US economic data released yesterday reinforced fears of an extended slowdown in the US economy. Consumer confidence fell, retail sales dipped and unemployment reached a five-year high, while a number of companies warned of disappointing results.
The US economy slowed sharply over the past few months as consumers cut back on spending and businesses slowed production in an effort to sell off stock-piled inventories. Now there are fears the slowdown will extend beyond the third quarter.
This could eventually impact significantly on US investment in the Republic. However, IDA Ireland's North American director, Mr Enda Connolly, said yesterday there had been no cancellations of previously announced ventures, apart from the decision by Intel to delay its huge new computer chip-making facility at Leixlip, Co Kildare.
The IDA has found that the economy in Silicon Valley, one of its main sources of investment, is softer than estimated earlier in the year.
The latest round of lay-offs has not seriously affected the Republic as most have been confined to the United States. The numbers are increasing however.
In March, 86,000 workers lost their jobs in the US, the most in one month for nearly a decade, though unemployment remains at a 30-year low. The Labour Department said 392,000 workers applied for initial unemployment benefits last week, a rise of 9,000 from the previous week and the highest since March 1996.
The latest redundancies came at Motorola, which said it would lose more money in the second quarter than in the first. It said annual revenue would drop because of slower sales of handsets and semiconductors. The second-biggest US cellularphone maker said it would eliminate 4,000 more jobs on top of 26,000 lay-offs announced since December.
Consumer sentiment in the US has resumed its monthly slide, putting new pressure on the Federal Reserve to reduce interest rates again before its next meeting on May 15th.
The closely watched consumer sentiment index from the University of Michigan showed consumers were growing increasingly worried about the economy and were paring back future spending plans. The index fell to 87.8 in April from 91.5 in March, about four times as much as analysts had predicted. Consumer debt levels have also been on the rise, discouraging spending.
Retail sales - the engine that drives the US economy - fell 0.2 per cent in March, a bigger-than-expected drop. Purchases of durable goods intended to last for three or more years, such as cars, fell sharply, dropping 0.7 per cent.
In another report that raised hopes for more interest rate cuts by the Federal Reserve, producer prices fell slightly in March, an indication that the Fed would not shy away from a further rate cut because of inflation fears.
