Friday, October 11, 2002

Of debt, deflation and denial The risk of falling prices is greater than at any time since the 1930s FOR decades inflation was the bogeyman in rich countries. But now some economists reckon that deflation, or falling prices, may be a more serious threat—in America and Europe as well as Japan. That would be decidedly awkward, given the surge in borrowing by firms and households in recent years. Particularly worrying is the rise in borrowing by American households to finance purchases of houses, cars or luxury goods. Deflation would swell the real burden of these debts, forcing consumers to cut their spending. . . . If deflation causes real debts to swell, debtors may have to cut spending and sell assets to meet their payments. This can unleash a vicious spiral of falling incomes, asset prices and rising real debt. . . . When Japan was the only country with deflation, one sure cure might have been a big devaluation of the yen to push up inflation. But for the world as a whole, this is not an option. Global deflation could be even harder to budge. 1:08:15 PM  Google It!  comment  []

Retail Sales, Consumer Confidence Down U.S. retail sales fell more than one percent in September as threats of war and concerns over a slow economy pushed consumer confidence to a nine-year low. A U.S. Commerce Department report released Friday says consumer spending fell at nearly twice the forecasted rate to its lowest point in 10 months. . . . The private University of Michigan index of consumer sentiment for early October says confidence in the economy has declined sharply to a nine-year low. The twice-monthly survey of 500 households reflects perceptions of American families' financial situation and whether it's a good time to make major purchases. The economy lost 43,000 jobs last month, although the unemployment rate dropped to 5.6 percent. 12:57:02 PM  Google It!  comment  []

Shoppers Take a Holiday The country's largest retailers reported September sales so dismal that they were only slightly better than sales a year before, when many shoppers stayed away from stores after the Sept. 11 terrorist attacks. The results reported yesterday further worried an industry looking warily toward a holiday shopping season, with consumers already troubled by a falling stock market, weak job prospects and the possibility of a war with Iraq. "Christmas is looking bleak," said Ben Johnson, the editor of Shopping Center World, a trade newsletter published by Primedia. "Back-to- school was disappointing to say the least, and now the September figures show the darlings like Target and Kohl's are down. They were like the rocks." Sales at stores open at least a year were up just 1.2 percent from last September, according to the Goldman, Sachs retail composite measure. Discounters were up 3.1 percent, while department stores were down 3 percent. One analyst after another sounded like Scrooge, pointing to evidence that retailers have already begun to expect the worst through the end of the year. 12:16:45 PM  Google It!  comment  []

Lucent to Cut 10,000 Jobs Lucent Technologies (LU.N), the struggling telecommunications equipment maker, said on Friday it would report a wider- than-expected quarterly loss, cut 10,000 more jobs and take $4 billion in charges for severance payments and a decline in its pension assets. The company -- which has been crippled by the drought in spending by telecoms companies amid a massive industry slump -- also said it expected business in 2003 to continue to decline, with revenues expected to be down 20 percent from 2002. 12:12:06 PM  Google It!  comment  []