US sees more housing woes: IMF
New US data Tuesday showed more woes gripping the troubled housing sector and confirmed the economy is shrinking, as the IMF's top economist warned of a possible second Great Depression.
In Washington, the Commerce Department said new home sales slipped 2.9 percent in the past month and 35.3 percent from a year earlier to an annual pace of 407,000 in November. That was the lowest level since January 1991.
Sales of existing US homes slumped a further 8.6 percent, according to a separate report from the National Association of Realtors.
"The home sales market took another major negative hit in November, with sharp declines in new and existing home sales, declines which put further downward pressure on prices, and upward pressure on inventories," said Brian Bethune, economist at IHS Global Insight.
He said the situation indicates "negative business cycle momentum (that) persists for an excruciating length of time."
The reports coincided with data showing US economic activity contracted at a 0.5 percent pace in the third quarter, an official estimate unrevised from last month.
The Commerce Department's final estimate on gross domestic product (GDP) for the July to September quarter is believed to mark the start of a steep downturn for the world's largest economy that intensified in the past few months.
"This report is largely old news," said John Ryding at RDQ Economics, who forecast fourth-quarter data out next month would be far bleaker.
"Given signs that the recession has deepened in the current quarter, we look for around a 6.0 percent drop in real GDP," he said.
Britain's economy also shrank by 0.6 percent in the three months to September compared to the previous quarter, against a previous estimate of 0.5 percent contraction, the Office for National Statistics said.
Meanwhile, the International Monetary Fund's top economist, Olivier Blanchard, maintained that governments around the world should boost domestic demand in order to avoid another Great Depression similar to the global downturn that shook the world in the 1930s.
"Consumer and business confidence indexes have never fallen so far since they began. The coming months will be very bad," Blanchard said in an interview with the French newspaper Le Monde.
"It is imperative to stifle this loss of confidence, to restart household consumption, if we want to prevent this recession developing into a Great Depression," he added.
Other economists offered sharply divergent views.
"We are in a recession, not a depression -- the worst of the losses will affect us over the next nine to 12 months, instead of the next nine to twelve years. This is partial consolation, but consolation nonetheless," said Adolfo Laurenti at US-based Mesirow Financial.
New data out in France offered some relief, showing that household consumption of manufactured goods -- a key growth indicator -- rallied 0.3 percent last month after slumping in October.
"It is a first small Christmas present for the French economy," said Alexander Law, an economist at the Xerfi research center in Paris.
But elsewhere in Europe the news was more downbeat. Retail sales in Italy saw a 0.3 percent decrease in October, Denmark's economy contracted 0.4 percent in the third quarter and the Dutch economy had zero growth, official data showed.
Finland's unemployment rate rose to 6.0 percent in November from 5.8 percent in October and the Polish central bank cut its key lending rate by 75 basis points to 5.0 percent in a bid to fend off a recession.