pre capitalism ... socialism and communism of 21 centuary
Friday, September 28, 2007
Thursday, September 27, 2007
Nepal making no progress in business and economic reforms: WB report
Nepal has ranked 111th in the list of 178 countries in terms of making progress in business and economic reforms, a new research by World Bank says.
The report entitled 'Doing Business 2008' indicates that the environment for starting business has deteriorated. Last year, the indicators showed Nepal at 60 which has decreased to 52 this year.
Similarly, Nepal's rank has dropped in areas such as registering properties, getting credits, protecting investors, paying taxes and trading across borders.
Nepal ranks fifth after Maldives, Pakistan, Sri Lanka and Bangladesh, but is ahead of three other South Asian nations - Bhutan, India and Afghanistan. The indicators show environment for employing workers is worst in the region while it tops the region in terms of registering properties.
The report says countries like Afghanistan, Bhutan, India, Pakistan and Sri Lanka of this region have made progress in doing business over the year
The report entitled 'Doing Business 2008' indicates that the environment for starting business has deteriorated. Last year, the indicators showed Nepal at 60 which has decreased to 52 this year.
Similarly, Nepal's rank has dropped in areas such as registering properties, getting credits, protecting investors, paying taxes and trading across borders.
Nepal ranks fifth after Maldives, Pakistan, Sri Lanka and Bangladesh, but is ahead of three other South Asian nations - Bhutan, India and Afghanistan. The indicators show environment for employing workers is worst in the region while it tops the region in terms of registering properties.
The report says countries like Afghanistan, Bhutan, India, Pakistan and Sri Lanka of this region have made progress in doing business over the year
Wednesday, September 26, 2007
Sunday, September 23, 2007
Small-town boy sings his way to Idol success
Seven months after he auditioned to participate in the third edition of Indian Idol, 24-year-old Prashant Tamang from Darjeeling clinched the title, beating the other finalist, Amit Paul, also 24.
Tamang and Paul together polled seven crore votes — the highest ever polled in a reality TV contest show, claimed hosts Mini Mathur and Hussain Kuwajerwala at the glitzy finale at Delhi's open-air NSCI ground. Special guests actor John Abraham and singer Sukhwinder Singh entertained and enthralled the 5,000-strong crowd — rooting for Tamang all evening — during the three-hour event.
"I thank my mother," said an emotional Tamang after Abraham announced him the winner. As soon as he did that, Tamang's sister came on stage and placed a traditional, Nepali cap on his head. "I thank the police force for allowing me (leave) to participate in the show, the judges and the public." Tamang won a Rs 1-crore contract with BMG for an album, a Maruti SX4 and a Sony Erricsson cellphone.
Paul too will take home the same car and handset model. Music director and one of the judges, Anu Mallik, gave Paul a bear hug as soon as the winner was announced. Earlier in the evening, Mallik made sure both finalists sang his songs — a total of seven — among the several Bollywood and Punjabi numbers that the two belted out. Former Idols Abhijit Sawant and Sandeep Acharya and this edition's final 11 contestants gave Tamang and Paul company on stage.
News channels played spoilsport by flashing the winner's name way before the 12 am embargo set by channel Sony Entertainment and production company Miditech.
Tamang and Paul together polled seven crore votes — the highest ever polled in a reality TV contest show, claimed hosts Mini Mathur and Hussain Kuwajerwala at the glitzy finale at Delhi's open-air NSCI ground. Special guests actor John Abraham and singer Sukhwinder Singh entertained and enthralled the 5,000-strong crowd — rooting for Tamang all evening — during the three-hour event.
"I thank my mother," said an emotional Tamang after Abraham announced him the winner. As soon as he did that, Tamang's sister came on stage and placed a traditional, Nepali cap on his head. "I thank the police force for allowing me (leave) to participate in the show, the judges and the public." Tamang won a Rs 1-crore contract with BMG for an album, a Maruti SX4 and a Sony Erricsson cellphone.
Paul too will take home the same car and handset model. Music director and one of the judges, Anu Mallik, gave Paul a bear hug as soon as the winner was announced. Earlier in the evening, Mallik made sure both finalists sang his songs — a total of seven — among the several Bollywood and Punjabi numbers that the two belted out. Former Idols Abhijit Sawant and Sandeep Acharya and this edition's final 11 contestants gave Tamang and Paul company on stage.
News channels played spoilsport by flashing the winner's name way before the 12 am embargo set by channel Sony Entertainment and production company Miditech.
Friday, September 21, 2007
India creating more jobs than China: Report
study conducted by the Organisation for Economic Cooperation and Development (OECD), a club of rich countries, has brought out the pleasant fact that India has been generating more jobs than any other BRIC - Brazil, Russia, India, China - country.
OECD's Economic Outlook 2007, released on Tuesday, has revealed that India generated 11.3 million net new jobs annually between 2000 and 2005, which is over 60% more than the 7 million new jobs created in China every year.
The performance looks even more impressive when contrasted with another emerging giant, Brazil. The South American biggie clocked 2.7 million new jobs created annually over the five-year period, while Russia saw some 700,000 new jobs added every year.
India, in fact, generated half the jobs in BRIC nations: a performance which must be way better than any of the OECD countries growing at a much slower pace.
At 22 million new jobs every year in BRIC countries - which make for over 45% of the global labour supply and account for a quarter of the world's GDP - faster economic growth meant that employment gains were more than five times faster that the 3.7 million new jobs created in the 30 developed countries that are members of OECD.
But the smart figures can hardly mask some of the underlying worries: the figures underline once again the continued problem of low employment elasticity - potential to create fewer jobs with every 1% increase in GDP - which has remained constant at 0.3%.
In other words, a stark reminder of the need to grow faster in order to create more jobs. Again, while the four economies have made good gains during the five years, the report pointed out that a large section remained unemployed particularly in rural areas.
It estimated that there were 130 million surplus workers in rural India. Besides, finding jobs for women and youth in India still remained a problem.
There was some more bad news packed in, with the report saying that at 50.5% the employment to population ratio in India was the poorest, compared with at least 66% in the other BRIC countries.
Though India can draw some solace from the fact that the unemployment rate was the lowest at 6% in 2005, issues related to under-employment and the veracity of data spoil the show. Over 94% of the work force in India was employed in the informal sector, which was much higher than the other three BRIC countries.
OECD's Economic Outlook 2007, released on Tuesday, has revealed that India generated 11.3 million net new jobs annually between 2000 and 2005, which is over 60% more than the 7 million new jobs created in China every year.
The performance looks even more impressive when contrasted with another emerging giant, Brazil. The South American biggie clocked 2.7 million new jobs created annually over the five-year period, while Russia saw some 700,000 new jobs added every year.
India, in fact, generated half the jobs in BRIC nations: a performance which must be way better than any of the OECD countries growing at a much slower pace.
At 22 million new jobs every year in BRIC countries - which make for over 45% of the global labour supply and account for a quarter of the world's GDP - faster economic growth meant that employment gains were more than five times faster that the 3.7 million new jobs created in the 30 developed countries that are members of OECD.
But the smart figures can hardly mask some of the underlying worries: the figures underline once again the continued problem of low employment elasticity - potential to create fewer jobs with every 1% increase in GDP - which has remained constant at 0.3%.
In other words, a stark reminder of the need to grow faster in order to create more jobs. Again, while the four economies have made good gains during the five years, the report pointed out that a large section remained unemployed particularly in rural areas.
It estimated that there were 130 million surplus workers in rural India. Besides, finding jobs for women and youth in India still remained a problem.
There was some more bad news packed in, with the report saying that at 50.5% the employment to population ratio in India was the poorest, compared with at least 66% in the other BRIC countries.
Though India can draw some solace from the fact that the unemployment rate was the lowest at 6% in 2005, issues related to under-employment and the veracity of data spoil the show. Over 94% of the work force in India was employed in the informal sector, which was much higher than the other three BRIC countries.
Wednesday, September 19, 2007
Tuesday, September 18, 2007
Monday, September 17, 2007
Greenspan: Fed Couldn't Stop Housing Bubble
The Federal Reserve tried to curb the explosive growth in the U.S. housing sector under Alan Greenspan's tenure, but each time it tried to raise long-term interest rates it failed, the former Fed chief said.
"In 2004 we tried to raise mortgage rates by moving the 10-year Treasury note up and we failed," Greenspan told CNBC, adding that the Fed failed again in 2005 and would have failed had it tried in 2002.
"We had no control, that I could see, which would have made any difference in the extent of the bubble that was emerging," he said. "And we concluded, as we did with respect to the stock market bubble in the 1990s, that … as I pointed out previously, every time we tried to tighten … we weren't trying to knock the stock market down. We were reacting to inflationary pressures.
Greenspan denied that the Fed inflated the economy under his leadership, saying that rate policy was reacting to price pressure.
"What we were responding to was global forces which every central bank was responding to," he said. "We had a continual, gradual decline in the rate of inflation. And, indeed, we were acutely aware that there are downsides to that, as well as upsides.
"The upsides were … world economic growth of unprecedented order. Hundreds of millions of people coming out of extreme poverty. And there are all sorts of plusses to it," Greenspan said. "But there are downsides. And the downsides are what we're experiencing in bubbles."
Possibility of Recession
On the possibility of the U.S. economy moving into a recession, Greenspan said. "the risks are probably, obviously larger now than back" in January, when he estimated a 1/3rd chance, but "not a great deal."
And Greenspan stressed that while current Fed Chief Ben Bernanke faces some of the same problems he did as chairman -- such as fear causing investors to disengage from the market -- Bernanke is facing a much tougher inflationary picture.
"We had the ability and flexibility if you so chose, to move (interest rates) down without worrying about the significant increases that may occur," Greenspan said. "It's different now. And it's very clear that the tradeoffs on inflation and growth are altered. And the Fed has to be far more careful about inflation now than when I was chairman."
The Federal Open Market Committee meets on rates Tuesday, with many in the market pushing for Bernanke to cut the fed funds rate by half a point.
Growth vs. Inflation
Greenspan said the economy still appears to be in a disinflationary mode, but there are signs in labor costs that inflationary pressures are starting to emerge.
"I'm saying that inflationary pressures will build up," he added. "And when I put the numbers together, we get, as I say, (interest rates on the 10-year Note) somewhere in the area of 8% or higher."
Greenspan also said an inflation target of 1% to 2% is unrealistic when the crutch of disinflation is gone.
"The Fed does have the capability of suppressing the type of inflation process which is going on," he said. "The difficulty is it will require very significantly higher interest rates. And when Paul Volker successfully suppressed inflation in the early 1980s, he was vilified."
"In 2004 we tried to raise mortgage rates by moving the 10-year Treasury note up and we failed," Greenspan told CNBC, adding that the Fed failed again in 2005 and would have failed had it tried in 2002.
"We had no control, that I could see, which would have made any difference in the extent of the bubble that was emerging," he said. "And we concluded, as we did with respect to the stock market bubble in the 1990s, that … as I pointed out previously, every time we tried to tighten … we weren't trying to knock the stock market down. We were reacting to inflationary pressures.
Greenspan denied that the Fed inflated the economy under his leadership, saying that rate policy was reacting to price pressure.
"What we were responding to was global forces which every central bank was responding to," he said. "We had a continual, gradual decline in the rate of inflation. And, indeed, we were acutely aware that there are downsides to that, as well as upsides.
"The upsides were … world economic growth of unprecedented order. Hundreds of millions of people coming out of extreme poverty. And there are all sorts of plusses to it," Greenspan said. "But there are downsides. And the downsides are what we're experiencing in bubbles."
Possibility of Recession
On the possibility of the U.S. economy moving into a recession, Greenspan said. "the risks are probably, obviously larger now than back" in January, when he estimated a 1/3rd chance, but "not a great deal."
And Greenspan stressed that while current Fed Chief Ben Bernanke faces some of the same problems he did as chairman -- such as fear causing investors to disengage from the market -- Bernanke is facing a much tougher inflationary picture.
"We had the ability and flexibility if you so chose, to move (interest rates) down without worrying about the significant increases that may occur," Greenspan said. "It's different now. And it's very clear that the tradeoffs on inflation and growth are altered. And the Fed has to be far more careful about inflation now than when I was chairman."
The Federal Open Market Committee meets on rates Tuesday, with many in the market pushing for Bernanke to cut the fed funds rate by half a point.
Growth vs. Inflation
Greenspan said the economy still appears to be in a disinflationary mode, but there are signs in labor costs that inflationary pressures are starting to emerge.
"I'm saying that inflationary pressures will build up," he added. "And when I put the numbers together, we get, as I say, (interest rates on the 10-year Note) somewhere in the area of 8% or higher."
Greenspan also said an inflation target of 1% to 2% is unrealistic when the crutch of disinflation is gone.
"The Fed does have the capability of suppressing the type of inflation process which is going on," he said. "The difficulty is it will require very significantly higher interest rates. And when Paul Volker successfully suppressed inflation in the early 1980s, he was vilified."
Sunday, September 16, 2007
Nepal´s GDP decelerated to 2.5 percent
Despite being optimistic in Tenth plan, Nepal´s Real Gross Domestic (GDP) product has declined in the fiscal year of 2006/7 compared to the previous year. As per the preliminary estimates of Central Bureau of Statistics, the growth of GDP decelerated to 2.5 percent at producer´s price in 2006/07 compared to a growth of 2.8 percent in 2005/06, said Ministry of Finance (MoF).
According to the current macroeconomic situation based on annual data of 2006/07, agriculture and non-agriculture production was estimated to grow by 0.7 percent and 3.6 percent respectively in the review year. The respective growths were 1.1 percent and 4.6 percent in 2005/06. The statistics of the MoF, shows that of the source of GDP, services sector increased by 4.1 percent on the back of growth of the real estate, rent and commercial services sector and financial intermediation sector by 8.6 percent. Similarly, transportation, storage and communication sector witnessed a growth of 8.1 percent while education sector scaled by 5.6 percent.
"Mining and quarrying sector and electricity, gas and water sector which increased by 6.0 percent and 3.2 percent respectively contributed to the growth industrial sector at a low level of 2.2 percent. Last year services and industries sector had increased by 4.7 percent and 4.3 percent respectively." the report says.
During the period, food grains production saw a decline as there was significant decrease in the production of paddy which is the major food grains of the country. The paddy production was heavily decreased due the insufficient rainfall at the time of paddy plantation. Similarly, the production of cash crops of potato and oil seeds also slipped.
The fiscal year 2006/07 which was the final year of the Tenth Plan had set an optimistic economic growth target of 6.2 percent and the normal growth target of 4.3 percent. However the actual average growth remained at 3.4 percent, a far less than the targeted normal growth rate during the Plan period.
The lower than expected economic growth was on account of less than satisfactory peace and security situation in the country, lower growth of private sector investment, hindrance in supply of goods due to strikes, a low level of capital expenditure by the GON and an adverse weather condition
According to the current macroeconomic situation based on annual data of 2006/07, agriculture and non-agriculture production was estimated to grow by 0.7 percent and 3.6 percent respectively in the review year. The respective growths were 1.1 percent and 4.6 percent in 2005/06. The statistics of the MoF, shows that of the source of GDP, services sector increased by 4.1 percent on the back of growth of the real estate, rent and commercial services sector and financial intermediation sector by 8.6 percent. Similarly, transportation, storage and communication sector witnessed a growth of 8.1 percent while education sector scaled by 5.6 percent.
"Mining and quarrying sector and electricity, gas and water sector which increased by 6.0 percent and 3.2 percent respectively contributed to the growth industrial sector at a low level of 2.2 percent. Last year services and industries sector had increased by 4.7 percent and 4.3 percent respectively." the report says.
During the period, food grains production saw a decline as there was significant decrease in the production of paddy which is the major food grains of the country. The paddy production was heavily decreased due the insufficient rainfall at the time of paddy plantation. Similarly, the production of cash crops of potato and oil seeds also slipped.
The fiscal year 2006/07 which was the final year of the Tenth Plan had set an optimistic economic growth target of 6.2 percent and the normal growth target of 4.3 percent. However the actual average growth remained at 3.4 percent, a far less than the targeted normal growth rate during the Plan period.
The lower than expected economic growth was on account of less than satisfactory peace and security situation in the country, lower growth of private sector investment, hindrance in supply of goods due to strikes, a low level of capital expenditure by the GON and an adverse weather condition
Saturday, September 15, 2007
Thursday, September 13, 2007
What, Me Worry? Most Shrug Off Subprime Mess
Americans remain relatively unconcerned about the subprime mortgage lending situation, and they say President Bush is doing a better job, according to the latest NBC News/Wall Street Journal poll.
When asked to rank several elements of the economy and whether they had been negatively impacted by them, respondents chose rising gasoline prices, health care costs and the federal budget deficit as their top concerns.
Jobs going overseas, the decline in home values and changes in the stock market were also ranked as having a somewhat negative impact by comparison.
Meanwhile, immigration issues and subprime mortgages ranked at the bottom of the list.
In fact, only 18% of those polled said the mortgage lending situation had a very negative personal affect on them. Fifteen percent said it had a somewhat negative affect, and 62% said it had had no negative affect whatsoever. Five percent of those polled remained unsure about the effect the mortgage situation might have had on them.
Rising gasoline prices, however, were a major concern for 57% of respondents. Thirty-one percent said they had been somewhat negatively impacted by gas costs, and 12% said they had not been negatively affected.
And when it comes to making their mortgage payments, 66% of those polled who own homes were not worried at all, 19% were only a little worried, 5% were fairly worried and 10% very worried.
These figures are virtually unchanged from the July NBC/Wall Street Journal poll, and even show a slight decline in concerns about making mortgage payments when compared to a May 2001 Fannie Mae National Housing Survey.
Respondents also were more apt to blame mortgage lenders than homeowners for the subprime problems, 48% to 27% respectively. Twenty-two percent of respondents said lenders and homeowners are equally to blame.
As for whether the federal government should ensure that people’s homes are not foreclosed upon because they took out adjustable rate mortgages, 59% said intervening is not the government’s role. Thirty-five percent said the government should step in, and 6% were unsure.
President Bush’s 33% overall approval rating in the latest poll shows a continuing rise since his all-time low in June of 29%, which ticked up in July to 31%.
Respondents remained unchanged since July on the way Bush is handling the economy, with 38% approving. But respondents also showed a significant increase in their approval of the president’s handling of Iraq, rising to 30% from July’s wartime low of 22%.
Congress likewise held steady in its approval rating at 23%.
When asked to rank several elements of the economy and whether they had been negatively impacted by them, respondents chose rising gasoline prices, health care costs and the federal budget deficit as their top concerns.
Jobs going overseas, the decline in home values and changes in the stock market were also ranked as having a somewhat negative impact by comparison.
Meanwhile, immigration issues and subprime mortgages ranked at the bottom of the list.
In fact, only 18% of those polled said the mortgage lending situation had a very negative personal affect on them. Fifteen percent said it had a somewhat negative affect, and 62% said it had had no negative affect whatsoever. Five percent of those polled remained unsure about the effect the mortgage situation might have had on them.
Rising gasoline prices, however, were a major concern for 57% of respondents. Thirty-one percent said they had been somewhat negatively impacted by gas costs, and 12% said they had not been negatively affected.
And when it comes to making their mortgage payments, 66% of those polled who own homes were not worried at all, 19% were only a little worried, 5% were fairly worried and 10% very worried.
These figures are virtually unchanged from the July NBC/Wall Street Journal poll, and even show a slight decline in concerns about making mortgage payments when compared to a May 2001 Fannie Mae National Housing Survey.
Respondents also were more apt to blame mortgage lenders than homeowners for the subprime problems, 48% to 27% respectively. Twenty-two percent of respondents said lenders and homeowners are equally to blame.
As for whether the federal government should ensure that people’s homes are not foreclosed upon because they took out adjustable rate mortgages, 59% said intervening is not the government’s role. Thirty-five percent said the government should step in, and 6% were unsure.
President Bush’s 33% overall approval rating in the latest poll shows a continuing rise since his all-time low in June of 29%, which ticked up in July to 31%.
Respondents remained unchanged since July on the way Bush is handling the economy, with 38% approving. But respondents also showed a significant increase in their approval of the president’s handling of Iraq, rising to 30% from July’s wartime low of 22%.
Congress likewise held steady in its approval rating at 23%.
Wednesday, September 12, 2007
Weekly Share Update : Nepse hits a new all time high. Rs 203.67b market capitalisation
Kathmandu, September 1: Share trading this week hit yet another all time high of 739.53 points as Nepal Stock Exchange (Nepse) index posted a rise of 13.67 points against last week’s 725.86 points. The sole secondary market which had a market capitalisation of six billion, when it started its trading floor in 1994, has this week registered a total of Rs 203.67 billion market capitalisation. Though the analysts have predicted a slow down in trading after automation of Nepse, it is posting a steady growth. The Nepse that opened at 725.86 points on Sunday faltered on the first two days and dropped to 723.71 and 723.04 points on the second and third day respectively. However, it bounced back to close at 739.53 points on the closing day. As usual, share prices of commercial banks, companies under hydropower and development banks groups dominated the trading floor this week, while the companies under finance and insurance groups became losers. The weekly turnover, however, decreased to Rs 156.7 million with 216,227 unit shares having been traded through 897 transactions, against the last week’s figure of Rs 192.3 million through the trading of 209,206 shares. The commercial banks group, which is the largest scrip by volume at the floor, registered a huge gain, as its index soared by 13.52 points. The group’s index climbed up to 824.91 points from the opening 811.39 points. The hydropower group, one of the aggressive performers in recent days, this week registered yet another impressive growth of 48.15 points, as its index rose to 1187.91 points from the opening 1139.76 points. It has been registering a double digit growth for the last couple of weeks. The development banks group bounced back with a huge gain of 96.52 points growth, one the largest growth in intra-group trading, to close at 631.01 points. The group had lost last week. Hotel group managed a marginal growth, as its index rose to 276.45 from opening 274. 54 points. On the other hand, finance group suffered a heavy loss of 19.27 po-ints and settled at 503.88 points. Insurance group is yet another lo-ser this week, as it’s index dropped by 4.15 points to close at 648.31 points. The manufacturing, trading and other groups, meanwhile, remained constant at 347.54, 162.03 and 818.12 points respectively throughout the week, as their shares were not traded. Nabil Bank Ltd outshone all others in terms of in monetary value this week, as the bank’s shares worth Rs 22,129,140 exchanged hands at the floor, while National Hydropower Co stood first in terms of the largest number of shares traded and transactions held for the week. The company’s 80,500 shares were traded through 58 transactions. The floor remained open for four days this week.
Monday, September 10, 2007
Fed Can Help U.S. Avoid Recession: Economists
Economists are clearly worried about the U.S. falling into a recession, but they also believe the Federal Reserve can help prevent one by cutting interest rates.
AP
A survey by the National Association of Business Economics showed economists believe recession is the biggest risk to the economy right now and that the Fed will cut rates by half a percentage point by March in the face of sluggish economic growth.
A separate survey by the Blue Chip Economic Indicators newsletter also said the chances of a recession are increasing as troubles in the housing sector and credit markets take their toll.
"Over 60 percent of the respondents cited recession as the major risk facing the economy over the next year, while only a third cited inflation as the greatest problem," the NABE said.
Those most concerned about a recession tended to cite problems in the subprime mortgage market and potential declines in home values as likely triggers.
Can Be Avoided
Still, many thought that recession, while a risk, could most likely be avoided -- with some help from the Fed. The survey, reflecting the estimates of 46 economists, was taken Aug 2-23.
That period began with relative calm before descending into a global credit meltdown capped by a cut to the Fed's discount rate and the issuance of a special Federal Open Market Committee statement that effectively shifted the bank to rate-cutting bias.
Only a third of respondents guessed that "domino effects" were under way where losses in the subprime mortgage market would spread to many other sectors.
RELATED LINKS
The panel trimmed its outlook for 2008 consumer spending growth to 2.5 percent from 2.8 percent and also cut its estimate for business fixed investment.
The economists forecast a 50-basis-point cut in the federal funds rate by the end of the first quarter of 2008, up from May's forecast of 25 basis points.
Meanwhile, the Blue Chip survey put the odds of a recession in the next 12 months at one-in-three. A month earlier, the odds were at one-in-four.
The survey of about 50 private-sector economists was taken Wednesday and Thursday, just ahead of the government's release of August employment data on Friday, which showed the first decline in payrolls four years.
Solidify Expectations
The newsletter stated that this dismal employment picture did not impact an already-weak growth outlook but it did solidify expectations for an interest rate cut from the FederalReserve.
The economists lowered their forecasts for growth due to concerns about credit market turmoil spilling into the economy. The panelists said they expect GDP growth to remain modestlybelow trend through the first half of next year.
Amid the turmoil from a troubled housing market and tightening credit, the consumer may rein in a bit on spending, the economists forecast.
Consumer spending, adjusted for inflation, is expected to grow at the slowest pace in four years during 2007 and slow further in 2008.
At the same time, the economists forecast that disposable personal income will outpace spending, the first time since 2002.
"Underlying this development is a belief among our panelists that households will attempt to rebuild savings in the face of increased uncertainty about job growth, the value of their homes and possibly the worth of their equity portfolios," the newsletter wrote.
Copyright 2007 Reuters Limited. All rights reserved. Republication or redistribution
AP
A survey by the National Association of Business Economics showed economists believe recession is the biggest risk to the economy right now and that the Fed will cut rates by half a percentage point by March in the face of sluggish economic growth.
A separate survey by the Blue Chip Economic Indicators newsletter also said the chances of a recession are increasing as troubles in the housing sector and credit markets take their toll.
"Over 60 percent of the respondents cited recession as the major risk facing the economy over the next year, while only a third cited inflation as the greatest problem," the NABE said.
Those most concerned about a recession tended to cite problems in the subprime mortgage market and potential declines in home values as likely triggers.
Can Be Avoided
Still, many thought that recession, while a risk, could most likely be avoided -- with some help from the Fed. The survey, reflecting the estimates of 46 economists, was taken Aug 2-23.
That period began with relative calm before descending into a global credit meltdown capped by a cut to the Fed's discount rate and the issuance of a special Federal Open Market Committee statement that effectively shifted the bank to rate-cutting bias.
Only a third of respondents guessed that "domino effects" were under way where losses in the subprime mortgage market would spread to many other sectors.
RELATED LINKS
The panel trimmed its outlook for 2008 consumer spending growth to 2.5 percent from 2.8 percent and also cut its estimate for business fixed investment.
The economists forecast a 50-basis-point cut in the federal funds rate by the end of the first quarter of 2008, up from May's forecast of 25 basis points.
Meanwhile, the Blue Chip survey put the odds of a recession in the next 12 months at one-in-three. A month earlier, the odds were at one-in-four.
The survey of about 50 private-sector economists was taken Wednesday and Thursday, just ahead of the government's release of August employment data on Friday, which showed the first decline in payrolls four years.
Solidify Expectations
The newsletter stated that this dismal employment picture did not impact an already-weak growth outlook but it did solidify expectations for an interest rate cut from the FederalReserve.
The economists lowered their forecasts for growth due to concerns about credit market turmoil spilling into the economy. The panelists said they expect GDP growth to remain modestlybelow trend through the first half of next year.
Amid the turmoil from a troubled housing market and tightening credit, the consumer may rein in a bit on spending, the economists forecast.
Consumer spending, adjusted for inflation, is expected to grow at the slowest pace in four years during 2007 and slow further in 2008.
At the same time, the economists forecast that disposable personal income will outpace spending, the first time since 2002.
"Underlying this development is a belief among our panelists that households will attempt to rebuild savings in the face of increased uncertainty about job growth, the value of their homes and possibly the worth of their equity portfolios," the newsletter wrote.
Copyright 2007 Reuters Limited. All rights reserved. Republication or redistribution
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