GE rating cut; grim global economic data persists
Blue-chip U.S. conglomerate General Electric Co lost its top-tier credit rating in the latest corporate fallout from the financial crisis, while European and U.S. data pointed to declines in demand, production and employment on Thursday.
But U.S. retail sales dipped only 0.1 percent in February, a sign of economic stabilization that helped prop up stocks.
The number of U.S. workers drawing unemployment benefits reached a record 5.317 million in February. Jobless claims rose to a higher-than-expected 654,000 in the week to March 7.
“Layoffs are stepping up further and we are seeing there is no corresponding pickup in new hiring,” said Pierre Ellis, a senior global economist at Decision Economics in New York. “This is very bad momentum into this downturn.”
In Japan, revised data showed the fourth-quarter slump for the world’s second-biggest economy was slightly less severe in than initially reported, but still marked the worst contraction since the 1974 oil crisis.
The European Central Bank predicted global and euro zone demand would likely be very weak in 2009 and recover gradually in 2010, while euro zone inflation would remain well below its target of just short of 2 percent.
Prices at euro zone factory gates dropped much more than expected in January, pointing to more consumer price deflation and another deep interest-rate cut by the ECB in April, while Europe’s top business group warned of a sharp economic contraction quick payday loans.
World Bank President Robert Zoellick told Britain’s Daily Mail he expected the global economy to shrink about 1 percent to 2 percent this year.
“We haven’t seen numbers like that since World War Two, which really means the 30s, so these are serious and dangerous times,” he said.
In the euro zone, producer prices dipped 0.8 percent month on month in January and 0.5 percent year on year, the EU’s Eurostat said, both more than forecast in polls.
Any lingering hopes that China might keep the world’s economy turning took another dent as growth of industrial output slowed to a 3.8 percent annual rate in January and February, the slowest on record, and its exports plunged.
Standard & Poor’s stripped GE of its AAA credit rating, citing the performance of its finance unit. Its shares rose as investors feared a deeper rating cut.
U.S. stocks rose in early trading, with the Dow Jones industrials index up 1.3 percent. The pan-European FTSEurofirst 300 index of top European shares turned positive, rising 0.3 percent.
‘BE VERY FRIGHTENED’
The world’s biggest powers are expected to put on a show of unity at this weekend’s G20 meeting, cloaking the reality that differences among them are likely to limit coordinated action.
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