US recession easing but likely not over: survey

WASHINGTON, Jul 20 , (bdnews24. com/ Reuters) - The US recession's grip on
the economy appears to be easing but likely has not yet ended, according
to a survey of economists released on Monday. The National Association
for Business Economics' quarterly industry survey found that demand is
stabilizing, but a small majority of the 102 respondents said their firms
had not yet seen the bottom. The survey "provides new evidence that the
US recession is abating, but few signs of an immediate recovery," said
Sara Johnson, managing director of global macroeconomics for IHS Global
Insight, who helped analyze the report for the NABE. "Industry demand was
still declining in the second quarter of 2009 , but the breadth of decline
had narrowed considerably since late 2008 , raising prospects for
stabilization in the second half" of the year, she said. The net demand
index dropped to -5 from the first quarter's -14. In the fourth quarter
it registered -28. Of the four major sectors, financial services showed
the strongest demand, with an index reading of +15. The transportation,
utilities, information and communications sector had the lowest reading at
-90. The US recession, which dates to December 2007 , is the longest since
the Great Depression and the deepest in decades. Most economists look for
growth to return in the second half of the year, but they caution that the
recovery is likely to be sluggish. The survey found that profitability
remained weak in the second quarter. Companies reporting declining profits
outnumbered companies posting higher profits for the sixth straight
quarter. However, the rate at which profits are shrinking is slowing.
There was wide dissension about whether or not the economy has hit
bottom. Fifty-five percent believe the low point has not yet been hit, with
14 percent projecting their companies will see their lowest sales in 2010
or beyond. Forty-five percent, however, said the worst was already over.
Thirty-six percent of respondents said their companies cut jobs last
quarter, while only 6 percent of the firms added jobs -- an all-time low
for the 30- year-old survey. Respondents expect job losses to slow and
look for employment to finally turn higher later this year.

BB offers higher credit to private sector

The central bank Sunday announced half-yearly monetary policy offering the
private sector enough credit for massive investment to help chase a higher
growth target and cautioning that the power and gas crisis coupled with
infrastructure deficiency might constrain quick economic development. The
policy statement for six months to December forecasts the gross domestic
product growth at 6 per cent — higher than budgetary projection of 5.5 per
cent — and the average rate of inflation at 6.5 per cent for this fiscal.
The private sector credit growth has been projected at 16.7 per cent
under the new monetary policy dubbed simultaneously 'proactive and
accommodative.' 'I assure the private sector that the government will
ensure flow of as much credit as they need to make productive investment.
This is a clear signal,' said Bangladesh Bank governor Atiur Rahman,
allaying the fears that higher public borrowing could limit credit to the
private sector. The policy projected public sector credit growth at 25.3
per cent, up from 24.5 per cent in June 2009. The central bank is even
ready to finance investment projects, if they are considered feasible and
worthy, from the foreign exchange reserve. It may bring certain changes
in the monetary policy approach to discourage imports of luxury items so
that the inflationary pressure could be eased, the governor pointed out.
'Deficiencies in gas, electricity and infrastructure supports are key
constraints to accelerating economic growth. And addressing the
infrastructure deficiencies and speeding up growth in various sectors will
depend crucially on capacity for efficient implementation of development
programmes,' said the governor. Asked how the central bank would utilise
the foreign exchange holdings for investment purposes, Allah Malik Qazemi, a
senior consultant of the bank, said approximately $500 million could be
invested without disturbing the balance of payments during the projected
period. The central bank will now play the role of a real regulator
instead of an adviser to compel the banks to slash down interests on lending
due to their unwillingness to do so, he said indicating a policy shift to
help increase investment. 'We the central bank are an adviser to the
government and we can do one or two things to show the path of investment
alongside keeping inflation in check,' said the governor. Asked about
higher growth projection in spite of conservative estimate announced in the
national budget, Atiur, himself a development economist, said the growth
might exceed the official projection, should the private sector respond to
budgetary steps and global economy recovery early. 'The private sector
credit growth at 16.7 per cent is projected in keeping with GDP growth and
inflation. Credit will not be a problem for investment,' said Ziaul Hassan
Siddiqui, deputy governor of the central bank. Dwelling on the risks of
global financial crisis, the Bangladesh Bank projected two scenarios, saying
that a prolonged recession might affect remittances, investment and economic
growth while an early recovery might cause commodity price hike triggering
inflation in Bangladesh as well. 'Fostering cultural attitudes relying
predominantly on equity- based rather than debt-based investments and on
disposable income-based rather than credit- based consumption may be better
safeguards of financial stability than arrays of regulations of ever
increasing complexity,' the monetary policy suggests. The governor
mentioned that the central bank would monitor the unfolding domestic and
external developments, and would stand ready to intervene appropriately to
meet challenges for macroeconomic stability and for an inclusive economic
growth. Announcing monetary policy in advance twice a year has been a
practice of Bangladesh Bank for the last few years in an effort to tailor
the financial instruments to the government's overall development
priorities.