Consumer confidence returns

A measure of U.S. consumer confidence recorded its biggest jump since April 2003. The Conference Board Consumer Confidence Index shot up to 54.9 in May from 40.8 in April despite plunging home prices and raging unemployment.

The survey found fewer Americans, 44.7%, reporting that jobs were “hard to get” than in previous months. However, only 5.5% said they intended to buy a car and 2.3% planned to buy a home.

Crude oil price is getting hotter

Oil surged past $60 a barrel in May to a fresh six-month high after OPEC decided to keep output unchanged and government data showed a steep drop in U.S. crude inventories.

U.S. economy shrank at an alarming rate

U.S. GDP fell at an annualized rate of 6.1% in the first quarter of this year according to data released on Wednesday April 29th.

The world’s largest economy has now contracted for three quarterly periods in a row. The fall was bigger than most had expected, and puts the cumulative shrinkage so far during this recession on a par with those in the downturns of 1973-75 and 1981-82, the worst of the post-war period.

Much of the fall was due to businesses slashing inventories to cope with drops in sales. Consumer spending actually rose by 2.2% at an annual rate, led by rising purchases of cars and other durable goods after a disastrous 2008, but much of this was offset by a sickening plunge in business investment, which fell at a 38% annual rate, the steepest on record. That is the steepest decline since records began, beating the old record set back in 1952, according to Morgan Stanley.

US consumer prices fall for first time since 1955

US consumer price index (CPI) slipped 0.4% below its year-earlier level in March and recorded their first 12-month decline in over 50 years, since 1955, with energy prices down 23% over 12 months.

The "core" CPI, which excludes food and energy prices, was up 1.8%.

Falling prices would make it tougher for borrowers to pay off debt, leading to even more defaults and even tougher lending standards amid continuing credit woes.

Unemployment rate jumps to a 26-year high 8.5%

U.S. unemployment rate in March jumped to a 26-year high 8.5% from 8.1% in February, while 663,000 jobs lost in the month, a sign that the recession is getting worse.

The total number of jobs lost since the recession began in December 2007 is 5.1 million. Of the 5.1 million jobs lost, 72% have disappeared in only the past six months.

The Fed pumps $1.2 trillion to the economy

The U.S. central bank would pump $1.2 trillion into economy to combat the worst global slowdown in decades, the Fed announced Wednesday, Mar. 18. The central bank’s plans to buy up to $300 billion long-term government bonds and some $750 billion in mortgage-backed securities, which would help revive the U.S. sagging housing market.

The Fed hasn't set out to influence long-term interest rates by buying long-term bonds since the 1960s.

By buying Treasurys and lifting the size for its programs to buy mortgage-backed securities and agency bonds, the Fed will boost money supply available for borrowing to combat the recession. The moves aims to lower mortgage rates and reduce the premium companies have to pay over the federal government to secure funding from the capital markets. The lower borrowing costs for consumers and companies are expected to prop up demand and spending in the U.S.

The Federal Reserve has been moving toward this quantitative easing policy since mid-September 2008. The policy is essentially required the Fed to print money to put the financial system back on its feet and jump-start the economy. But economists warned that such efforts could lead to long-term inflation, and could drive down the value of the dollar.

The Fed’s Open Market Committee also announced it would keep interest rates near zero, and said it expected its target interest rates to remain exceptionally low “for an extended period.” Interest rates in the U.S., the fed-funds target rate, has been in the range of 0%-0.25%. In all major economies, the interest rates have been pushed to ultra-low levels.

Moments after the Federal Reserve announced its plans, yields on the benchmark 10-year Treasury note posted their biggest drop in years as investors welcomed a big new buyer to the market for government debt. The central bank’s decision to fire up $1.2 trillion continued to sweep over world financial markets on Thursday, pushing the price of government bonds higher and dragging down the value of the dollar.

The Fed’s plan follows similar actions taken by central banks across the globe. The Bank of England is buying government securities, while the Swiss is selling francs to try to push down the value of their currency. The Bank of Japan announced Wednesday that it would also expand its purchase of government debt by almost 30 percent.

The markets are responding favorably to the U.S. Federal Reserve's bold $1.2 trillion spending plan. On Wall Street, stocks advanced on the day, but slipped on the next day. World stock markets were mostly higher the next day, Mar. 19.

The dollar has been sold off aggressively across the board in the wake of the Federal Reserve's decision. The dollar extended its decline against the euro, the yen and other major currencies on Thursday.

U.S. unemployment at 25-year high, 12.5 million people jobless

The U.S. unemployment rate rose to a 25-year high of 8.1 percent in February as employers shed 651,000 jobs in the deepening recession, government data showed on Friday, Mar. 6. A total of 12.5 million people were unemployed in February, the Labor Department said.

February's jobless rate was the highest since December 1983 and was a half percentage point above January's 7.6 percent.

Since the recession started in December 2007, the economy has shed 4.4 million jobs.
Companies struggling with falling revenues and tight profit margins are axing jobs in huge numbers, forcing households to further scale back spending, creating a vicious cycle.

The Obama administration has been rolling out a $787 billion stimulus package to try to break the economy's frightening downward spiral.