Fears mount over US economy

Bush admission

Trying to calm jitters about the economy, George Bush, the US president, has conceded that the country “obviously is going through a tough time” but expressed confidence about a rebound.

In a speech to The Economic Club of New York on Friday, Bush said this was not the first time the economy has been rattled and he is certain that it will ride out its troubles.

“Every time, this economy has bounced back better and stronger than before,” Bush said.

He said unemployment was low at 4.8 per cent and productivity was strong. But he acknowledged that petrol prices are up while grocery stores and housing values are down.

Consumer jitters

Earlier, the US commerce department announced a 0.6 per cent drop in consumer spending for February.

“Hard-working Americans are concerned,” he said.

“They are concerned about their families. They are concerned about making their bills.”

Bush praised the work of the Federal Reserve to boost the economy.

“Today’s events are fast moving, but the chairman of the Federal Reserve and the secretary of the treasury are on top of them and will take the appropriate steps to promote stability in our markets,” he said.

But Bush predicted an economic rebound once the impact of the Federal Reserve’s credit cuts and the recently passed economic stimulus package began to be felt.

Analysts were not as confident, worrying that the economy was being hit by multiple blows and noting that some of the problems, such as plunging home sales and mortgage defaults, were showing no signs of abating.

Climbing crude

Crude oil prices hit all-time highs on Thursday with crude closing at $110.33 per barrel on the New York Mercantile Exchange. 

Gold prices topped $1,000 an ounce on Thursday for the first time after the dollar’s plunge.

Paulson announced plans on Thursday to tackle foreclosures [AFP]

Gold, which is priced in dollars, becomes cheaper for buyers using other currencies when the US unit falls in value.

There was also the troubling news that Chrysler, the country’s third-ranked car manufacturer, announced it was shutting down operations for two weeks in July to boost productivity and efficiency.

The president’s Working Group on Financial Markets, led by Henry Paulson, the treasury secretary, put forward a broad blueprint of changes on Thursday aimed at correcting a variety of abuses such as mortgage brokers who pushed prospective buyers into loans they could not afford.

While the recommendations could help prevent a repeat of the current crisis, critics said the administration still needed to go much further to stave off an expected tidal wave of foreclosures in coming months.