Confidence index in the economy has not dropped off

By Yasmin Popescu

News Reporter

yasmin@nasguard.com

What is the economic outlook for The Bahamas? Within the past week we were down graded by the Standards & Poors Ratings on two occasions and word of a double dip recession in the UK makes some persons a bit uneasy.

Recently the issue with the oil exploration license being denied, causing the stock of Bahamas Petroleum Company to see much loss, add to some worries.

However, according to news in the UK Guardian on Tuesday, the Federal Reserve is beginning its latest two-day policy meeting as investors nervously await an update on the U.S. economy from chairman Ben Bernanke.

The report said that economists and investors expect that the Fed will leave interest rates unchanged. But that after mixed signals on the health of the U.S. economy, they said Bernanke's statement and press conference – that was scheduled for the end of the meeting on Wednesday – could have a big influence on stock markets.

It continued to say that Bernanke and his colleagues ended their January meeting, hinting they were considering a third round of bond-buying to pump more cash into the economy – a policy known as quantitative easing.

But since that meeting, reports have suggested that the U.S. economy has strengthened. But it said, there was disappointing news on the jobs front in March with the U.S. adding just half the number of new positions it created in February.

It said that the U.S. housing market remains in the mire following the property crash and that according to the latest S&P/Case-Shiller index, property values continued to fall in February, and average prices across 20 major cities are now at levels last seen in 2002.

It noted that the commerce department said on Tuesday that sales of new homes dropped in March to their lowest level in four months, but the figure beat analysts' expectations and the government said sales in prior months were higher than initially thought.

The report quoted Jack Ablin, chief investment officer with Harris Private Bank as saying, "We've had some positive news and some negative, especially on the jobs front. I'd like to know what they think. For the past two years stock market rallies have fizzled out in the spring and investors continue to worry about a repeat of that patter. We are at an important juncture. If this is a very somber statement it will send a negative message to the market."

U.S. think-tank Conference Board released its latest consumer confidence index Tuesday. The index fell marginally to 69.2 in April compared to a revised 69.5 in the previous month.

Ken Goldstein, a Conference Board economist, was also refered to as saying the marginal fall suggested people had not been overly affected by March's disappointing jobs numbers. He said that he expected Bernanke to deliver a "cautiously optimistic" statement about the economy.

He was then quoted as saying, "Despite the disappointing jobs numbers, the confidence index did not drop off. That suggests that this burgeoning sense of confidence is taking root."

Capital Economics analyst Paul Ashworth said it was unlikely that Bernanke would make any big moves.

Ashworth was quoted as adding "The Fed's best option is to stay on the sidelines waiting to see which way the recovery breaks."

The UK economy has returned to recession, after shrinking by 0.2 percent in the first three months of 2012.

However in the UK itself, the Guardian said a sharp fall in construction output was behind the surprise contraction in their economy.

This from the Office for National Statistics.

The report said a recession is defined as two consecutive quarters of contraction as they noted that the economy shrank by 0.3 percent in the fourth quarter of 2011.

BBC economics editor Stephanie Flanders is quoted as saying it "adds to the picture that the economy is bumping along the bottom."

She added that economic output was slightly smaller now than it was in the autumn of 2010.

Wednesday's figure is an early estimate and is subject to at least two further revisions in the coming months. It is compiled using 40 percent of the data gathered for later revisions.

The UK economy was last in recession in 2009.

© 2012 The Freeport News