U.S. and European stock prices were up slightly Friday, despite a report that shows Americans are cutting back on their spending. VOA's Kent Klein reports from Washington.
Another U.S. government report is showing weakness in the country's economy. The Commerce Department says personal spending fell by three-tenths of a percent in September. That's the biggest decline since June 2004, and it combined with flat readings in July and August for the worst quarterly performance in 28 years. The September drop was slightly worse than economists had expected.
Beth Ann Bovino, senior economist at the financial research company Standard and Poor's, says rising unemployment is one reason for the spending slump.
"Given that we have seen nine months of job losses, and it looks like those job losses are going to continue, with unemployment climbing, consumers are certainly in a much more tough situation," she said.
Bovino says with the economic uncertainty, nervous consumers are becoming more conservative with their money. "Even with oil prices falling, the consumer has been hit by lost jobs, by loss of value in their homes, and they are pulling back," she said. "We expect them to save more and not spend that much time at the [shopping] mall."
As a result, Bovino says, the U.S. economy is expected to remain sluggish for at least several more months. "We think the fourth quarter is going to be very, very weak, so it is going to be a ho-hum holiday. We think that is going to extend probably through early 2009 as well. We think we are in a recession," she said.
Despite the dreary news on consumer spending, U.S. stocks spent the first half of Friday in positive territory. Some of the small gains were attributed to profit-taking.
Europe's markets also posted slight advances. London's Financial Times 100 finished 52 points higher, at 4,343. In Paris, the CAC-40 gained 38 points, to 3,446. And the DAX in Frankfurt surged 125 points, or about 2.5 percent, to 4,995.
Tokyo's Nikkei index dropped five percent, to 8,577, and the Hang Seng in Hong Kong was down 2.5 percent, to 13,969. However, India's Sensex index soared almost seven percent.
The price of oil slid below $65 a barrel Friday, as part of its biggest monthly decline on record. The price of crude oil for future delivery has fallen about 35 percent this month, and almost 60 percent since its record high in July.
Meanwhile, oil companies are reporting record profits from July, August and September. The second largest U.S. oil company, Chevron, says its profits for that period more than doubled, to almost $8 billion. One day earlier, ExxonMobil reported a 58-percent increase in earnings, and Royal Dutch Shell posted a 22-percent rise.
There are more signs of tough times in the auto industry. Nissan, Japan's third largest car company, and Suzuki, say their profits will fall, due to declining sales resulting from higher oil prices and the financial crisis. Nissan says it will cut production by about 200,000 vehicles, and will cut as many as 3,500 jobs. Three major auto parts makers (TRW Automotive Holdings, Lear Corporation and Visteon Corporation) also plan to eliminate jobs.
France has asked the European Union to push the United States and other countries to commit to major reforms of the financial system when they hold a summit two weeks from now. France asked the E.U. to seek changes to the world financial industry, to address "excessive risk-taking." The G20 summit starts November 15, here in Washington.
Russian President Dmitry Medvedev also says the global financial system needs big changes. He plans to tell the summit that a new system should improve risk management, and rely less on the U.S. dollar as a reserve currency, among other changes.