Past Week's Economic Food For Thought

Some interesting extracts for the past one week which i thought could be of interest to some..

Quote of the week:

Federal Reserve Chairman Ben Bernanke, said the "Fed continues to monitor the situation and will act as needed to limit the adverse effects on the broader economy that may arise from the disruptions in financial markets. Further tightening of credit conditions, if sustained, would increase the risk that the current weakness in housing could be deeper or more prolonged than previously expected. The Federal Reserve stands ready to take additional actions as needed to provide liquidity and promote the orderly functioning of markets. He also made clear he won't rescue investors from bad decisions."

• US consumer spending rose by 0.4% in July, double the June increase.
• The US GDP was revised up to 4.0% annual rate of growth in 2Q07, from 3.4% estimated
  previously. (This is interesting, given the current subprime housing woes in US and its likely impact on economy! This is clearly a sign that US Government think the subprime issue will not pose a great danger to the overall economy...Time will tell if this holds true but i have my doubts)
  
• US construction spending unexpectedly fell in July by the most since January
• US mortgage application volume increased 1.3% in the past week.
• The US economy will slow sharply this year and fall behind growth rates in most of the
  world, according to forecasts in a U.N. report. Woes in the housing market will drag US
  GDP for 2007 to a modest 2% growth, compared with 3.3% last year. For the first time
  since 2001, both the European Union, at 2.8%, and Japan, 2.3%, are predicted to have
  higher GDP growth than the US. China, at 10.5%, and India, 8.5%, should experience
  economic growth rates similar to the last three years, the report said.
  
• China ordered banks to put aside more money as reserves for the seventh time this year to cool lending and investment after inflation accelerated to a 10-year high.

Back in Malaysia, the key event to watch will be the announcement of Budget 2008 this afternoon. It is widely speculated that there is a likelihood of personal income tax cut and more incentives for property sector for the benefit of general public (not just the high-end segment but across the board). This could also well be the last budget tabling before the calling of the next general election!