The world's biggest economy stumbled one step closer to recession yesterday as new figures that show US consumers are deserting shopping malls left global stock markets reeling and sent the dollar to within a cent of its record low against the euro.
The Irish stock market sank 3.7 per cent, with €3.2 billion wiped off the value of the companies listed on the Iseq index, after US retail sales made a surprise fall and the subprime mortgage crisis triggered quarterly losses of $10 billion at Citigroup, double the losses that analysts had expected.
American consumers' reluctance to spend money was echoed in the UK yesterday, where Tesco announced a disappointing 3.1 per cent growth in like-for-like sales for the crucial Christmas trading period.
Alan Greenspan, the former chairman of the US Federal Reserve, told the Wall Street Journalin an interview published yesterday that the US may already have entered a recession, or will do so shortly.
A consumer-led recession could lead to a sharper downturn, more akin to the 1990-1991 recession than 2001's downturn, Rossa White, economist at stockbroker Davy, said yesterday. The poor sales at US retailers - which fell 0.4 per cent in December - created economic shockwaves around the world.
Ailing European stock markets were not helped by a greater than anticipated fall in the ZEW index of German investor sentiment, but it was the $18.1 billion in subprime write-downs at Citigroup that was the main catalyst for the Irish market's plummet.
The US's largest bank announced 4,200 job cuts, but there are fears that more of the firm's 300,000-strong global workforce could be axed. A spokeswoman for Citigroup's Irish operation said it was too early to say if any of the job cuts would be in the Republic, where it employs 2,200 people.
Some 1,500 of Citigroup's Irish employees work in the International Financial Services Centre (IFSC), while 700 employees of Bisys, which Citigroup acquired last year, are based in Dublin and Waterford.
