Tuesday, 31 January 2012

US consumer spending flat, Europe agree on fiscal pact but not Greek rescue

US economic data on Monday were mixed.

US consumer spending was flat in December but income rose 0.5 percent. Adjusted for inflation, spending dipped 0.1 percent last month.

Meanwhile, however, demand for business loans increased for the fourth quarter as a whole, according to a Federal Reserve survey of senior loan officers at banks.

And the economy continues to improve at the start of 2012, at least in Texas, where the Texas Manufacturing Outlook Survey showed that the production index rose to 5.8 in January from 0.2 in December and the general business activity index jumped to 15.3 from minus 0.3.

There are also signs of improvement in the eurozone economy, where an index of executive and consumer sentiment rose to 93.4 in January from 92.8 in December, the first increase since February 2011.

However, Europe's economy is still threatened by the debt crisis.

There were some positive development on this front for the medium to long term as 25 out of 27 EU states agreed to sign a fiscal compact to ensure budgetary discipline on Monday, with only Britain and the Czech Republic opting out, and leaders agreed that the European Stability Mechanism will enter into force in July, a year earlier than planned.

For the near term, though, there was practically no progress as Greece remains in confrontation with the rest of Europe over its debt relief package while yields on Portuguese debt continued to rise.

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