Economic Update – IMF Feels Exceedingly Bearish
- Apr 23, 2009
Only a year ago, the International Monetary Fund predicted growth of 1.9 percent for the world economy in 2009, a prediction that seems positively quaint now. On Wednesday, the IMF called the current crisis “by far the deepest global recession since the Great Depression,” and urged governments to stimulate their economies more. The organization is now predicting a worldwide economic contraction of 1.3 percent in 2009, with the U.S. economy shrinking 2.8 percent, a largest decline since 1946. Still, there may be glimmers of recovery in parts of the U.S. economy damaged most by the recession. Indicators such as existing and new home sales and durable goods orders for March are slated to be released later this week, and analysts are looking for improvements on top of the February numbers, which were all up. “Banks report new mortgage applications are rising,” noted Peter Morici, professor at the University of Maryland, in his weekly newsletter. “If those are more than homeowners refinancing at lower rates, then existing homes sales should dart up from the 4.72 million annual pace recorded in February. The consensus forecast is 4.65 million, and my electronic Ouija board predicts 4.74 million. Something above 5 million would be cause for optimism.” In the restaurant business, Wednesday was a good day for McDonald’s Corp., and an okay day for Yum! Brands, franchisor of Pizza Hut, KFC and Taco Bell. Global comparable-store sales for the hamburger giant were up 4.3 percent during 1Q09, compared with the same period a year ago. Comp-store sales for U.S. McDonald’s restaurants increased 4.7 percent over the same periods. “We all know the state of today’s consumers,” said McDonald’s CEO James Skinner during an earnings conference call on Wednesday. “They’re scaling back and being more discerning about what they purchase. This means a strong value proposition is critical, from price to product, to experience.” Yum saw comp-store sales rise 1 percent worldwide during the first quarter of this year, compared to 1Q08. But in the case of Yum, it was international comp-store sales–some places saw an increase of 6 percent–making up for a decline in U.S. com-store sales, which were down 2 percent. Shares in those companies were up Wednesday. Overall, though, after spending most of the day in positive territory, Wall Street ended mostly down. The Dow Jones Industrial Average ended down 82.99 points, or 1.04 percent, while the S&P 500 was down 0.77 percent. The Nasdaq eked out a gain of 0.14 percent.