Tuesday, April 14, 2009

Sales down as Obama speaks of hope

The 1.1 per cent drop in March retail sales surprised investors and sent stocks falling [AFP]

Poorer retail sales figures than expected have sparked a fall in US share prices, putting a dent in recent market optimism.

The news that retail sales for March had dropped 1.1 per cent came just before Barack Obama, the US president, said on Tuesday that he saw a glimmer of hope for the economy but warned that the recession was not yet over.

The poor sales data, combined with a sharp drop in wholesale prices, overshadowed better-than-expected earnings reports from investment bank Goldman Sachs and led the Dow Jones industrial average to fall by 1.7 per cent to 7,920.18.

Other indexes also lost ground after three days of gains, with the Standard & Poor's 500 index falling two per cent, to 841.50, and the Nasdaq composite dropping 1.7 per cent, to 1,625.72.

Goldman's $1.8bn profit for the first quarter of the year was also overshadowed by its announcement that it planned to issue new stocks to raise $5bn to repay some of the government bailout money it took last year.

In a speech at Georgetown University, Obama gave a cautiously optimistic assessment of the economy ahead, saying that "times are still tough" but that there were "glimmers of hope".

"There is no doubt that times are still tough," Obama said.

"But from where we stand, for the very first time, we are beginning to see glimmers of hope. And beyond that, way off in the distance, we can see a vision of an America's future that is far different than our troubled economic past."

The president warned, however, that things may get worse in the months ahead before they get better.

'More pain'

"The severity of this recession will cause more job loss, more foreclosures, and more pain before it ends."

The US president warned the US economy may worsen before it improves [AFP]
The speech, in which Obama summarised his administration's economic efforts so far, comes as he nears the symbolic 100-day mark of his presidency, the traditional marker by which new administrations are judged.

Obama also said the country needed to seize the opportunity to rebuild its economy on a stronger foundation, less dependent on a risk-obsessed financial sector and more on clean energy, good education and healthcare costs brought under control.

"We cannot rebuild this economy on the same pile of sand," he said, invoking a biblical reference.

"We must build our house upon a rock. We must lay a new foundation for growth and prosperity, a foundation that will move us from an era of borrow-and-spend to one where we save and invest, where we consume less at home and send more exports abroad."

Obama's message came as his central bank chief, Ben Bernanke, suggested that the recession in the US may at last be bottoming out.

In a speech in Atlanta, the Federal Reserve chairman cited recent data on home and car sales, home building and consumer spending to echo Obama's "glimmer of hope" message that the situation was getting better.
Source: Al Jazeera and agencies

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