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"A View From Across The Pond" an Englishman's personal view of the week's news in the USA - from Erithacus
Stocks fell on Friday, with the Nasdaq dropping to its lowest level in almost six weeks and closing 5% down at 2425.38, 45.5 points down on the week. The Dow Jones fared little better, losing 91.2 points to close at 10,799.82, although it was 18.2 points up on the week. Already nervous after pessimistic forecasts from companies such as Nortel Networks, indicators showing confidence among consumers continuing to drop, and the U.S. government's Producer Price Index showing its biggest one-month gain for 10 years, the news that U.S. and British warplanes had attacked targets in Iraq added to the gloom and pushed markets lower. Analysts suggest the current Market nervousness is resulting in over-reaction to every piece of news, good or bad, and although this tends to produce good conditions for traders, the plethora of recent bad news seems to be steadily pushing the Markets lower over all.
The International Monetary Fund has forecast economic growth in the United States to be 1.7% for this year, according to reports today (Saturday). Although this represents a significant reduction on the previous forecasts of 3.2% published in October and below the Federal Reserve’s forecast issued last week of between 2% and 2.5%, the 1.7% figure is in line with levels that have been quoted by many economic analysts since the beginning of the year. The figure from the IMF is not yet official, but is reported to have come from two separate sources. Realistically, if so far this year the economy, as most expect the figures to reveal, has shown zero growth, then to achieve a figure of more than 2% for the year would take a healthy rebound which must start in the very near future.
There are some, however, who are far less pessimistic. A report from the Economic Cycle Research Institute this week says that the slowing of the economy will be short-lived and will take off again "faster than a speeding bullet". Anyone thinking this might be an off-target forecast produced by a small group of no significance, should note that the "Weekly Leading Index" (WLI) produced by the Institute and used to predict economic movement was developed by Geoffrey H Moore, economics teacher to Alan Greenspan, Chairman of the Federal Reserve. The WLI also correctly predicted the recession in 1990.
While President Bush presses ahead with tax-cut plans and struggles to produce a budget acceptable to most, some of his other activities have led him into dangerous territory. Bush’s first foray as President into the difficult area of international diplomacy came on Friday this week in Mexico at the ranch of President Vicente Fox, Mexico’s most famous broccoli grower. Proud as Mexico is of its exports of the broccoli crop to both the U.S. and Europe, any adverse comment from America’s new President could have done untold damage. It is, however, well known that for the Bush family this flowery green vegetable holds little pleasure. Indeed, George Bush senior incurred the wrath of many broccoli growers for his derogatory comments about it during his own presidency, and George W Bush himself, when asked by a news agency for his comments, gave a thumbs-down sign and said "Make it cauliflower". But President Bush does seem to have overcome any broccoli-phobia, as the talks in Mexico between the two Presidents seem to have proceeded cordially into the more pressing topics of trade, immigration and the fight against drug trafficking, Or perhaps he was warned-off making any adverse comments during his brief meeting with Dona Mercedes Quesada, elderly mother of Mexico’s President Fox. At 81, but undoubtedly still the backbone of the Mexican President’s family, she’s not a lady I would argue with.
18th February 2001