MADE IN U.S.A.
For the twenty-first month in a row, U.S. factory output expanded. Owing in large part to a weak dollar, demand for U.S. made products overseas helped propel the output to its fastest rate of growth in seven years. Auto sales, on the rebound, also are contributing to the strong showing. Good news on the manufacturing front is tempered by the fact that only 11% of the U.S. economy is comprised of this sector and that inflation is eating away at manufacturing profits and will do so for the foreseeable future, reports the Washington Post. It will take more than a continued, strong showing from manufacturing to pull the economy out of its current state.
The initial euphoria at bin Laden’s death which lifted the stock market indices, was quickly replaced later yesterday with a less than optimistic assessment of the state of economy, notes Bloomberg. The Dow dropped 3.71 points, the S&P 500 was down 2.4 points and the Nasdaq closed 9.46 points lower. Earnings reports and the realization that the U.S. may be no safer from terrorist attacks than before had a settling effect on the markets.
SWISS ACCOUNTS EXPOSED
In a deal currently being negotiated between Switzerland and the UK, billions in funds owned by British residents held in Swiss accounts would be taxed. The Financial Times reports that a 50% tax, including a one-time levy for past taxes, would be collected by the Swiss government and then transferred back to the UK. This action is a consequence of an initiative by the G20 to create more transparency in financial transactions. In exchange for this effort, Swiss banks would be allowed greater access to the UK market. It is expected that individuals holding undeclared funds in Switzerland may move their monies to Hong Kong, Singapore or other financial centers in advance of this change in Swiss policy.
In other Swiss banking news, ABC reports that nearly $800 million owned by Hosni Mubarak, former Egyptian President, and by Moammar Gaddfi of Libya, have been frozen. This action comes as requests from Egypt to repatriate funds intensifies while Libyan officials, perhaps sensing that an end of their conflict is near, seek sources of funds that they believe are rightfully Libya’s.
The state of Missouri lost its court battle to block the Army Corps of Engineers from blowing up levees down river of Cairo, IL. Last night at 10 pm CST according to the AP, the first in a series of explosions signaled the breach of Missouri levees. The ensuing rush of water buried newly planted agricultural fields, destroying farm crops and burying homes across this southeast portion of Missouri. At risk was the populated area in and around Cairo which was evacuated earlier due to waters rising above flood stage. Heavy rains throughout the central states and Ohio Valley have led to record high river levels. Attention moves south to Louisiana now where levees are threatening to break under heavy stress from last week’s storms.
The U.S. Congress has been granted a limited reprieve of sorts. Due to a larger than predicted tax revenue receipts, the debt ceiling debate may have been extended by one month, the New York Times reports. The current debt ceiling of $14.29 trillion was originally figured to be reached in July. Higher receipts and reworking some obligations will allow the government to meet its payments until August. Republicans have insisted on substantial budget cuts in order to garner their votes to raise the existing debt ceiling.