US personal income and spending worsen

The US personal income and spending data is generally weaker than expected. It is the first monthly decline in three months in March as incomes slide and people saved regularly. While they prove oneself equal to the crisis, for instance they try to cope with the recession.

In real terms, personal consumption expenditures sink by 0.2 per cent and this followed a revised increase in February. But in general, in the first quarter of this year consumption rose at an rate of about 2 per cent. The cause is cheaper petrol and a boost from tax rebates.
Moreover, the incomes also fell by 0.3 per cent and this for the third straight month in March. The decline is due to job cuts, pay freezes and eliminated bonuses, who savaged salaries recently.

The commerce department’s gauge of prices decreased by 0.2 per cent but was up when food and energy is exclude. Meanwhile the savings rate rose to 4.2 per cent. Chief US economist at IHS Global insight predicted that there will be a drop in employment and consumers have to be cautious.
New US jobless claims eased, a decline by 14,000 to 631,000. This is in contrast with the labour department figures, they showed a rose to a record of 6.27 million.

According to me, this situation of slowdowns in the different sectors, in the behaviour of consumers,...is normal in these hard times. We have to cope with the problems but in fact the decline in income and spending are just causes of the crisis. So we can speak of a vicious circle.

Obama says he's fighting for economy

In a press-conference on Wednesday night President Obama spoke about his efforts to rebuild the economy in his first 100 days as President of the U.S. He began his conference with mentioning that his economic recovery plan has already saved or created 150.000 jobs. But he also noticed that the nation is still facing the economic problems.

During the conference some questions were asked about the intervention of the government in the bank and car sectors. Obama made clear that he’s not interested in running private companies but he’s just trying to get those industries back on their feet.

When asked about the possible bankruptcy of Chrysler he said that Chrysler may be able to avoid bankruptcy and he also defended the government’s interventions in the car industry. But Obama will try to get the government as fast as possible out of the car industry in the U.S.

Obama also talked about his federal budget outline which is based on steps taken to recover the economy. The budget will also invest in education, worker training and will create renewable energy jobs.

According to me Obama is doing great because normally a President of the U.S. has to deal with some problems but not with that amount of problems Obama has to deal with. He is trying to solve the problems in a lot of sectors like the bank sector, the employment market,… He can’t possibly say what everyone has to do and he has to keep their different interests in mind. But the economic crisis in not the only problem, he also must realize some promises he made before he was elected as President; like the health insurance,… so it’s a great responsibility.

Source: http://money.cnn.com/2009/04/29/news/economy/obama_economy/index.htm?postversion=2009042921

Chrysler’s Fall May Help Administration Reshape G.M.

WASHINGTON — Fresh from pushing Chrysler into bankruptcy, President Obama and his economic team are hoping that the hard line they took last week gives them leverage to force huge changes in General Motors, a far larger and more complex company.

Officials say that, difficult as Mr. Obama’s decision was on Wednesday to take all the risks of a Chrysler bankruptcy, the politics of reshaping G.M. will be far harder. Already a shadow of the company that once dominated the American landscape, G.M. will be forced to dismiss 47 000 jobs worldwide, closing more than a dozen plants in the United States, eliminating four brands and shuttering 2 600 dealerships.

In Chrysler’s case, the tough job-cutting decisions had already been made and the government is taking only a small stake. An alliance with Fitat envisions selling the company’s cars in new markets around the world and adding cars that use Fiat’s fuel-efficient technology.

But in G.M.’s case, Mr. Obama needs to force deeper cuts and becoming the controlling shareholder. He will also be overseeing the radical downsizing of G.M.’s work force as he is trying to reverse rising unemployment.
That is why the recent decision about Chrysler is a very important one according to me. The threat of bankruptcy is very important in the negotiations with the bondholders. Without a clear and present danger to them, they won’t make a reasonable deal.

Bankruptcy may also be the only way to force the kind of paring down that Chrysler, with only a third of G.M.’s workers and half the number of plants, did not have to endure.

We have to remain realistic though, Mr. Obama is not going to allow G.M. to be broken up, its assets sold or abandoned. Mr. Obama could afford to take a hard line when dealing with Chrysler, but when dealing with a company as politically sensitive and as large as General Motors, he will have a far harder time separating the economic decisions from the political challenges.
But I am sure we all agree that we must take action in order to save as much of General Motors as possible. It will be hard to make G.M competitive again, especially when Obama is trying to reach his fuel-efficiency and low-emission goals at the same time.


Source: http://www.nytimes.com/2009/05/03/business/03auto.html?_r=1&ref=business