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Monday, July 5, 2010

Deficits Shrinking Most in Decades as Growth Lets S&P 500 Rally - BusinessWeek

Deficits Shrinking Most in Decades as Growth Lets S&P 500 Rally - BusinessWeek

Deficits Shrinking Most in Decades as Growth Lets S&P 500 Rally

July 05, 2010, 7:04 PM EDT
By Rich Miller and Simon Kennedy
July 6 (Bloomberg) -- Industrial countries are embarking on the most aggressive tightening of fiscal policy in more than four decades, led by the U.S. and Britain, as governments gamble they can pare debt without strangling an economic recovery.
Rich nations will reduce their primary budget deficits, excluding interest payments, by 1.6 percentage points next year, the most since the Organization for Economic Cooperation and Development began keeping records in 1970, according to JPMorgan Chase & Co. economists. The budget squeeze will lop 0.9 percentage point off growth in 2011.
Even as President Barack Obama warns his counterparts to be wary of derailing demand, U.S. gross domestic product will be reduced by 1.3 percentage points next year when his $787 billion stimulus program expires. That compares with a drag of 0.7 percentage point in the euro-area and 2.4 points in the U.K., JPMorgan calculates.