News / Economy

Economic Confidence Declines in US, Europe

Multimedia

Separate reports on U.S. consumer confidence and European economic sentiment added to the volatility in global markets Tuesday.

In the U.S., consumer confidence fell to its lowest level in 16 months, while the European Union's index of economic sentiment saw a sixth consecutive decline. The pessimism reflects the growing economic uncertainty on both sides of the Atlantic.

U.S. consumer confidence deteriorated sharply in August as Americans grew more pessimistic about jobs and the slow pace of recovery.  Despite an uptick in consumer spending, the Commerce Department says U.S. growth has been less robust than expected, expanding at an annual rate of just 1 percent in the second quarter.  Economist Gary Burtless at the Brookings Institution says the political debate on deficits and the debt ceiling has made matters worse.

"Nothing that the Congress has done so far this year is going to boost the rate of growth of the economy and, arguably, it's going to - in the short-run - make things a little bit worse over the next 12 months," Burtless said.

While the appetite for spending cuts could increase the risk of another U.S. recession, weak growth prospects in Europe is adding to the pessimism.  Germany, considered the powerhouse economy among the 17-nations that use the euro, grew by a mere one tenth of one percent in the second quarter.  Analysts say that further complicates the eurozone's ability to underwrite debt-heavy nations such as Greece and Portugal.

The uncertainty could force banks to hike interest rates -- raising the risk of debt defaults among weaker eurozone countries.

Iain Begg at the London School of Economics says the resulting crisis could have a domino effect on banks in the U.S.

"I think we already know the degree of the contagion because we witnessed it in 2008 after the demise of Lehman Brothers, which showed just how heavily interconnected both sides of the Atlantic - indeed the whole world - is when it comes to financial markets.  So the risks are considerable," Begg said.

Economist Vincent Reinhart at the American Enterprise Institute in Washington says such a scenario might cause investors to pull their money out of the banking system.

"The extent to which problems in Europe infect financial intermediaries and the extent to which problems in Europe lead investors to withdraw from risk taking generally -- that hits our asset markets," Reinhart said.

Despite the inability of Europe's leaders to find a short-term solution to end the debt crisis, there are a few glimmers of hope in the U.S.  

Global markets remain optimistic about the possibility of new action to jolt the U.S. economy when the Federal Reserve's Open Market Committee meets in September.  

Investors are also anticipating a big announcement next week by President Barack Obama on a new initiative to encourage U.S. companies to hire more workers.

You May Like

US Imposes Sanctions on Alleged Honduran Drug Gang

Treasury department alleges Los Valles group is responsible for smuggling tens of thousands of kilograms of cocaine into US each month More

At 91, Marvel Creator Stan Lee Continues to Expand his Universe

Company's chief emeritus hopes to interest new generation of children in superheroes of all shapes and sizes by publishing content across multiple media platforms More

Photogallery New Drug Protects Against Virus in Ebola Family

Study by researchers at University of Texas Medical Branch, Tekmira Pharmaceuticals is first looking at drug's effectiveness after onset of symptoms More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
African Media Tries to Educate Public About Ebolai
X
George Putic
August 20, 2014 8:57 PM
While the Ebola epidemic continues to claim lives in West Africa, information technology specialists, together with radio and TV reporters, are battling misinformation and prejudice about the disease - using social media to educate the public about the deadly virus. VOA’s George Putic has more.
Video

Video African Media Tries to Educate Public About Ebola

While the Ebola epidemic continues to claim lives in West Africa, information technology specialists, together with radio and TV reporters, are battling misinformation and prejudice about the disease - using social media to educate the public about the deadly virus. VOA’s George Putic has more.
Video

Video Ferguson Calls For Justice as Anger, Violence Grips Community

Violence, anger and frustration continue to grip the small St. Louis suburb of Ferguson, Missouri. Protests broke out after a white police officer fatally shot an unarmed black teenager on August 9. The case has sparked outrage around the nation and prompted the White House to send U.S. Attorney Eric Holder to the small community of just over 20,000 people. VOA’s Mary Alice Salinas has more from Ferguson.
Video

Video Beheading Of US Journalist Breeds Outrage

U.S. and British authorities have launched an investigation into an Islamic State video showing the beheading of kidnapped American journalist James Foley by a militant with a British accent. The extremist group, which posted the video on the Internet Tuesday, said the murder was revenge for U.S. airstrikes on militant positions in Iraq - and has threatened to execute another American journalist it is holding. Henry Ridgwell has more from London.
Video

Video Family Robots - The Next Big Thing?

Robots that can help us with daily chores like cooking and cleaning are a long way off, but automatons that serve as family companions may be much closer. Researchers in the United States, France, Japan and other countries are racing to build robots that can entertain and perform some simpler tasks for us. VOA’s George Putic reports.
Video

Video In Ukraine, Fear and Distrust Remain Where Fighting has Stopped

As the Ukrainian military reclaims control of eastern cities from pro-Russian separatists, residents are getting a chance to rebuild their lives. VOA's Gabe Joselow reports from the town of Kramatorsk in Donetsk province, where a sense of fear is still in the air, and distrust of the government in Kyiv still runs deep.
Video

Video Five Patients Given Experimental Ebola Drug Said to Be Improving

The World Health Organization has approved the use of experimental treatments for Ebola patients in West Africa. The Ebola outbreak there is unprecedented, the disease deadly. The number of people who have died from Ebola has surpassed 1,200. VOA's Carol Pearson reports on the ethical considerations of allowing experimental drugs to be used.
Video

Video China Targets Overseas Assets of Corrupt Officials

As China presses forward with its anti-graft effort, authorities are targeting corrupt officials who have sent family members and assets overseas. The efforts have stirred up a debate at home on exactly how many officials take that route and how likely it is they will be caught. Rebecca Valli has this report.
Video

Video Leading The Fight Against Islamic State, Kurds Question Iraqi Future

Western countries including the United States have begun arming the Kurdish Peshmerga forces in northern Iraq to aid their battle against extremist Sunni militants from the Islamic State. But there are concerns that a heavily-armed Kurdistan Regional Government, or KRG, might seek to declare independence and cause the break-up of the Iraqi state. As Henry Ridgwell reports from London, the KRG says it will only seek greater autonomy from Baghdad.
Video

Video In Rural Kenya, Pressure Builds Against Female Circumcision

In some Kenyan communities, female genital mutilation remains a rite of passage. But activists are pushing back, with education for girls and with threats of punishment those who perform the circumcision. Mohammed Yusuf looks at the practice in the rural eastern community of Tharaka-Nithi.

AppleAndroid

World Currencies

EUR
USD
0.7492
JPY
USD
102.27
GBP
USD
0.5960
CAD
USD
1.0950
INR
USD
61.300

Rates may not be current.