Economic Update

Economy

U.S. Economy Grew at 4 Percent Rate in Second Quarter, Up From 3.4 Percent Surging exports and business spending propelled U.S. growth to the fastest pace in more than a year before turmoil in the credit markets forced the Federal Reserve to warn of a bleaker outlook.

Initial Jobless Claims in U.S. Increased More Than Anticipated Last Week First-time applications for jobless benefits unexpectedly increased for a fifth week, the longest streak since May last year, suggesting the housing recession and related turmoil in credit markets are costing jobs.

Bank of England Says It Made $3.2 Billion Loan of Funds at Emergency Rate The Bank of England, acting as the lender of last resort, extended 1.6 billion pounds ($3.2 billion) at its highest rate, suggesting commercial banks are reluctant to provide credit after the collapse of the U.S. subprime-mortgage market.

Harper Installs Allies on Bank of Canada Panel That Picks Dodge Successor Canadian Prime Minister Stephen Harper, who can't choose a new central bank chief himself, has done the next-best thing: stacked the panel that nominates David Dodge's successor.

Bernanke May Hear Call for Fed Activism on Asset Prices After Housing Bust Federal Reserve Chairman Ben S. Bernanke may be urged to consider tighter regulation as he and his counterparts clean up the financial mess from U.S. subprime- mortgage defaults.

Italian Consumer Confidence, Retail Sales Decline on Concern About Growth Italian consumer confidence and retail sales dropped in August on concern that the rising cost of credit may weigh on spending and economic growth.

Fed Watch

Fed Underestimated Impact of Debt Rout, Focused on Inflation, Productivity Federal Reserve officials, underestimating the impact of credit-market turmoil, focused at their Aug. 7 meeting on inflation and slowing productivity.

Fed Bank Presidents Fisher, Poole, Lockhart Say Trade Barriers Hurt Growth Southern U.S. states should improve workers' skills to compete in the global economy rather than look to trade restrictions for protection, three Federal Reserve bank presidents said.

New York Fed Affirms Policy of Accepting Certain Asset-Backed Securities The Federal Reserve Bank of New York targeted investor gridlock in the asset-backed commercial paper market today, giving banks new information on how they can use such securities as collateral in exchange for central bank loans.