But US Commerce Secretary Don Evans said that was
"not good enough" and that the US recovery was still
And he implicitly called for a rate cut by the US
central bank, arguing that low inflation created an opportunity for
stimulative fiscal and monetary policies.
Some of the growth was due to declining imports,
according to the US commerce department.
"The largest contributors to the step-up were an
acceleration in consumer spending — especially for motor vehicles —
and a slowdown in imports," it said.
This could spell trouble for other countries who have
been hoping to overcome their own economic troubles by exporting to the
The US runs a $400bn trade deficit with the rest of
the world, and Asian countries in particular have been keen to boost
The news will help President George W. Bush, who is
hoping to regain control of both Houses of Congress in the mid-term
elections which take place on Tuesday, 5 November.
The news will also pose a dilemma for the US central
bank, the Federal Reserve, which had widely been expected to cut
interest rates for the 12th time to help revive the economy.
Now they will closely watch the unemployment figures,
for signs that job fears might weaken further consumer spending plans.
GERMANY CUTS GROWTH OUTLOOK
The German government has cut its official growth
forecast, confirming the sluggish state of its economy.
The government now expects the economy to grow by
just 0.5% this year, down from the previous estimate of 0.75%.
And it says the economy will expand by 1.5% in 2003
instead of 2.5%.
The revision had been widely expected and came on the
same day that the International Monetary Fund (IMF) cut its growth
forecast for Germany.
The IMF also warned that the German government should
not try to cut its budget deficit too quickly as this could damage any
In its annual review of the German economy, the IMF
held its growth prediction for this year at 0.5%, but trimmed its 2003
forecast to 1.75% from 2%.
"In 2003, GDP growth is expected to pick up, but
is likely to remain weaker than previously projected and subject to
considerable risks," the IMF said.
"These include global uncertainties and a
complex set of domestic factors."
One of the factors is the German Government's budget
Germany has already admitted that its deficit for
this year will be above the 3% of GDP level ceiling set by EU's
Stability and Growth Pact.
The IMF said it expected a German budget deficit of
3.5% of GDP this year, but that the government would try to cut it to
2.75% in 2003.
However, the IMF said a smaller cut might be more
suitable given the economy's weakness.
DISDAIN GREETS JAPAN REFORM PLAN
Japan's plans to revive its stuttering economy and
rescue its banks from mountainous bad debts have been met with a chorus
Newspapers, investors and credit ratings agencies
have all given the proposals the thumb's down.
The plan was announced after several delays by the
man installed by Prime Minister Junichiro Koizumi specifically to take
But the consensus of opinion is that the plan has
been watered down by political infighting to the point where it may fail
to make any serious impact.
The most immediate reaction to the unveiling, which
happened after Tokyo's markets closed, was a 1.3% fall on the benchmark
Nikkei 225 index.
IMF TRIMS EURO GROWTH FORECAST
The International Monetary Fund has trimmed its
forecast for eurozone growth, and suggested that the bloc's central bank
should consider cutting rates to kick-start the economy.
The IMF lowered the region's 2002 growth forecast to
just 0.75% from 0.9% last month, and revised its growth prediction for
2003 down to 2% from 2.3% last time.
It added that the recovery would remain
"tepid", warning that the area still faces "considerable
"The economy is fairly weak and we don't see a
very robust recovery in prospect," said Michael Deppler, the head
of the IMF's European department.
He added that in view of persistently sluggish growth
in the region, a "clear bias towards further monetary easing would
DROUGHT WIDENS AUSTRALIA'S TRADE DEFICIT
Australia has blamed a damaging drought for sending
its trade deficit ballooning to almost 1bn Australian dollars (£360m;
The worst drought in a generation will cut this
winter's grain harvest by more than half and hit the country's earnings
from exports of agricultural products, the government has warned.
Production of the country's four major winter crops
— wheat, barley, canola and lupins — is set to fall to 14.8 million
tonnes in the year to June 2003, down from a record 34.1 million tonnes
a year earlier, according to the Australian bureau of agriculture and
resource economics (Abareconomics).
"You're seeing that already and I expect that it
will affect exports in future months," said the country's
treasurer, Peter Costello.
So far, the drought has cost more than 40,000 jobs.
Rural exports have slipped 6% and the trade deficit widened to A$948m in
September, the worst figure for more than two years.
MEXICO AND JAPAN PLAN FREE TRADE DEAL
Mexico and Japan plan to seal a free trade agreement
(FTA) within a year to reinvigorate their declining economic ties.
Japanese Prime Minister Junichiro Koizumi and Mexican
President Vicente Fox announced the move in a joint statement at the
Asia Pacific Economic Cooperation (APEC) summit in Los Cabos, Mexico.
"In order that Japan and Mexico will benefit,
without delay, from the strengthening of the bilateral economic
partnership, the two leaders shared the view that the two governments
should start official negotiations for the agreement in November 2002 in
Tokyo," they said.
Mexico exports goods — mostly crude oil, pork and
machines — worth about $2bn to Japan each year, while it imports
Japanese machinery, auto and electronic parts worth $4bn.
MIZUHO MOVES ON BAD DEBTS
The world's biggest bank, Japan's Mizuho, has
unveiled a plan to tackle four fifths of its mountain of loans gone sour
by March 2004.
The plan is the first response from the banking
sector to the government's package of measures to address deflation and
the bad debts crippling the country's economy, announced to some
The bank has lent 3 trillion yen to 150 companies
which are "near to failure" or have already collapsed,
according to the Asahi Shimbun newspaper, and will aim to clean up 2.4
trillion yen of them in the year from next April. The government's own
deadline is 2005.
CHINA TELECOM US FLOTATION 'DELAYED'
With the world's stock markets still deeply mired in
gloom, China looks almost certain to have to put off the massive
flotation of its biggest telecoms company.
China Telecom, for years the state-owned monopoly and
still the biggest player, was due to release shares worth as much as
$4bn to the New York market on 6 November.
'LAUNDERING' CHARGE FOR TOBACCO GIANT
The maker of Camel cigarettes, RJ Reynolds, is being
taken to court in the US, accused of money laundering.
The action, which is being brought by the European
Commission and 10 European Union member states, has been dismissed by
the tobacco firm.
AUSTRALIAN HOUSING BOOM SLACKENS
The housing boom in Australia has slipped slightly in
September after soaring in August but not by enough to remove fears that
the leap is unsustainable.
The September figures for buidling approvals, an
index of how many new homes are being planned, showed a 19.4% fall from
the month before.
The slide produced a sigh of relief among
market-watchers, for whom August's breakneck 22.9% rise had been a
startling wake-up call.
An interest rate increase from the current 4.75% now
looks less likely when the Reserve Bank of Australia meets, but the
evidence of over-heating is still there as investors, rather than
prospective inhabitants, are driving the housing boom.
IBM ADOPTS NEW $10BN TACTIC
IBM has launched a new business strategy backed by
$10bn in new investment.
IBM chief Sam Palmisano said that his company planned
to adopt a new focus on 'on-demand' computing — a flexible business
model under which corporate clients pay only for the computing power
that they actually use.
firm Qwest Communications International said that losses for the three
months to September widened to $214m (£137m), from $142m during the
same period last year.
TXU: US energy giant TXU, the Dallas-based firm
said profits for the three months to September came in at $206m
(£131m), 38% down on the same period last year.
Exxon Mobil—ChevronTexaco: The world's largest
oil company, Exxon Mobil, has said it suffered a $540m fall in net
profits to $2.64bn (£1.69bn) for the July to September quarter while
its competitor ChevronTexaco has said it was hit by a $900m loss.
Volkswagen: Europe's largest car maker,
Volkswagen's net profits fell to 439m euros (£277m; $439m) during the
quarter from 903m euros during the same period last year.
Toyota: A cost-cutting drive and favourable
exchange rates helped net profits to surge to a record 553.7bn yen
($4.53bn, £2.9bn), while operating profit rose 44% to 730.8bn yen.
Unilever: Unilever, the world's third largest
food group, reported profits of 1.3bn euros (£800m; $1.28bn) for the
three months to the end of September, against expectations of 1.1bn
VIVENDI REJECTS VODAFONE OFFER
Franco-American media giant Vivendi Universal has
rejected an offer for its 44% stake in French mobile operator Cegetel
from the UK's Vodafone.
BANGLADESH WINS PRAISE FOR REFORMS
The Asian Development Bank (ADB) has praised
Bangladesh's programme of economic reforms, and promised to continue its
$330m-a-year (£212m) development programme.
The country's central bank, meanwhile, has launched a
programme to persuade Bangladeshis living abroad to invest their hard
currency earnings at home.
INDIA CUTS RATES AND GROWTH TARGET
India's central bank has cut its key interest rate
and lowered its economic growth target for the financial year to March
After its mid-year review, the Reserve Bank of India
(RBI) cut its bank rate to 6.25% from 6.5% and said it expected it to
remain at that level until the end of the year. The forecast for
economic growth has been cut by a point to 5-5.5%.
TREASURY DENIES BORROWING CLAIM
The Treasury has denied reports that it could borrow
up to £70bn in the next few years and still not breach its fiscal
According to the Financial Times, Chancellor Gordon
Brown could borrow up to £70bn ($109bn) more than originally planned
and still meet his spending rules, which say that current spending must
balance over the economic cycle.
Treasury officials told that the government's
finances were "prudent" and well able to cope with the ups and
downs of the financial cycle after the Chancellor has accumulated a
£50bn surplus since 1999, which could be offset against future
SCHROEDER TELLS GERMANS TO SACRIFICE
Germany's Chancellor Gerhard Schroeder has told the
country that taxes must rise, the welfare state be cut back and the
labour market be liberalised.
The dire warnings came in the Chancellor's first
policy speech since the re-election of his governing coalition of Social
Democrats and Greens a month ago.
His speech was dominated by economic issues, and the
threat of war with Iraq.
NEW PLANS TO BOOST NEPAL'S ECONOMY
The Nepalese Government has announced economic
reforms to boost the country's ailing economy.
The authorities say the move is mainly aimed at
reducing government expenditure, increasing revenue, and improving
'NO CLEAR CASE' FOR EARLY TAX RISES
There is no imminent need for tax rises or spending
cuts in the UK even though the government's budget deficit is rising, a
report has concluded.
The study by economists at PricewaterhouseCoopers (PwC)
trimmed its growth forecast for the UK, but said tax rises in the
short-term were not needed and could even be counter-productive.
But PwC said taxes might have to rise in the long run to fund higher
spending on public services and pensions.