Obama inherits economy in red ink

Stock brokers follow the news from the US on television at the stock exchange in the central German city of Frankfurt yesterday. German shares fell by 0.88 percent to 5,231.51 points on the DAX index when trading opened following Barack Obama's US presidential victory. Photo: AFP

To the victor goes the mess. Barack Obama's presidential election victory comes with an albatross of a prize - an economy beset by a stubborn housing slump and the worst financial crisis in 70 years in the US.
Consumers and businesses are sharply reducing their spending and the government is awash in red ink.
"He will inherit an economy that is in recession and ... is likely to get worse before it gets better," said Stuart Hoffman, chief economist for PNC Financial Services.
The current administration on Wednesday will detail its plans to borrow a record $550 billion in the final three months of the year as a down payment for the various financial rescue packages put into effect in response to the global crisis.
A Treasury Department official on Monday projected the government would need to borrow an additional $368 billion in the first quarter of 2009. Treasury is expected to bring back its three-year notes to help cover the increased borrowing needs.
Still, investors seemed to draw hope Tuesday from the selection of a new presidential administration, while shrugging off the latest in a series of grim economic reports. The Dow Jones industrial average surged more than 300 points. The Dow and the other major stock indexes all finished with gains of more than 3 percent.
As election results were being announced in the U.S., Asian stocks rallied early Wednesday. Japan's Nikkei 225 stock average climbed 2.9 percent, while Hong Kong's Hang Seng Index surged 6.1 percent. South Korea's Kospi jumped 5.5 percent.
Futures trading also initially indicated a slightly firmer opening for Wall Street stocks on Wednesday. Dow futures rose 15, or 0.2 percent, to 9,602 shortly after news emerged of Obama's election win.
Analysts said investors appeared to be looking forward to the end of political uncertainty and hoping the new U.S. president will move to boost the economy, which got another bit of dismal news Tuesday.
The Commerce Department reported Tuesday factory orders dropped 2.5 percent in September from August, more than three times as much as analysts had expected. Excluding autos and aircraft, orders fell 3.7 percent, the steepest drop since 1992, when the department began tracking sector-specific changes.
The weakness was led by a heavy drop in nondurable goods orders, which fell 5.5 percent. That included a 17 percent drop in the value of petroleum and coal products, reflecting the decline in oil and gas prices in September.
Analysts said the report wasn't as bad as it looked, because much of the decline was driven by the drop in the value of oil and gas orders.
But orders for non-defence capital goods excluding aircraft, considered a good indication of business investment plans, fell 1.5 percent. That follows a 2.3 percent drop in August and indicated companies are cutting back on their investments.