Amid a Bleak Backdrop, Consumers Step it Up
Thank goodness for Americans' unwavering need to buy stuff, because sometimes we feel like we can't deal with all of the endless belt-tightening stories. The National Retail Federation reports that shoppers spent an average of $372.57 over the weekend, up 7.2 percent from last year's average. Total spending reached an estimated $41 billion.

Black Friday traditionally helps businesses gauge consumers' appetite for shopping and discounts at the outset, analysts say. After suffering from decelerating demand since September, merchants also were left with higher inventory levels than expected. The Black Friday price promotions were historically aggressive last week, and the crowds apparently responded. After weak consumer spending in September and October, shoppers surprised analysts by jumping on deep discounts and sales and spending money last Friday.

Falling gas prices perked up consumers in November, according to the monthly Conference Board index, which reported Tuesday that confidence rose from a record low in October. The November consumer confidence index increased to 44.9 from an upwardly revised October reading of 38.8.

But don't let those numbers trick you into thinking consumers are going to jump-start the economy back into an age of prosperity...

Advanced Economies Face Protracted Recession, OECD Warns
The Organization for Economic Cooperation and Development (OECD) last week warned that "developed economies face a protracted recession and a sharp increase in unemployment" and "called for aggressive economic stimulus measures," the New York Times reports.

"Many advanced economies are in or nearing downturns of a magnitude not experienced since the early 1980s," the Times reports the OECD as having said in its twice-yearly economic outlook. The organization, which includes European countries, the United States, Canada, Japan and Australia, "projected that the economies of its 30 members would decline in 2009 by 0.4 percent over all, after growth of 1.4 percent this year. It forecast that growth would return in 2010, with advanced economies growing a combined 1.5 percent."

The OECD specifically said the "American economy would decline 0.9 percent next year, after posting growth of 1.8 percent this year."

It's Official: U.S. Recession Began a Year Ago
The National Bureau of Economic Research (NBER), a panel of academic economists charged with the official designation of business cycles, has determined that the U.S. economy has been in recession for a year.

In a statement released this morning, the NBER says its Business Cycle Dating Committee determined that the U.S. entered recession in December 2007, marking the end of the economic expansion that began in November 2001.

The committee does not judge a recession as two consecutive quarterly declines in gross domestic product (GDP). Instead, it looks at four key monthly economic indicators, including employment, industrial output and sales.

U.S. Economy Slides To Seven-Year Low
The U.S. economy contracted at a 0.5 percent annual rate in the third quarter of the year, slower than the negative 0.3 percent estimated about a month ago, the U.S. Department of Commerce reported last week. The revisions to real gross domestic product (GDP) growth make it the sharpest fall since the third quarter of 2001.

Most of the major components contributed to the downturn in real GDP growth in the third quarter, the largest contributors being a sharp drop in consumer spending, a deceleration in exports, a smaller decrease in imports, and decelerations in nonresidential structures and in state and local government spending. Notable offsets were an upturn in inventory investment and an acceleration in federal government spending.

Overall manufacturing activity in the U.S. declined at the fastest pace in 27 years in November, the Institute for Supply Management reports today. The ISM index last month fell to the lowest level since early 1982. The new orders index fell to the lowest since 1980. The prices paid index indicates that commodity process continue to decline at a rapid clip.

Fed Throws Another Lifeline
The Federal Reserve last week announced another massive life-support intervention for the U.S. financial system, announcing two new programs aimed at making it easier for consumers to obtain loans for homes, cars and on credit cards.

"Under the new mortgage program, the Fed will buy up to $100 billion of debt issued by government-sponsored mortgage enterprises Fannie Mae, Freddie Mac and the Federal Home Loan Banks. It will also buy up to $500 billion of mortgage securities backed by Fannie Mae, Freddie Mac and Ginnie Mae," according to Reuters.

Under another plan announced Tuesday, the central bank announced what it called a term asset-backed securities loan facility, "a plan under which it will lend up to $200 billion to support the issuance of debt backed by consumer and small-business debt — such as credit-card loans, student debt, auto loans and loans backed by the Small Business Administration," MarketWatch reports. The market for these securities in the consumer category was about $240 billion in 2007, but due to the credit crunch, it virtually disappeared in October 2008, according to Forbes. The Treasury will use $20 billion from the $700 billion pool in the Troubled Asset Relief Program (TARP) to guarantee the loans.

At this rate, the government is gonna need a bailout, too.

Detroit Planning New Plan
In continuing coverage of IMT's recent three-part report, Detroit's three battered (and embittered) automakers are "due to submit blueprints to Congress tomorrow in hopes of persuading lawmakers to give them $25 billion in federal aid," the Financial Times (subscription required) reports.

The New York Times today says that the automakers plan to "deliver more detailed plans for how they would use that money not just to survive, but also to turn themselves around to be competitive in the long term."

General Motors Corp. is expected to "propose a significant shrinking of its North American operations, including shutting more factories and streamlining its sprawling brand lineup."

Meanwhile, Ford Motor Company "is not likely to propose more cuts, as it is further along than Chrysler and GM in shifting to a more fuel-efficient lineup of vehicles," the Times says. "It also has more cash to weather the downturn."

Chrysler LLC "has acknowledged it is running out of cash and may tell Congress that it needs a merger or alliance with another company to survive long term."

"Members of Congress remain deeply divided on the aid, with many in both parties wary of supporting another costly government rescue on the heels of the $700 billion Wall Street bailout," the Associated Press says. A second rebuff from lawmakers this week would be likely to postpone any financial aid until after President-elect Barack Obama's inauguration as president on January 20.

The Times adds that the three chief executives will make their case before the House financial services committee on Friday, hoping for a warmer reception than their last appearance 10 days ago when they were excoriated for their companies' past mistakes and for bringing their begging bowls to Washington in their corporate jets.

That caravan of fuel-efficient cars planned to bring the Detroit automakers' CEOs to Washington for another round of Congressional hearings is now off the table.

Tragedy in Mumbai
More than 170 people died and hundreds more were wounded in coordinated terror attacks in Mumbai, the financial capital of India with about 19 million inhabitants, last week. Reports put the death toll at nearly 180 up to 195 lost in the nearly 60-hour siege at five-star hotels, a Jewish center and a restaurant in various attacks. Almost 300 people have been reported wounded in the attacks.

The aftermath, devastating for far too many families at the personal level, is expected to be come in the form of significant economic damage, too: the UK Guardian says the attacks "will temporarily have an impact. It's clearly not good for the economy at a time when the world is in financial crisis."

"Both investor and consumer confidence will have been dented by the terrorist attack on Mumbai, with overseas investors unlikely to rush back in," Capital Economics analyst Tehmina Khan told the Guardian.

By targeting foreign nationals, the attackers also struck at international links that have underpinned 9 percent average growth in the $1.3 trillion economy for the past three years," Bloomberg News reports.

Mumbai's southern tip has been "India's premier business district for the past 150 years," says the Wall Street Journal.

Chinese to Establish Fund to Help Small Biz
A Chinese industry association for small and medium-sized businesses said last week that it plans to establish a 3 billion yuan (US$440 million) venture capital fund for its members, Agence France-Presse reports.

The fund, to be established by year's end, is part of efforts to help small businesses weather the financial crisis along with establishing a bank dedicated to small and medium-sized businesses, according to the China Association of Small and Medium Enterprises.