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US Consumer Spending Up

US consumer spending has shown a marked improvement over the course of August over the course of August in the face of credit crunch conditions and a deteriorating housing market, according to official figures released today.

In figures released by the US Commerce Department, consumer spending over the course of August was said to have risen by 0.6%, up from an increase of 0.4% in July and the most significant rise in around four months, despite economic results that would imply the contrary.

Simultaneously, consumer prices rose by just 0.1%, a stable increase in line with that of the last run of six months, meaning the US economic rate of inflation is on track not to cause any problems for the Federal Reserve at this time.

The boost in sales is thought to be partially down to the slash in interest rates initiated by the Federal Reserve, which also saw banks breathe a sigh of relief, and the price of variable mortgages decrease to the benefit of the public at large.

And with the likelihood of further rate cuts round the corner, consumer attitudes appear buoyant in the face of wider economic problems stemming from the housing market situation, which has also brought widespread instability to the global marketplace in recent months.

The collapse of the US sub-prime sector had driven many lenders to the brink of financial ruin, virtually forcing the Federal Reserve to cut rates in that manner. Analysts are now predicting that further rate cuts are around the corner, which they say will inevitably help increase consumer spending and fuel business growth as a positive side effect of helping ease the liquidity situation.

However, the Federal Reserve will be keen to closely monitor growth within the US economy with a view to preventing any inflationary threat which could pose problems if rates were to continue to be cut further.

Demand For US Durables Down

The level of demand for durable goods from the US has seen its most significant decline for over seven months, according to official figures released today, reflecting ongoing problems with the US economy.

In figures released by the US Commerce Department, the level of orders for durable goods, which are generally high-ticket manufactured goods like household appliances and aircraft, had fallen by almost 5% - a more significant drop than most analysts had forecast.

Today’s figures have been taken as further indication that the troubles arising from the US housing market have now spread to the wider US economy, which could suggest a wider downturn is on the horizon, with the potential to impact upon consumer spending and employment figures later down the line.

The news comes just days after Alan Greespan, former Chairman of the Federal Reserve, predicted with a 50% chance that the US economy would plunge into recession over the course of 2008 as a direct result of problems with the housing market and the sub-prime lending sector.

Whilst many analysts have come short of predicting a full-blown recession, few have disputed that the US economy could be in for a rocky year in 2008 as it deals with the fallout of the sub-prime lending crisis and a business-adverse credit crunch.

The news prompted positive trading on the Dow Jones through the early morning, as a likely indicator that the Federal Reserve could be poised to cut interest rates further when it meets next month.

The Federal Reserve this month slashed interest rates by half a percentage point from 5.25% to 4.75% in an attempt to fuel growth and ease strained lending markets.

With today’s figures, many analysts and investors are now anticipating that even more interest rate cuts could be on the way as an emergency measure to try and halt the onset of a deeper recession in the US economy.

Dollar Further Down Against Euro

The value of the dollar has fallen yet again to a new all-time record low against the euro, after ongoing unrest within the US economy has led to more widespread sell offs on international currency exchanges.

With US consumer confidence down to its lowest point in over two years, and average US house price plummeting off the back of a continuing demand shortage in spite of the Federal Reserve interest rate cuts, investors are turning away from the dollar, seeing its value fall even further against the euro.

Analysts have also added that the Federal Reserve could be poised to cut interest rates even further in an attempt to get the US economy back on track - news which has served to further dissuade investors in the dollar.

Simultaneously, the euro has been increasingly gaining in strength over the last few sessions with the promise of a central bank interest rate rise throughout the eurozone and strong growth forecasts from France sufficient to attract investors to the single currency.

In early Wednesday trading, the value of the euro was up to $1.4163 - an all time high - before slipping back to just over $1.41 by mid-morning throughout European markets.

The ongoing strength of the euro is causing problems for those exporting outwith the eurozone, as they are forced to slash prices in order to remain competitive.

Meanwhile US exports are enjoying something of a revival, particularly within the eurozone as a result of the weakened currency, which has seen US manufacturing industries performing well in recent weeks.

Analysts and currency traders are now further awaiting results from the US in order to make their next investment decisions. Depending on the outcome of the report on durable good sales due at the end of this month, trading in the dollar could plummet further towards the danger $1.45 mark.

US Consumer Confidence Takes A Knock

US consumer confidence has fallen beyond analyst expectations over the month of September, to some of its lowest levels over the last two years as the continued sub-prime sector fallout hinders market performance.

The US Conference Board Confidence Index reflected a downturn in investor confidence over the course of the last month, a phenomenon it attributed to a strained global credit environment and uncertainty particularly in relation to employment markets.

The confidence index was down from 105.6 in August to 99.8 in September, sharply below analysts’ expectations of a fall to around 104.0 over the same period and now at its lowest level since late 2005, reflecting a dull outlook for economic health over the immediate future.

The ongoing unrest from within the sub-prime sector has undoubtedly had a part to play in the bleak consumer outlook, with credit conditions less than favourable and markets wholly unsettled as a result of the ongoing liquidity shortage.

As a result, consumers and businesses have adopted significantly more prudent attitudes towards spending and investing in light of the growing uncertainty that exists on a global level, which will likely have a cyclical effect on growth within the US economy over the medium term.

The news comes almost immediately off the back of a warning from former Chairman of the Federal Reserve that the US economy is en route to a recession through 2008 as a direct result of related sub-prime problems.

Consumer confidence bears particular importance within the US economy given that domestic spending accounts for over 60% of national economic activity, hence a bleak consumer outlook can have a heavily detrimental effect on the US economy in the long run.

Despite the Federal Reserve’s interest rate cuts of last week, consumers still seem yet to benefit from any confidence boost or bounce from the news, although many analysts are predicting this is more likely to be felt in next month’s figures.

Dollar Continues To Weaken Against Euro

The value of the dollar has fallen to yet another record low on world currency exchanges against the euro, continuing its downward trend of recent weeks through another day of poor investment trading.

The value of the dollar has continued to plummet since the US Federal Reserve announced its decision to cut interest rates to 4.75% in order to ease financial markets and stimulate economic growth. The resulting currency sell-off has seen the dollar fall to all-time record lows against the euro, which has conversely see several weeks of strong performance as a result of the ongoing promise of a European Central Bank interest rate rise.

In trading through Monday, the euro had reached the dizzying heights of $1.4130, an all time record before slightly weakening through the rest of the day. The news comes as no surprise to industry analysts, many of whom have feared that prolonged euro exchanges of $1.45 may be realistic before too long.

The news is beneficial for US exports, making them more affordable against other world currencies. As a result, US manufacturing firms have seen strong growth in output and new orders in recent weeks, as a direct response to the cheaper cost of exporting goods.

However the weak dollar is causing problems for importers and those firms that rely on international custom in services and foreign supply in manufacturing sectors. With one dollar buying less foreign currencies, more dollars are required to sustain operations at their previous level.

Many firms in Europe have warned that the high value of the dollar could result in widespread unemployment in those manufacturing businesses dealing outwith the eurozone, which many analysts are fearing could further compound the effects of the global credit crunch in bringing on a recession.

With the dollar very much a face value currency for business transactions, world commerce is already feeling the effect of a consistently weakening dollar.

Fed To Keep Its Ear Close To The Ground

The Federal Reserve has announced that it intends to keep a close eye on individual economic indicators as they are released over the course of the month, to enable it to respond promptly to any changes in the economic climate.

Board Governor Kevin Warsh is quoted as saying it is the Reserve’s intention to stay in line with indicators from the market in order to determine the best course of action for interest rates next time around, to help ensure markets are presented with the best possible chance of ongoing stability and long term recovery.

He also added that the Federal Reserve would not engage in rescuing any specific banks that came for help, unlike the Bank of England which has come under fire this week for its unprecedented support of lender Northern Rock.

By taking a focus on growth, employment and inflation figures over the month, the Federal Reserve has proposed to engage in a more ‘grass roots’ interest policy making process over the coming months, to enable it to help nurse the US and the global economy ultimately back to health.

The US economy has suffered rocky times over the course of this year so far, starting with a slowdown in housing sales and an increase in risky, high yield/high risk sub-prime mortgages.

As the Federal Reserve moved to raise interest rates to control inflation, the number of sub-prime borrowers finding themselves in trouble skyrocketed, which has led to an unprecedented level of repossessions, leading to credit crunch conditions across the globe.

Many analysts have praised the Federal Reserve’s move to slash rates by a half a percent this week, which is designed to take some pressure off the sub-prime sector and allow banks, and the economy, to regain some momentum to carry forward on the road to recovery.

Sub-Prime Losses Could Exceed ‘Pessimistic’ Forecasts, According To Bernanke

Losses arising from over exposure to the sub-prime sector will rise in excess of even “the most pessimistic” forecasts, according to a statement made today by the Chairman of the Federal Reserve.

Chairman Ben Bernanke made the announcement to a US finance committee meeting which suggested that the extent of the sub-prime crisis was further beyond previous analyst expectations, sending trading on global markets down significantly as a result.

The sub-prime sector has been the source of endless worry and heartache for lenders in the US and across the world. With banks becoming over-exposed to the risky sub-prime sector, many have felt the heat as foreclosures and repossessions from rising interest rates have tied up liquidity and prevented ordinary lending practices.

The announcement came just two days after Ben Bernanke announced a significant cut in interest rates in the US, taking the basic rate of lending down to 4.75% from 5.25% in a bid to bring more stability back to global financial markets.

The Federal Reserve also announced their intention to invest more funds directly into the finance sector to ease the credit worries plaguing the markets, a move which has won plaudits from industry analysts and experts across the world.

Recent quarters have seen an increase in foreclosures of around 50% on normal rates with high interest rates pushing knife-edge sub-prime mortgages beyond the realms of affordability, leaving many banks with significant liquidity shortages to continuing their lending operations.

Bernanke announced that the full extent of foreclosures and repossessions could be much more significant than analysts had previously suggested, which could still have an even more serious fallout for the wider US economy as lenders begin to feel the full effect of a higher cost of borrowing and lack of available liquidity.

The Federal Reserve’s movements in recent days have been well received by lenders and markets, as having the potential to help ease current market jitters over the medium term.

US Inflation Down

The US rate of inflation has fallen slightly over the course of August, according to official figures released today, waiving most critics fears that inflation could prove a problem for the Federal Reserve.

Over the month of August, inflation fell down by 0.1% as a result of plummeting energy costs throughout the US, reflecting an improving situation in the economic outlook for the short to medium term.

However the US consumer prices were seen to have risen by 0.2% with food and energy stripped from the equation, which is pretty much in line with analyst forecasts prior to the announcements, reflecting the significance of the fall in energy prices over the period.

The news comes twenty four hours after the Federal Reserve announced its decision to slash interest rates by two increments down to 4.75%, in a bid to bring stability back to the sub-prime lending market and world stock exchanges after recent weeks of turmoil.

Critics had warned that the Federal Reserve’s new interest rate policy would further boost inflation, which was already proving something of a problem for the health of the economy.
However, today’s figures reflect that whilst inflation may be problematic, it is not yet at the rate many had previously thought.

Many analysts are now of the opinion that whilst the interest rate cut may stimulate inflation in the medium term, it will be more beneficial in reducing unrest in the sub-prime sector and global markets over the coming months.

Meanwhile, separate figures released today suggested that the US housing market is even further in decline, with new home builds are their lowest rate in over a decade.

It is hoped that the cheaper rate of borrowing will help increase demand for housing in the sector that has been stagnant for several years.

Fed Cuts Interest Rates

The Federal Reserve has today announced its decision to cut interest rates by a half a percent in a bid to bring some further stability to world markets and enhance the US economic recovery.

US interest rates are set to fall from their previous 5.25% down two increments to 4.75%, which has ultimately seen shares on the stock markets rise to their highest point in over four years on the back of hopes that the worldwide economy could be taking steps towards improvement.

This is the first time that interest rates have been cut in well over a year, despite heavy pressure from analysts across the world in order to help redress the volatility caused by the sub-prime lending market.

The sub-prime lending market, once seen as an attractive investment prospect, has led to widespread over exposure to liquidity-intensive foreclosures and repossessions, ultimately breeding a credit crunch environment.

As a result, business and economy growth has undoubtedly been hindered with banks less willing to finance projects, and increasing the rate of interest they charge to one another. The situation has also led to widespread unrest in global stock markets as investors have been reluctant to move outwith the realms of absolute prudence.

Whilst a small minority of analysts wanted the Federal Reserve to hold rates in order to focus on eradicating the inflationary problems the economy has been facing, generally the news has been well received today within the US.

The mainstay of economic opinion was that a cut in interest rates would help reintroduce some form of stability, easing the sub-prime lending problem by reducing the cost of variable mortgage repayments.

The news looks set to bring some form of stability back to investment markets, as it should also help ease the liquidity problems currently facing lenders across the US.

Sales Results Fall Below Expectations, As Sub-Prime Begins To Spread

The wider US economy could now be suffering the effects of the sub-prime lending crisis, according to figures released towards the end of last week.

The publication of retail sales figures and industrial output figures were widely anticipated last week as analysts tried to establish whether the sub-prime crisis had spread to the wider economy.

Their fears appeared to be confirmed when consumer sales rose by only 0.3% in spite of prediction of growth of a half a percent. The figure also comes in as a decrease in sales from July, which equalled analyst forecasts for this month at 0.5%.

Additionally, industrial output in the US economy over the course of August rose at its slowest rate in three months at just 0.2%, suggesting that manufacturing firms could be feeling the brunt of the sub-prime fallout.

The sub-prime sector has been the source of untold woe for mortgage lenders and banks across the world. With these figures, it would now seem that it is finally beginning to take its toll on wider economic spheres.

With excessive lending to those with poor credit histories, banks in the US began to feel the pinch as interest rates rose. As defaults and repossessions grew, so too liquidity shrunk as banks turned to lengthy litigation in foreclosure.

Furthermore, with inter-bank lending and assignation of sub-prime exposure, the problem spread to banks across the globe, requiring assistance from most major central banks to restore some stability.

As a result, banks have been less willing to lend and businesses less willing to invest, resulting in the feared wider economic impact that today’s results show, which is expected to have an overall adverse effect on growth and could potentially result in a global recession.

The news was not well received on the Dow Jones, which saw significant sell offs as a result of dented investor confidence and the bleaker outlook for the US economy.

Dollar Continues To Trade Down

The dollar has fallen to near record lows against the euro as the US economy is poised to hear data that indicates the depth of the sub-prime lending crisis.

The value of the dollar was at $1.3870 to the euro among fears of the pending outcome of retail sales data, which analysts are predicting will hold the key to the extent of the damage in the sub-prime sector.

Further, with the prospect of an interest rate cut to bring stability to the markets, currency investors have turned away from the dollar in trade through Asian markets over the course of today.

The retail sales data is expected over the course of this week, and analysts are suggesting that it could indicate whether or not the trouble in the sub-prime crisis has had a bearing on consumer buyers.

The results of the data are likely to have a significant impact on trading on the US markets and indeed across the world, with analysts literally hanging on the results as providing some indication of the range of the troubled market.

Analysts have already suffered the impact of an unexpected loss of 4,000 jobs last month, despite predictions that employment figures would actually rise by 11,000 over the same period, sending market trading into turmoil and significantly hindering investor confidence for the short term.

Forecasts are currently suggesting that sales will rise by 0.4% from the month, up from 0.3% last month. Any rise short of this is likely to send markets into further turmoil, as an indication that over exposure to the sub-prime sector could have spread to consumer sectors.

With expectations suggesting the Federal Reserve could cut rates by two steps down to 5.25% and the potential for further market upset, the dollar has weakened significantly over consecutive sessions, taking it near record lows.

Dollar Slides Even Lower Against Euro

The dollar has fallen even further down against the euro through trade yesterday, as currency investors continue to fear the implications of a worldwide credit squeeze on the US economy.

Through trading yesterday the dollar was down as low as $1.3920 per euro, gathering momentum from yesterday’s record lows. With markets continuing to trade over volatile US economic conditions, analysts are predicting that the dollar could continue to fall over the next few weeks.

The dollar has seen seven consecutive drops across trading sessions over the last week as a result of fresh hopes that the Federal Reserve is poised to slash interest rates, which would ultimately fuel an economic recovery to a certain extent.

Additionally, the ongoing economic climate in the US as a result of the continuing housing market situation has turned investors off US investments, which has seen the value the dollar plummet in recent days.

The European Central Bank also suggested yesterday that Eurozone interest rates could rise after markets settle, leading to heavier investment in the euro as opposed to the dollar, further suppressing the dollar.

And with the European economy buoyed today off the back of strong French economic figures, many analysts are predicting the euro could soon break the landmark $1.40, which would see the dollar reach its lowest ever point against the euro, and underline the underlying weakness of the dollar and the US economy as a whole.

The sub-prime saga is continuing to weigh down the US economy and the dollar, with investment becoming increasingly hard to come by as banks look to preserve liquidity.

Analysts are predicting that until the Federal Reserve take measures to improve stability, markets will remain volatile. Ultimately, this will come at the expense of the value of dollar, as interest rates look to be cut.

Euro Reaches Record High Against Hapless Dollar

The dollar has closed down a record low against the Euro, surpassing the previous record set on 24 July of this year with the Federal Reserve poised to slash interest rates to bolster the economy.

The dollar has fallen to $1.3880 to the euro, beyond the $1.3852 record low set in July off the back of increasing speculation that the Federal Reserve will cut interest rates at the next opportunity, seeing the sixth consecutive weakening against the euro.

The turbulent housing market has been at the centre of the dollar’s bad fortune along with increasingly volatile stock market trading, seeing investment in US business significantly weak to the detriment of the economy as a whole.

The Federal Reserve are set to meet next week to discuss interest rate policy for the next month, with recent market volatility and the threat of a global credit crunch likely to be at the forefront of any decision.

With the sub-prime crisis still in full swing, any cut in interest rates will stabilise lending markets by reducing the cost of variable mortgage repayments, which should have the effect of reducing the number of foreclosures and defaults, as one step towards remedying the shortage of liquidity.

Additionally, cutting interest rates will make borrowing more affordable for consumers and businesses alike, which prompts increased consumer spending and business growth. Analysts are predicting that should the Federal Reserve cut rates as expected, the US economy should see some strong growth over the next few months, with some form of stability likely to return to the troubled economy.

The Federal Reserve is poised to meet to discuss interest rate policy next week. The US main interest rate currently stands at 5.25%, and any cut would see interest rates fall for the first time since 2003.

US Trade Deficit Narrows

The US trade deficit has fallen to its lowest point in over four months off the back of record food and manufacturing exports, according to official figures released today.

In the figures released by the US Commerce Department, the trade deficit was said to have decreased from $59.4 billion in June to $59.2 billion in July - reflecting a 0.3% decrease over the course of the month.

The trade deficit reflects the difference between exports and imports in an economy, where imports are greater than exports. Generally speaking, it is more desirable for economic growth to operate as near to a trade surplus as possible, showing a step in the right direction for the US economy.

Despite higher fuel costs as a result of the rising cost of crude oil, strong car and food exports have moved the deficit closer to positive territory, as a move towards economic recovery after troubled times over the last few months.

Furthermore, with oil prices set to decrease after oil production and supply increases later this year, the US trade deficit could shrink even further before 2007 is over.

High exports were the main factor in shrinking the trade gap, up 2.7% on the month for the fifth consecutive increase to $137.7 billion. Analysts have suggested that the continued weak dollar is having a positive effect on international exports, which dragged the deficit closer to positive figures.

Total US imports over the month of July were up at a record $196.9 billion, in spite of the overall closing of the gap.

The news was well received on global stock markets today, which were already buoyant after the news of OPEC’s shock decision to increase oil output as of November of this year, which looks set to enhance economic growth and lower manufacturing costs globally.

Countrywide To Slash Jobs

Countrywide Financial, the US’s biggest mortgage lender, is to make substantial job cuts, amounting to up to one fifth of its current workforce.

Countrywide had been one of the worst hit lenders by the ongoing sub-prime disaster, which continues to haunt banks throughout the US and indeed across the world.

The job cuts, to extend to around 12,000, are set to reflect significant losses from rising defaults and the current negative US housing market which has seen the company share price fall by half in recent months.

Official projections from Countrywide forecast a decrease in new mortgages by up to 25% through 2008 on 2007, after what has already been a bad year for mortgages and mortgage lenders.

As interest rates have risen, the widespread practice of over-lending to the sub-prime sector has left many banks and lenders across the world struggling for liquidity. With cash tied up in mortgages that homeowners can’t afford to repay, banks have learned the tough lessons of over exposure to risk.

With repossessions and foreclosures dramatically up at present, buyers are even keener to stay away from the over-supplied US housing market in favour of renting accommodation, amidst fears that the economy as a whole is continuing to perform below par.

House price inflation has almost completely ground to a halt over the last few years, reflecting the extent of imbalance within the housing market and encapsulating the degree of difficulty faced by those exposed to the sub-prime

With the number of new home buyer enquiries falling constantly, and top banks forced to borrow money or sell assets to fund daily cash flow, the situation has led to a sharp fall in investor confidence with an undoubted knock-on effect on the wider economy.

Countrywide Financial have already cut 1,400 jobs as a result of recent events, signifying a marked reduction in staff and labour costs.

US Jobs Slowdown Prompts Fear Of Wider Economic Problem

The number of jobs within the US economy has fallen through August, according to figures released today which analysts predicted would have shown a substantial increase.

The figures released today by the US Department of Labor reflected a reduction of 4,000 in the US workforce, sparking fears that the wider economy was beginning to show the effects of the sub-prime situation.

Analysts were shocked at the figures released today, with the figure expected to be somewhere closer to an increase of 11,000 jobs within the economy over the same period.

The Department of Labor cemented the figures by reducing its forecast for the number of new jobs created in June and July by over 81,000, adding to the suggestion that the economy could be in for a rough few months.

This is the first loss of jobs overall within the US economy for over 4 years, since when in 2003 the number of jobs decreased by 42,000, reflecting the potential depth of the situation for the wider US economy.

The news hit the world markets hard, with investors already lacking confidence in stock investments. Just twenty-four hours after the former Federal Reserve Chairman suggested the current climate is reminiscent to the run-up to previous recessions, markets have closed heavily down through this afternoon.

The fall is being put down to expanding pressures from within the sub-prime lending sector. With banks less willing to lend money to one another, and credit becoming less readily available, businesses are expected to feel the brunt of harsh banking trends through shorter credit lines and less ambitious growth support.

With the sub-prime sector still far from clarified, the situation looks likely to continue to have an impact on the wider economy, with business and economic growth slowed significantly as a result.

US Supply Shortages Boost Oil Prices

Oil prices have today risen beyond $77 per barrel after official figures have shown a significant fall in US crude oil reserves beyond analyst’s expectations.

With oil prices nursing around the high $70 mark for some months now, the news of falling stockpiles in the US has driven the price of oil even closer to breaking the $80 boundary. The current price, whilst high, still falls short of the record highs of $78.77 seen in August this year.

Long term supply shortages and power outages at US refineries had been previously held responsible for the high price of oil. With OPEC having been predicted to increase output until now, analysts had thought that prices would tumble.

However, the prospect of OPEC increasing output has now declined, and the significant decreases in US oil reserves have sent oil prices spiraling to reflect the greater supply shortage than had previously been expected.

The high price of oil further compounds many analysts’ views that the world economy could be in for recession. Playing an instrumental role in the health of the global economy, rising oil prices push up inflation across business and consumer goods and can seriously impact upon economic growth.

And with financial markets already in turmoil and the tightening credit environment, economies could feel the brunt of rising oil prices more severely than was previously the case, leading to significantly less stability in markets across the globe.

OPEC, the cartel of nations responsible for 40% of world oil exports, are expected to meet later next week to discuss supply and demand for world oil as a market regulator, which analysts are hoping will take into account growing demand from Eastern markets and idle production capacity, which would lead to a fall in the price for crude oil.

US Stock Markets Lead To Global Sell Offs

The US stock markets have today returned to poor trading, with significant losses on both exchanges leading to worldwide sell offs.

The results came off the back of news that the US economy is in for a significant slowdown over the remained of this year, according to figures released today.

The impact of the sub-prime lending market, with the added weight of the sluggish housing market is expected to make its full extent known over the remainder of this year, still with no indication as to the potential damages lenders could be facing.

Furthermore, with sub-prime exposure still growing in some areas, investors have lost all confidence after what has been a few days of modest but volatile positive trade.

The leading exchange in New York, the Dow Jones traded well down, losing 143.39 points on the day to close at 13305.5 at the bell.

The smaller, tech-based NASDAQ exchange also traded poorly, losing 24.29 points to close at 2606.0, compounding the negative trading from its larger sister exchange. The S&P 500 exchange was down 17.13 points to 1472.3.

The knock-on effect of this was to stimulate major sell offs across European markets, which until today had enjoyed some relatively good trading performances this week.

In London, the FTSE 100 was down by 106.10 points, closing 6270.7 on the index through the close of play, reflecting the same extent of the losses suffered stateside after the gloomy analysis of the future of the worldwide economy.

The CAC 40 exchange in Paris was among the day’s biggest losers, shedding 121.17 points through trade to close at 5551.6.

Meanwhile in Frankfurt, the Dax exchange closed down 133.74 points to 7588.0, with analysts predicting markets could trade positively after interest rate decisions from London and Brussels are announced tomorrow.

US Manufacturing Remains Buoyant Despite Sub-Prime Calamity

The manufacturing sector in the US economy has continued to show strength over August, according to official figures released today.

The figures released by the Institute for Supply Management reveals a slight fall in their manufacturing index from 53.9 to 52.9, with analysts widely predicting a round 53.0 to be the outcome of the day. While the figure remains over 50, the manufacturing sector is growing, whereas number below 50 indicate contraction, suggesting that the US manufacturing sector is growing in line with the wider economy.

Whilst the news does reflect a slowdown, it also suggests that US manufacturing has remained relatively strong at a time when the rest of the economy is suffering the brunt of the sub-prime calamity.

With foreclosures and repossessions expanding too quickly for banks to react, mortgage lenders are being left short of liquidity. As such, inter bank borrowing is at an all time high in terms of cost, with credit becoming more of a premium worldwide.

As a result, many businesses throughout the US will find it increasingly hard to finance growth and expansion, which could have a knock-on effect on employment and the direction of the economy as a whole. With mortgage lenders on the verge of insolvency, it is thought the economy as a whole could be in for recession, in the worst case scenario, with adverse growth and performance almost a certainty.

However, with today’s news comes the reflection that the US is not yet down and out, suggesting that the sub-prime is either unlikely to have any impact at all, or more realistically, that impact has not yet been felt across the broader economy.

The news was well received on the Dow Jones and NASDAQ exchanges today, which both traded strongly after the news was announced.

US Workforce Ranks Top For Productivity

US employees came out on top of a survey of workforce productivity per person by nation, according to a report released today by the International Labour Organisation.

The survey covered the wealth created by each employee on average as a measure of production output, before compiling a leader board of nations by value. The annual report has seen the US stalk the top of the table for several years, remaining fixed a number one through 2006 with longer working hours than most other developed nations.

The US topped the table for 2006, with each worker coming in at having produced $63,885 of wealth. Analysts have suggested that the impact of longer working hours has led to the US workforce taking the coveted top spot.

The Republic of Ireland came in second place in the rankings, with average output of $55,986 per person over the course of 2006, whilst East Asian nations made the greatest progress from the last survey.

The figure is calculated by dividing total national output by total employment numbers, producing an average value per employee. In a different measure of productivity, which sees value added per hour, the US still maintained a high ranking, coming second only to Norway.

With the US economy facing significant threats from the rocky sub-prime sector, and analysts fearing the economy is performing below other major world economies, the news today comes as consolation to investors, and a sign that the market could be on the road to recovery.

The news was well received on the stock exchanges, with the Dow Jones growing considerably by the end of the day. Analysts are predicting that with interest rate cuts at the Federal Reserve likely, the US economy could see a further turnaround over the coming months, despite the ongoing sub-prime crisis that has thus far hampered growth.

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