The gloomy data — compounded by continuing worries
about a possible war in Iraq — depressed hopes of an early economic
They also weighed heavily on stock prices, with the
Dow Jones industrial average dropping 86 points, or 1.1%, to close at
Tim Anderson, a senior trader at Salomon Smith Barney
in New York said: "People aren't terribly convinced about the
economic recovery or the extent to which the Bush economic stimulus plan
will be passed, on top of dealing with a lot of uncertainty about
The Commerce Department's final monthly trade tally
for 2002 The new $435.2bn imbalance beat the previous record of $378.6bn
The deficit with Germany set a record and the gulf
with Japan was the highest since October 2000.
Imports from China, the largest US import partner,
surged to $125.2bn.
Meanwhile, wholesale inflation, which has been
virtually non-existent, jumped by 1.6% in January, its biggest increase
in 13 years, according to figures from the Labour department.
Many analysts dismissed the wholesale price figures
as a temporary blip, reflecting a surge in energy prices and the ending
of certain car sales discounts.
And the increases seem unlikely to be passed on to
consumers, with the leaders of some of America's biggest companies
warning on Thursday there would be little scope for price rises over the
BLEAK OUTLOOK FOR JAPAN'S ECONOMY
The sluggish Japanese economy is unlikely to recover
for some time, the Bank of Japan has said.
The central bank maintained a gloomy outlook in its
report on the state of the Japanese economy in February.
"Economic activity remains flat amid substantial
uncertainty about the outlook for the economy," the Bank of Japan
A separate research showed that corporate
bankruptcies fell in January for the first time in two months, but the
debts of such companies increased to the highest for any January in the
Independent research firm Teikoku Databank said 1,436
companies collapsed in January, a drop of 11% from a year earlier and a
7.8% fall from December.
But the number of bankruptcies is expected to remain
high towards the March end of the fiscal year, with limited financial
support from the government.
In its monthly report, the Bank of Japan left its
overall view of the economy unchanged for the third straight month
The report said net exports — exports minus imports
- and industrial production were flat in February.
The Bank said that due to a slowing US economy and
weakness in European economies, it expected little growth in exports
while industrial production would also stay flat.
The report said rising oil prices and a planned
increase in medical costs from April would slow the pace of a decline in
Last November, the Bank of Japan downgraded its
assessment of the state of the economy for the first time in almost a
year, citing the effects of a weak US economy on Japan's exports and
The February report said the economy could show signs
of recovery later in the year, provided overseas economies showed a
US ECONOMY HITS THE BRAKES
The US economy slowed alarmingly in the final quarter
of 2002, growing at an annual rate of just 0.7% due to uncertainty
caused by talk of war.
The preliminary result was below analysts'
expectations of 1% growth, after the economy grew by 4% in the third
It will be unwelcome news for President George W Bush
— who is threatening a unilateral attack on Iraq — after he proposed
$674bn in tax cuts to stimulate the economy ahead of his re-election
campaign in 2004.
The US Federal Reserve last week left its key
interest rate at a 41-year low of 1.25%.
The central bank has cut interest rates 12 times
since January 2001, with the last reduction coming in November 2002, to
kick-start the troubled economy.
SRI LANKA MOVES TO PROTECT TEA INDUSTRY
The government in Sri Lanka is acting to protect the
country's $700m tea industry in the event of war in Iraq.
Sri Lanka is the world's biggest tea exporter —
last year it exported 291 million kilograms with more than half of it
going to the Middle East and North Africa.
The prospect of a war in Iraq is causing panic among
small-scale Sri Lankan tea growers, who are asking the government to
bail them out.
The last two auctions in Colombo have seen tea prices
drop, and there are fears about shipping lines to the Middle East
US WAVERS ON EU TRADE SPAT
Washington has decided to hold off hauling the
European Union before international trade officials for refusing to
allow the sale of genetically modified produce.
The US embassy's official for agricultural affairs in
London, Peter Kurz, told the BBC's Radio 4 Farming Today programme that
a complaint would not be made to the World Trade Organisation for the
Mr Kurz denied the concession was designed to curry
favour among EU nations over a war against Iraq.
"I wouldn't dream of speculating about any
connection between this issue and any... broader urgent issue in the
world today," he said.
"I happen to think that this decision is
probably made on the merits of the issue itself."
LONDON ECONOMY TO DEFY CITY DOOM
London's economic growth will keep outstripping the
UK average despite the financial gloom in the City, a report has said.
London Chamber of Commerce predicted the capital's
economy would grow by 2.8% in 2003, compared with an estimated 2.4% last
London was faring better than the rest of the UK
despite job losses at City institutions.
The main cause of the growth was the ongoing
construction boom, as builders cashed in on strong house prices, the
London's construction industry grew by 7.6% last
year, as the capital addressed its critical housing shortage.
The recession in the manufacturing sector, meanwhile,
has not had such a dramatic impact in London as in other parts of the
But Justine Lovatt, the chamber's economist, warned
that London's healthy outlook was not as rosy as it appeared.
US POWERS INTERNET GROWTH
America continues to be the driving force behind the
global growth in internet use, new figures suggest.
About 10 million US adults hooked up to the Internet
for the first time in 2002, boosting the overall number to 168.6
million, or 79% of the population, according to Nielsen Net ratings.
Spain had the highest percentage growth, jumping from
10.1 to 17 million net users, an increase of 6.9%.
Sweden, with 6.1 million users, continued to have the
greatest number of home surfers per head of population, at 85%.
GHANA OPENS FORESTS TO MINERS
Ghana — Africa's second biggest gold producer —
is to grant mining licenses in its protected forest reserves to attract
new foreign investment.
"Our doors are open," Mining Minister
Kwadwo Agyei-Darko told a conference in South Africa.
"The government has committed itself to measures
that will enhance mining and restore it to its former glory."
Ghana produces, annually, about 2.2 million ounces of
gold, representing about 45% of foreign currency revenues.
PROFITS FALL AT VOLKSWAGEN
Volkswagen, Europe's biggest car maker, has reported
a 10% fall in profits as it battles with weak demand in the fiercely
competitive car market.
VW said profits before tax slipped to 3.9bn euros
(£2.68bn) in 2002, which was roughly in line with expectations.
UK SHOPPERS SHUNNED THE SALES
Shoppers hunting for bargains in the January sales
have not been as eager to spend as economists had hoped.
Retail sales in January were 1% lower than in
December, figures from the Office for National Statistics (ONS) showed.
The gloomy data came as the Confederation of British
Industry lowered its growth forecast for the UK economy to 2.2% in 2003.
The figure aligns the CBI with the growing number of
forecasters warning that Chancellor Gordon Brown's estimate of 2.5%-3%
growth this year is too optimistic.
BANK MEMBERS SPLIT OVER RATE CUT
The Bank of England's nine strong Monetary Policy
Committee voted 7-2 in favour of a cut in interest rates two weeks ago.
A quarter point cut in interest rates took the city
by surprise on 6 February.
But unexpectedly gloomy data about the state in the
British manufacturing sector — released the following day — helped
explain why the Bank had made the decision to reduce rates to 3.75%.
Minutes of the meeting show that deputy governor
Andrew Large and bank insider Paul Tucker wanted to keep rates steady at
EU PREPARES FOR US NUCLEAR TRADE WAR
The European Commission is preparing to retaliate
against US import duties on European uranium, raising fears of another
damaging trade dispute.
Earlier this year the US Department of Commerce
imposed tariffs on European producers of low enriched uranium (LEU),
claiming they received unfair state subsidises.
The Commission, which values the LEU exports at $500m
(£320m) — or one third of the US market — has condemned the duties
An EU spokeswoman told it had failed to reach an
"amicable" solution after months of talks with the US and
would now seek to refer the case to the World Trade Organisation (WTO).
US FUND SNUBS EMERGING MARKETS
The world's largest pension fund, US-based Calpers,
has ruled out investing in some of the world's main emerging economies,
citing worries over stability and business ethics.
Among the countries rejected by Calpers are China,
India, Indonesia and Russia, and the fund also dashed hopes that it
might begin putting money into Malaysia and Thailand.
Calpers, which manages the retirement funds of
Californian public employees, has some $133bn in assets, including some
$1.8bn in emerging markets.
It has traditionally taken a lead in ethical
investments, and is highly influential within the US fund management
INTERNET VETERAN ALTAVISTA SOLD OFF
The Internet veteran AltaVista has been sold to
marketing firm Overture for $140m.
AltaVista was once the most visited search engine on
the Internet, but failed to keep up with rivals such as Yahoo and Google,
which is now the web's search engine leader.
BAE SWALLOWS £750M OVERRUN
Britain's biggest defence firm has agreed with the
Ministry of Defence to alter two major defence contracts.
BAE Systems has been battling with the government
over delays and cost overruns to contracts for its Nimrod maritime
patrol plane and Astute attack submarine.
BAE said the contract changes would lead to a £750m
($1.2bn; 1.1bn euros) charge, to be included in its latest profits
SNOWSTORMS BATTER US ECONOMY
Massive snowstorms across the north-eastern US have
dealt a further blow to the economy, and especially to the already
ailing airline industry.
At their heaviest, the storms dumped four feet of
snow on the Appalachian mountains in western Maryland, and caused havoc
in Washington DC, New York and other eastern cities.
BRITONS 'BAFFLED OVER EURO RATE'
The debate over whether the UK should join the single
currency has failed to teach most Britons what the euro is actually
worth, according to a new survey.
Eight out of ten people did not know the value of the
currency, with the average person guessing that £1 bought four euros
— and not the 1.49 euros they would actually get.
Some people thought £1 was worth 10 euros and in
Scotland — recently shown to be most in favour of joining the single
currency — the average person thought they would get seven euros.
Despite the poor results — from a survey of 2,000
people carried out for a foreign exchange company — the estimates were
better than when a similar study was carried out last August.
Six months ago only 12% of people knew the value of
the euro, compared to 20% now.
UK INFLATION STEADY AT 2.7%
The UK's underlying rate of inflation remains
unchanged at 2.7%, official figures have revealed.
The figure, for January, means inflation has stayed
above the government's 2.5% target for the third month in a row.
The headline rate, including mortgage interest
payments, also remained unchanged at 2.9%, figures from the Office for
National Statistics showed.
Some economists had expected underlying inflation to ease slightly to