Food for bears

Alastair Darling says he has taken comfort from the IMF's new growth forecast but the government already had plans to tackle the budget deficit. "Today's IMF forecasts show that the government's decisive action to support the economy is working.

"My judgment remains that the economy will return to growth around the turn of the year – and the IMF's significant upward revision in UK growth for 2010 supports this view. Alongside our support to the economy, we also have a clear plan to halve the deficit over four years."

Funny then that his boss has always insisted that growth would return in the third quarter not at the end of the year. But it may be that neither is correct. First of all we had the news that whereas last month's UK PMI index was reported just above 50, this month that number has dropped below 50. The index is a forward looking indicator and probably reflects an attitude in August that business would pick up when everybody got back from their holidays, and a realisation in September that it wasn't happening.

Then yesterday we had the news that US unemployment fell on a seasonally adjusted basis by 262,000, which is much worse than analysts had forecast, at around 200,000. But a little further examination shows that unemployment in the US, reported at 9.8% a 26 year high, is far worse than is reported in the headline numbers. The number of people in work in the US actually dropped by 1,262,000, but the government statisticians decided that nearly a million Americans, 995,000, simply decided to leave the workforce in September and hence do not show up on the unemployment statistics.

They decline to say whether these are students going back to school or Mexicans who have decided to go home after the fruit picking season, but all in all that is a big number in one month, which is why the FTSE fell 1.5% and back through 5,000 yesterday afternoon.

And the gloom doesn't stop there. Reuters, citing data from the American Bankruptcy Institute, reported consumer bankruptcies had soared 41 per cent in September compared with the same period a year ago and were up 4 per cent from August. September filings totaled 124,790. Interesting statistic. For every 2 people losing their job in America today, there is one person filing for bankruptcy.