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Recession Easing, but Many Americans Still Afraid to Spend

December 21st, 2009 at 03:47am Under Economy Report

This is the VOA Special English Economics Report.

Stock prices took a roller-coaster ride this week — down one day, up the next. Experts say the situation is likely to continue until investors feel more sure about signs of economic recovery.

Some investors worry that Americans are not doing enough to lift the world’s largest economy out of recession. This is back-to-school season. But the National Retail Federation says school-related sales are down from last year.

MOTHER: “I don’t want to spend more than twenty dollars for a backpack.”

Sale signs on a store window in Santa Monica, California

Consumer spending is seventy percent of the economic activity in the United States. But consumer confidence — a measure of trust in the economy — fell unexpectedly this month. A lot of people feel uneasy about spending after the longest recession since World War Two.

WOMAN: “My situation is fine, but I am still aware that I could lose my job at anytime, and there’s still no definite security. That’s why I am paying attention more.”

Jobs have continued to disappear, though at slower rates. Record numbers of Americans are in danger of losing their homes. And the days of easy credit are gone. The Treasury Department says lending fell for a fifth month at banks that received government aid.

Still, some economists say other signs in the economy show that the recession is over already, or will be soon. Then the question is: how fast or how slow will the recovery be?

The recession may also be ending in Japan. Japan has the world’s second largest economy. Officials reported this week that the gross domestic product grew nine-tenths of one percent between April and June. It was the first growth in Japan’s economy in fifteen months.

But there are concerns that Japan and the United States could face a “double-dip” recession. That is a period of growth followed by another downturn. Japan will hold national elections on August thirtieth. Public opinion surveys show the main opposition party in the lead.

In Europe, reports last week showed a year of recession easing in Germany, its largest economy, and in France. Both countries had growth of three-tenths of one percent between April and June. That news raised hopes for an early recovery among the sixteen countries  that use the euro.

Still, the chief economist of the International Monetary Fund says the effects of the world economic crisis will hurt both supply and demand for years to come. Olivier Blanchard says even after recovery, the global economy may not produce as much as it did before.

And that’s the VOA Special English Economics Report. For the latest news, and for transcripts and podcasts of our reports, go to voaspecialenglish.com. I’m Steve Ember.

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Global Recession Hits the Developing World

March 21st, 2009 at 06:34pm Under Economy Report+ VOA

This is the VOA Special English Economics Report.

Both the World Bank and the International Monetary Fund expect the world economy to shrink this year for the first time since World War Two. As recently as January, the I.M.F. had predicted growth of one-half percent. But this week its chief, Dominique Strauss-Kahn, said the world has entered what he called “a great recession.”

A trader reacts last week to a fall in the value of South Korea’s currency, the won

A new World Bank report says the recession may hurt the developing world the most. Those countries depend on trade for economic growth. But world trade is expected to fall at the fastest rate in eighty years.

East Asia has been hardest hit. In February, exports from China fell twenty-six percent from a year ago.

Rich nations are expected to borrow heavily in world credit markets to finance spending at home. But investors are demanding very high returns if they are willing to lend to the developing world at all. Jeff Chelsky, a World Bank senior economist, says investors are avoiding higher risk debt in a flight to quality.

The bank estimates that up to three trillion dollars of public and private loans in developing countries must be repaid this year. Some nations have enough foreign currency reserves, but others will struggle to find new financing to pay their existing debts.

The World Bank estimates that developing nations will need between two hundred seventy and seven hundred billion dollars in financing. The amount depends on the depth of the recession.

The I.M.F. is seeking to expand its lending ability. And World Bank President Robert Zoellick has called on rich nations to put some of their economic recovery spending into a crisis fund to help poor countries.

Bank economist Jeff Chelsky says the poorest countries are in the greatest danger. They cannot borrow in credit markets and they depend on exports of commodities like crops or minerals. But falling commodity prices mean they now depend more than ever on foreign aid.

Finance ministers and central bankers from major industrial and developing countries meet this weekend outside London to discuss the financial crisis. President Obama wants all countries in the Group of Twenty to coordinate their separate efforts to strengthen their economies. But European Union officials have rejected American calls to spend more.

There was some good news this week, including better-than-expected reports on spending by Americans in January and February. And financial stocks rose after Citigroup reported a profit for those two months.

And that’s the VOA Special English Economics Report, written by Mario Ritter. I’m Steve Ember.

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