals Week, amid predictions of falling prices in the coming months.
On Monday, the price of copper hit $1,364 a tonne, a level
last seen in February 1987. On Wednesday, the price of copper was about $1,382.
Foreign investors shun Britain
The UK's cost-base has become less competitive The UK has
lost its edge as a target for foreign direct investment (FDI), according to a
new report from consultants Ernst & Young.
The flop of internet-driven businesses and a sharp downturn
in the telecoms and software sectors has led to a decline in foreign investment
projects throughout Europe.
But the UK has lost market share to other European
competitors as well as seeing overall FDI fall away.
US may issue war bonds
The United States could issue war bonds for the first time
since 1945 after members of Congress voted in favour of the measure.
War bond sales would enable ordinary Americans to show
support for the United States' campaign against the suspects in the 11 September
attacks, according to the bill's backers.
"At this time of national unity these war bonds serve as
an ideal vehicle for Americans to support efforts to bring those responsible for
these attacks to justice," said John Sweeney, a Republican congressman from
New York who initiated the bill.
New Railtrack will be a 'good risk'
Transport Secretary Stephen Byers has said the company he is
proposing as a replacement for Railtrack would be viewed by lenders as a
The new not-for-profit company would face challenges in its
early years, Mr Byers told the House of Commons in a written statement.
But he assured potential investors that it would have access
to emergency loan facilities in the event of a financial crisis.
US steel ruling condemned
A US trade panel has cleared the way for President George W
Bush to impose import restrictions on steel products, after finding that some
foreign steel products harmed the domestic industry.
The ruling by the International Trade Commission (ITC) has
been condemned by South Korea, which has called for joint action with Japan and
the European Union.
US steel importers warned the ruling risked triggering a
Dutch plan euro giveaway
On 1 January 2002 the euro finally becomes legal tender in 12
More than 15 billion euro notes and 50 billion coins will be
delivered to banks around Europe over the next few weeks in preparation.
The Netherlands has embraced the single currency with
enthusiasm, and aims to complete the changeover in less than half the time that
other countries are aiming for.
The government has undertaken an expensive advertising
campaign and plans to give away free cash.
Bangladesh exports hit by US slowdown
Bangladesh's Finance Minister Saifur Rahman has warned that
the country's economy will be hard hit by the slowdown in the US, one of its
largest export markets.
The economic repercussions of the 11 September attacks in the
US are likely to hit Bangladesh hard, he said.
World economists have already warned that poorer nations
would be the ones who would suffer most from any resultant down-turn in the
Canada cuts interest rates
The Canadian central bank has cut its key interest rate by 75
basis points, surprising analysts who had expected a smaller cut.
The bank cited the 11 September attacks as a reason for the
cut in its overnight rate to 2.75%, which is "intended to underpin
confidence and provide additional support for domestic demand".
"They're obviously expecting some weakness as far as
consumer spending and employment so I think they're being as proactive as
possible," Robert Spector, senior economist at Merrill Lynch Canada said.