Petrol prices are expected to continue climbing as
crude topped $110 on Thursday [AFP]
The US economy has been hit by a new series of setbacks, with a slump
in consumer spending, another drop in the dollar and oil prices
hitting a new record increasing fears of recession.
The US dollar on Friday fell below the Swiss franc for the first time
ever.
The dollar briefly dipped to 0.9986 francs in international trading
before rising above parity again.
The dollar's decline against the franc mirrors its fall against the
euro.
The euro reached a new record of $1.5651 on news of financial woes at
the US bank, Bear Stearns Cos.
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.
The fall was the second big drop in the past three months, a pattern
consistent with the onset of recession.
"Hard-working Americans are concerned," he said.
Worrying signs
February retail sales figures weaker than expected
Crude oil prices at all-time high of more than $110
Dollar at record lows against yen and euro
Gold prices soar about $1,000 for first time
Third largest car manufacturer in US announces two-week closure
"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.
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.
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