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The U.K. economy shrank more than economists forecast in the first quarter in the biggest contraction since Margaret Thatcher came to power in 1979.

Gross domestic product fell 1.9 percent from the final three months of 2008 as manufacturing and business services posted record declines, the Office for National Statistics said today in London. The median prediction in a Bloomberg News survey was 1.5 percent. On the year, GDP slumped 4.1 percent.

The recession, which may turn out to be the worst since the 1930s, prompted Prime Minister Gordon Brown’s government to say this week that the budget deficit may swell to a record and is casting doubt on Britain’s credit rating. The Bank of England nevertheless argues the slump may be easing as they print money to stave off deflation and keep rates at a record low.

“It’s shockingly bad,” said Alan Clarke, an economist at BNP Paribas SA in London. “People still aren’t pessimistic enough. This casts shadows over any green shoots of recovery. This recession will be more prolonged than people expect.”

The pound was little changed against the euro and the dollar after the figures were released and traded at $1.4607 at 11:17 a.m. in London.

The U.K. is the first Group of Seven nation to report first quarter GDP data. Leaders from the G-7 meet in Washington today as unemployment, deflation and toxic bank assets still stand in the way of a rebound from the global recession.

European Economy

Reports today gave a mixed picture about the health of Europe’s economy. Spanish unemployment rose to a decade-high of 17.4 percent, while Germany’s Ifo business confidence index rose for the first time in 11 months.

U.K. business services and finance shrank 1.8 percent, the most since records for the category began in 1983. Manufacturing contracted 6.2 percent, the most since at least 1948, the statistics office said.

The worsening recession may see Britain’s economy shrink by the most since 1931 this year, the London-based Centre for Economics and Business Research said today, forecasting a 4.5 percent annual contraction.

This is the first time GDP has contracted by more than 1 percent for two consecutive quarters since modern records began after World War II. GDP declined 1.6 percent in the fourth quarter of 2008.

‘Anxious’ Consumers

“The best we can say is that the pace of economic decline may slow in the coming months,” said John Cridland, deputy- director general at the Confederation of British Industry. “Given that unemployment will continue rising sharply, even if businesses begin to see the rate of decline in activity starting to ease, consumers are likely to feel anxious.”

The economy last shrank by more in the third quarter of 1979. Labour Prime Minister James Callaghan began that year by saying he wouldn’t declare a state of emergency and denying that the country had been left in chaos because of rampant strikes instant payday loan. Margaret Thatcher replaced him as the nation’s first female premier after the Conservative Party won the election in May.

Brown must hold an election by June 3 next year. His ruling Labour party trails the opposition Conservatives in opinion polls, lagging by 19 percent in a BPIX poll published April 19.

Chancellor of the Exchequer Alistair Darling predicted in his April 22 budget that the economy will contract about 3.5 percent this year, and rebound with a 1.25 percent expansion in 2010. That’s at odds with the International Monetary Fund, which predicts a GDP drop of 0.4 percent next year after shrinking 4.1 percent in 2009.

Public Finances

Britain’s “balance sheet is deteriorating rapidly, due to a combination of weakening revenues and the accumulation of sizeable assets and contingent liabilities as a result of successive bank bailouts,” analysts at Moody’s including Arnaud Mares in London wrote in a report yesterday. “The government is taking risks with public finances.”

Brown told reporters today that he’s satisfied Britain will retain its top sovereign credit rating. He has spent 1.4 trillion pounds ($2.1 trillion) bailing out British banks crippled by the crisis, pushing this year’s budget deficit to 12.4 percent of GDP, the highest of any Group of 20 nation.

Darling this week offered motorists a 2,000-pound ($2,928) payment to trade in old cars for new ones to stem job losses at manufacturers. Auto sales slid 31 percent in March.

Lloyds Banking Group Plc, which has received billions of pounds of state guarantees, said yesterday it will cut 985 jobs. Michael Page International Plc, the U.K.’s second-largest recruitment company, said April 7 first-quarter profit slumped 32 percent as the pace of layoffs increased.

Rising Unemployment

U.K. unemployment rose in March to the highest level since Brown’s Labour Party came to power in 1997 as the recession forced companies to cut jobs.

Retail sales still climbed 0.3 percent in March, the statistics office said in a separate report today. Economists predicted a 0.3 percent drop, according to the median of 26 forecasts in a Bloomberg News survey. Debenhams Plc, the U.K.’s second-biggest department story company, said yesterday that sales rose and profit margins increase.

Bank of England policy makers said there are signs the pace of economic contraction may be moderating, minutes of their April 9 meeting show. The bank is spending 75 billion pounds to buy bonds with newly created money after it cut the key interest rate to 0.5 percent, the lowest since it was founded in 1694.

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The U.K.’s plan to sell a record 220 billion pounds ($318 billion) of gilts this year to revive the economy may cause investor “indigestion,” according to some of Britain’s biggest bond traders.

The amount, 50 percent more than the 146.4 billion pounds sold in the fiscal year that ended March 31, may be too much for the market to absorb, according to Royal Bank of Scotland Group Plc. The issuance plan, announced by the London-based Debt Management Office yesterday following the government’s budget report, is a “surprise,” according to Barclays Capital.

“The scope for bouts of indigestion going forward is high,” Richard McGuire, said senior fixed-income strategist in London at RBC Capital Markets. “In terms of the market’s ability to absorb this supply, the key is whether the budget presents a credible road map toward fiscal sustainability and here we would argue it is lacking.”

Prime Minister Gordon Brown is betting the bond sales will help to haul the nation out of the worst recession since World War II and revive the government’s prospects of winning a general election next year. Gilts fell following yesterday’s announcement, with the yield on the 10-year note rising 14 basis points to 3.44 percent in London.

The unprecedented sale plan raises the risk that bond auctions will fail, former U.K. Chancellor of the Exchequer Norman Lamont said in a Bloomberg Television interview this week. The debt office couldn’t find enough buyers at a sale of 40-year bonds on March 26, the first time since 2002 that demand fell short.

Sale Plan

The Treasury will issue 74 billion pounds of securities maturing in as much as seven years, 70 billion pounds of bonds coming due between seven and 15 years, and 27 billion pounds of gilts maturing in more than 15 years, the debt office said yesterday. It will offer a further 19 billion pounds of long- dated debt through syndicated deals and so-called mini tenders, and 30 billion pounds of inflation-protected gilts, it said.

U.K. debt underperformed German bonds this year, as investors demanded higher yields to compensate for the prospect of increased supply. Gilts lost 2 percent, while bunds returned 0.03 percent, according to Merrill Lynch & Co. indexes. The yield difference, or spread, between 10-year gilts and bunds widened to 31 basis points today, the most since March 5, compared with six basis points at the start of the week.

“It’s a challenging remit but I am confident that there is strong ongoing demand for gilts and we will work closely with the market to successfully deliver it,” Robert Stheeman, chief executive officer of the debt office in London, said in an e- mailed response to questions yesterday cheap payday loan. “From the perspective of the gilt market, which is highly efficient, we don’t think that a funding strike is in any way a realistic scenario.”

Market ‘Anxiety’

While Chancellor of the Exchequer Alistair Darling said in his budget yesterday that the economy will expand 1.25 percent next year after a contraction of about 3.5 percent in 2009, the International Monetary Fund expects the country to stay mired in recession. The Washington-based lender predicted a contraction of 0.4 percent next year after a 4.1 percent slump in 2009.

“The main anxiety in the market is that this might not be the worst of it,” said Robin Marshall, director of fixed income in London at Smith & Williamson Investment Management. The U.K. may sell “more next year given the economic outlook. The key is growth and how soon the financial sector functions properly again.”

The debt office said March 18 that it would issue 147.9 billion pounds of bonds this year. The revised plan is almost five times the average in the five years before 2007 and surpassed every forecast in the Bloomberg survey.

It’s “20 billion pounds more than the highest estimates, and there are going to be more syndicated deals than the market expected,” said Adam McCormack, head of gilt sales at Barclays Capital in London. The median forecast of 14 of 16 banks that deal directly with the Treasury was 180 billion pounds.

Darling said the government’s budget deficit this year will reach 175 billion pounds, or 12.4 percent of gross domestic product. That’s the biggest shortfall in the Group of 20 nations and surpasses the 12 percent forecast in the U.S.

The U.K. will raise gilt issuance to over 240 billion pounds in the next fiscal year and to almost 250 billion pounds in the fiscal 2011-12, according to Citigroup Inc.

“The U.K. is mortgaged up to the hilt,” Paul Day, chief market analyst at MIG Investments SA, said in an interview from Singapore yesterday.

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Chancellor of the Exchequer Alistair Darling this week will introduce guarantees for mortgage-backed bonds, allowing buyers to unload the securities at no loss, an effort to kick start lending and wean U.K. banks off government aid, two people familiar with the plan said.

The Treasury will offer guarantees for about 50 billion pounds ($73 billion) of the securities through the new mechanism, the people said. Treasury officials hope the backing will help banks now dependent on state support to write loans.

The program is aimed at reviving the $400 billion market for asset-backed securities, which funded a third of the mortgage market before the credit crunch started in 2007. Banks including Merrill Lynch & Co., Deutsche Bank AG and Barclays Capital have cut staff selling the bonds. Alliance & Leicester was the last British bank to sell the bonds in August 2008.

“It’s not clear that this will work,” said Danny Gabay, director of Fathom Financial Consulting and a former Bank of England economist. “It’s the assets that are the problem, not the derivative. Until there is some clarity on how far house prices will fall, it’s difficult to know if these schemes will work.”

Treasury officials expect the initial participation in the program to be limited while banks make use of other simpler and cheaper measures already in place, the people said.

Budget Measures

Darling will give details of the program in his budget speech to Parliament tomorrow, according to the people, who wished not to be identified before the formal announcement. The program builds on measures Prime Minister Gordon Brown’s government unveiled on Jan. 19, the second major package in the U.K. since October to rescue banks and financial markets.

With the economy headed into its worst recession since World War II, house prices are tumbling and banks have curtailed funds for new mortgages. House prices fell 15.7 percent from a year ago in March, Nationwide Building Society said.

Banks approved 38,000 new mortgages in February, less than half the 104,000 monthly average in 2007, according to Bank of England data. Opposition lawmakers have questioned whether the government is right to revive the asset-backed securities market, which was the source of the turmoil in markets.

“This is a failed model and a dangerous model because it helps banks hide behind some very risky decisions,” said Vince Cable, a lawmaker who speaks on finance for the Liberal Democrats. “Mortgage backed securities were the smoking gun of this crisis. The bankers’ finger prints were all over them. It’s not right that the government should revive them.’”

Treasury Guarantees

Under the plan, the Treasury will underwrite so-called put options on new mortgage-backed securities, allowing investors to sell them back to banks for what they paid for them instant faxless payday loans.

The guarantees will sit alongside a broader set of Treasury pledges that underwrite U.K. residential mortgage-backed securities, according to the people.

The Treasury will adopt both guarantees to attract two different types of investor to the market to give the program a greater chance of success, the people said.

The government faces difficulties in creating a new market for the bonds, said Chris Ames, head of asset-backed investment at Schroder Investment Management Ltd. in London.

“It’s a challenge for them to come up with a structure that is attractive to a new investor base, which is the key driver,” Ames said. Adopting both guarantees to attract two different types of investor will give the program a greater chance of success, the people said.

Markets Frozen

Investors have shunned mortgage-backed bonds and other hard-to-value assets after money markets seized up two years ago. Sales of mortgage-backed securities have sunk to zero so far this year from almost 100 billion euros ($130 billion) in the same period in 2007, according to UniCredit SpA.

Investors are demanding as much as 3.1 percentage points over benchmark rates to buy top-rated mortgage-backed bonds, about 30 times as much as before the credit crunch, according to Societe Generale.

The put option guarantee aims to lure credit market investors who normally are willing to take on more risk for a greater return back to the market. The simpler guarantee aims to lure investors who normally deal in ultra-safe U.K. government bonds, known as gilts.

Mortgage-backed securities package home loans into bonds that investors trade. The Treasury earlier this year said it will insure AAA-rated mortgage portfolios.

Other Programs

Banks including Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc probably will keep using the Credit Guarantee Scheme, a program opened in October and extended in January that offers 250 billion pounds in backing for mortgage lending.

The banks probably will keep using the Credit Guarantee Scheme, a program opened in October and extended in January that offers 250 billion pounds in backing for mortgage lending.

For the next few months, because they can borrow more cheaply through that current program, banks are unlikely to tap the new measure Darling will announce this week, the people said. The new plan may not reach the 50 billion-pound level Darling will offer to guarantee.

Since the January rescue program was announced, the government has taken bigger stakes in RBS and Lloyds, extracting promises from them to increase lending by 39 billion pounds this year. The Treasury now is relying on those agreements to bolster funding for mortgages, the people said.

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U.S. Treasury Secretary Timothy Geithner refrained from labeling China a manipulator of the yuan’s exchange rate, backtracking from an assertion he made during his confirmation hearings in January.

In its first semiannual report on foreign-exchange policies since Geithner became secretary, the Treasury said yesterday that while the yuan remains “undervalued,” no country “met the standards” for illegal currency manipulation in the second half of 2008.

The conclusion clashes with Geithner’s January 22 statement to a Senate panel that President Barack Obama “believes that China is manipulating its currency.” The shift may anger U.S. lawmakers, companies and trade unions who have sought measures to punish nations perceived to have undervalued exchange rates.

“Clearly the Treasury has made more of a political decision than an economic decision here,” Republican Senator Lindsey Graham of South Carolina said in a Bloomberg Television interview. “The truth is the Chinese manipulate their currency.”

Senate Action

Graham was a co-sponsor of a 2007 measure that would have allowed U.S. companies to ask for steeper tariffs against goods coming from countries found to have misaligned currencies. Democratic Senator Charles Schumer of New York, another sponsor of that bill, said he would reintroduce it.

“We are relying on the administration, as market conditions clear up, to keep China’s feet to the fire on this issue,” Schumer said in a statement. “To continue the effort on this front, we intend to reintroduce our legislation.”

The U.S. Business and Industry Council, which represents domestic manufacturing companies, said the decision not to label China as a currency manipulator “breaks a major commitment candidate Obama made last year to fight Chinese exchange-rate protectionism.”

In its report, the Treasury said it “did not find that any major trading partner had manipulated its exchange rate for the purposes of preventing effective balance-of-payments adjustment or to gain unfair competitive advantage.”

Yuan Stagnates

China limits the yuan’s gains by purchasing dollars, much of which are invested in U.S. Treasuries. From July 1 to the end of last year, the yuan rose just 0.4 percent. Its value has been little changed since the beginning of the year, closing yesterday at 6.8325 to the dollar.

Nicholas Lardy, an economist specializing in China at the Peterson Institute for International Economics in Washington, said that while China’s approach to financial management is “much more credible today” than it was during the Bush administration, “you’d have to be brain dead to say that this is a market-determined rate.”

By law, the Treasury has to enter direct talks with a country deemed to be manipulating its currency, and also seek redress through the International Monetary Fund. The department said yesterday it would “use every opportunity” to engage the Chinese “to permit greater flexibility” in the yuan, also known as the renminbi.

The White House was consulted on the report, a Treasury official told reporters in Washington on condition of anonymity. The official also said that the administration isn’t satisfied with what the person termed the slight movement versus the dollar in recent months no fax quick cash.

‘Appropriate Response’

Wang Baodong, a spokesman for the Chinese embassy in Washington, said his government will give an “appropriate response” to the Treasury report.

Geithner’s January remarks suggested a change in policy from the Bush administration, which had stopped short of using the term in criticizing China’s exchange-rate management. No country has been branded a manipulator since China in 1994.

At the time, People’s Bank of China Vice Governor Su Ning called Geithner’s allegations “untrue and misleading,” and China’s Commerce ministry suggested accusations of government tampering in foreign exchange would fuel U.S. protectionism.

Since then, Geithner has worked to repair relations with China, the U.S.’s second-largest trading partner. In February, Geithner told Bloomberg that the Treasury was still weighing how to evaluate China in the formal currency report.

Group of Seven

“We haven’t made that judgment yet,” he said in a Feb. 10 interview with Bloomberg Television. “We’re going to make that judgment carefully, looking not just at what’s happening in China and the management of their exchange rate regime, but at what’s happening globally at that time.”

That month he also pushed finance ministers and central bankers from the Group of Seven industrial nations to soften criticism of China’s economic policies, according to a person briefed on the matter.

In yesterday’s report, released in Washington, Geithner said China “has taken steps to enhance exchange-rate stability,” and that “officials acknowledged in January the need for greater flexibility and the need to allow the exchange rate to adapt to an equilibrium level.”

The Financial Services Forum, which represents 17 major commercial banks, securities firms, and insurance companies, called Geithner’s change of heart a “prudent call.”

“The most effective way to achieve the goal of a flexible, market-based exchange rate in China is to maintain an engagement posture and open dialogue,” said Rob Nichols, the Forum’s president and a former Bush Treasury spokesman.

While China has enacted a large fiscal stimulus, which should help spur domestic demand, strengthening the currency, the Treasury said its low level of debt means it has “headroom to undertake further fiscal measures.”

Global Recession

The report noted that while the global recession has caused a record trade contraction and led a number of currencies to depreciate against the dollar, many emerging markets have used their foreign-exchange reserves to temper the effects. Demand for Treasuries has been “robust,” it also said.

The U.S. needs China to sustain its purchases to fund billions of dollars worth of programs aimed at reviving the economy, about 70 percent of which reflects consumer spending. China’s holdings of Treasuries rose 0.6 percent to $744.2 billion in February, U.S. Treasury figures showed yesterday.

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U.S. retail sales probably rose in March even as a drop in factory production and slower inflation signal the recession is far from over, economists said before reports this week.

Purchases increased 0.3 percent, the second gain in the last three months, according to the median estimate in a Bloomberg survey before the Commerce Department’s April 14 retail report. Industrial production dropped 0.9 percent, the 14th decline in the last 15 months, figures from the Federal Reserve may show.

Tax refunds and money from President Barack Obama’s stimulus plan are giving American consumers a temporary lift, easing the pain caused by the highest unemployment rate in a quarter century, plunging wealth and a lack of credit. Companies from General Motors Corp. to Gap Inc. are relying on incentives and promotions to move merchandise, keeping inflation in check.

“We’re seeing a little bit of a bounce from the consumer after a horrendous holiday season,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., a New York forecasting firm. “The tax refunds have gotten to people in a timely fashion. Once that feeds through, then we’re left with the major negative of the labor market.”

Autos sold at a 9.9 million annual pace in March, up from 9.1 million the previous month that was the lowest since 1981, according to industry figures. Incentive spending by automakers on each sale jumped 30 percent from a year earlier to a record $3,169, according to research firm Edmunds.com.

‘Sign of Hope’

“It’s one month in a row, and it’s of interest and there may be a small sign of hope,” Chrysler LLC President Jim Press said on an April 2 call with reporters about the automaker’s results. “But if you look at the trends out there, there’s a lot of concern.”

Sales at clothing retailers including Gap and Limited Brands Inc. fell less in March than analysts projected as promotions lured shoppers. Still, large discounters like Wal- Mart Stores Inc. and department stores didn’t fare as well.

Consumer spending, which accounts for 70 percent of the economy, probably rose at a 0.5 percent rate in the first quarter, according to economists surveyed by Bloomberg last week loans until payday. Purchases fell by an average 4 percent rate in the second half of 2008, the longest slide since 1991.

The gain will help slow the decline in growth. The world’s largest economy shrank at a 5 percent pace in the first three months of the year, following a 6.3 percent rate of contraction in the previous quarter that was the worst performance since 1982, according to the survey last week.

Trimming Stockpiles

Manufacturers cut output to trim the glut of stockpiles that piled up as spending sank at the end of 2008, contributing to the drop in gross domestic product. The projected drop in industrial production follows a 1.5 percent decrease a month earlier, economists said the Fed may report on April 15.

The first simultaneous global recession since World War II has caused prices to soften. The cost of living probably fell 0.1 percent in the 12 months ended March, according to economists surveyed ahead of the Labor Department’s consumer- price report on April 15. It would be the first year-over-year drop since 1955.

“Inflation will remain subdued,” the Fed said in its March 18 policy statement. The central bank has lowered its key rate to near zero and is flooding the market with cash to spur borrowing and spending.

Prices Soften

Prices at the wholesale level, due from the Labor Department a day earlier, were probably down 2.2 percent in March from the same time last year, according to the survey.

Other reports this week are projected to show home construction and consumer confidence held above recent lows. Commerce Department figures on April 16 may show housing starts dropped last month after surging in February. Still, the estimated 540,000 homes at an annual pace would be higher than the record low 477,000 reached in January.

The Reuters/University of Michigan preliminary consumer sentiment index for April, due on the 17th, rose to 58 from 57.3 last month, according to economists surveyed. The measure was at a three-decade low of 55.3 in November.

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Japan’s Prime Minister Taro Aso may today unveil a record 15.4 trillion yen ($154 billion) stimulus package to help revive an economy headed toward the worst recession since World War II.

The ruling Liberal Democratic Party will propose the government spend about 3 percent of gross domestic product on the environment, education, child care and measures to support the job market and companies, according to a document obtained by Bloomberg News. Aso’s third package since taking office in September would take total spending to 25 trillion yen.

Bond yields rose to the highest since November yesterday as Chief Cabinet Secretary Takeo Kawamura said Japan will issue as much as 11 trillion yen of debt to fund the plan. Aso, facing an election this year, emphasized stimulus at a Group of 20 summit last week after chastising Germany for its reluctance to spend.

“This is an important step,” said Martin Schulz, a senior economist at Fujitsu Research Institute in Tokyo. “The economy is in free fall: wherever you put the money, it will have a positive impact.”

Aso is scheduled to hold a press conference at 5 p.m. in Tokyo today. The yield on the benchmark 10-year bond fell 3 basis points to 1.445 percent. The Nikkei 225 Stock Average climbed 0.7 percent to 8,967.53 as of 10:46 a.m.

Aso must call elections by September just as companies from Toyota Motor Corp. to Sony Corp. slash production and fire workers and the economy flirts with deflation.

World’s Largest Debt

The government’s ability to revive the economy is constrained by its debt, which is already the world’s biggest and is likely to spiral to 197 percent of gross domestic product next year, according to the Organization for Economic Cooperation and Development.

Aso yesterday pledged in a speech in Tokyo to create up to 2 million jobs in the next three years and boost demand by between 40 trillion yen and 60 trillion yen in the next three years by focusing on industries such as solar batteries, electric cars and energy-saving consumer electronics.

The prime minister’s approval rating, which fell below 10 percent less than two months ago, has rebounded as he prepares sanctions against North Korea after it launched a missile over Japan this week. He has also benefited from a drop in support for Ichiro Ozawa, leader of the opposition Democratic Party of Japan, whose top aide was charged with campaign-funding violations.

“The new stimulus package reeks of an election ploy,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “It will work as a pain killer for the economy, but it’s not enough instant credit report.”

Cash Handouts

Elsewhere in Asia, governments have unveiled more than $710 billion in increased spending, tax cuts and cash handouts and central banks around the region have slashed borrowing costs to kick-start consumer demand.

Aso’s latest package differs from his previous efforts, which were put together with little consultation. This time sought advice from economists, including Richard Koo of Nomura Research Institute Ltd., and executives from companies including Canon Inc. and Sharp Corp.

They proposed spending on the environment, nursing, education and agriculture — areas they said were growing and best able to spur a sustainable recovery and create jobs.

The LDP document, obtained from a party official, earmarked 3 trillion yen to help companies, 1.9 trillion yen to support employment, 2 trillion yen for child care and education and 2.6 trillion yen for roads and airports.

The plan also includes about 1.6 trillion yen in incentives to consumers to buy energy-efficient appliances and automobiles as well as solar panels.

Gift Tax

The government will also increase the value of gifts that are tax deductible to 6.1 million yen from 1.1 million yen on condition the money be used to buy or repair housing. This measure is designed to help shift the 1,400 trillion yen in financial assets held mostly by Japan’s older generation.

The package will be the largest ever for a single year, surpassing former Prime Minister Keizo Obuchi’s 8.5 trillion yen stimulus during the Asian financial crisis in 1998.

The LDP’s plan totals 56.8 trillion yen when financial initiatives such as funds set aside to help companies get access to credit are included, according to the document.

Reports this week painted a mixed picture of the world’s second-largest economy.

Production Recovery

Japanese machinery orders unexpectedly rose for the first time in five months in February, figures showed yesterday. Merchant sentiment surged to the highest since July, the Cabinet Office said this week, indicating factory production may recover in coming months, according to Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo.

Meanwhile, exports plunged a record 50.4 percent in February from a year earlier, the Finance Ministry said, and another survey showed bankruptcies rose to a six-year high in March. The Bank of Japan said the economy is deteriorating “significantly.”

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Colorado Gov. Bill Ritter met Tuesday with executives of Sun Microsystems Inc., one of Colorado's largest high-tech employers, Ritter's spokesman said Wednesday.

The meeting came during Ritter's recently concluded two-day trade mission to California's Silicon Valley, where Sun is headquartered.

Ritter met with five officials of the company, said the governor's chief spokesman, Evan Dreyer.

"The governor made it clear how much Colorado values Sun's presence here, and they made it clear how much their employees like being in Colorado," Dreyer said. "They discussed the IT sector, its growth in the state and wanting to ensure that the state and Sun continue to be great partners moving forward."

He said a report in the Denver Post Wednesday that Ritter failed to meet with Sun executives was "not totally accurate faxless payday loan guaranteed." However, the governor did not meet with Sun's CEO as planned, Dreyer said.

Ritter said Monday he planned to speak with officials of Sun (NASDAQ: JAVA) about their potential merger with IBM Corp. (NYSE: IBM) Those acquisition talks reportedly have fallen through.

Sun and IBM each employ thousands in the Denver area — Sun in Broomfield and IBM in north Boulder.

Analysts had predicted that a Sun-IBM merger could lead to additional layoffs in the Denver area, especially at the Sun facility.

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The owner of the Coral Landings III shopping center, which is anchored by Best Buy, is facing foreclosure by Wachovia Bank.

The shopping center, located between Coral Springs and Margate, is on 26.5 acres at the southeast corner of Sample Road and Northwest 62nd Avenue.

The 114,956 square feet of completed buildings have Best Buy, HomeGoods and Jo-Ann Fabrics and Crafts as the main tenants, according to the Web site for Safety Harbor-based developer Monroe’s Prestige Group. The portion of Coral Landings III still under construction was to include 49,275 square feet, plus a branch for TD Bank.

Wachovia, a subsidiary of San Francisco-based Wells Fargo, granted the property’s owner, MPG Terrapin, a $37.2 million mortgage in 2006.

Wachovia filed a notice of foreclosure in Broward County Circuit Court on Feb. 25 against MPG Terrapin; Charles H. Monroe III, the chairman of Monroe’s Prestige Group; and various contractors who have claims against the developer. That filing was recently posted on the court’s Web site affordable health insurance.

William P. McCaughan, the Miami attorney who represents Wachovia in the lawsuit, did not immediately return a call seeking comment.

This is the second pending foreclosure lawsuit in South Florida against an affiliate of Monroe’s Prestige Group. On March 9, Fort Lauderdale-based BankAtlantic filed a foreclosure lawsuit against MPG Gateway and Monroe over a $14.4 million leasehold mortgage, which covered the Quantum Village shopping center in Boynton Beach. Publix anchors that 93,144-square-foot center.

Monroe’s Prestige Group owns shopping centers throughout Florida, including Sea Plum Town Center in Jupiter, Whitworth Farms in Boynton Beach, Parkland Commons in Parkland and Vista del Lago in Miami.

An executive with Monroe’s Prestige Group did not immediately return a call seeking comment.

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Passenger carrier Southwest Airlines Co. said Friday its March traffic remained basically consistent with the same period a year ago.

Dallas-based Southwest (NYSE: LUV) said it recorded 6.65 billion revenue passenger miles in March, which is within a close range of the 6.68 billion revenue passenger miles recorded in March of last year.

Additionally, Southwest reported that available seat miles fell 1 affordable car insurance.5 percent to 8.6 billion from the March 2008 level of 8.7 billion.

During the month of March, Southwest estimated that passenger revenue per available seat miles fell 10% to 11% from the level reached in March of 2008.

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Netflix Inc on Thursday said it delivered its two billionth movie and gave the lucky recipient of the milestone DVD a complimentary lifetime membership.

Netflix said it hit the 2-billion mark on Wednesday when a Blu-ray version of “Nick and Norah’s Infinite Playlist” was delivered to Clay Shannon, a Netflix subscriber in Birmingham, Ala., from the company’s distribution center in Atlanta.

Netflix, launched in late 1999, now serves more than 10 million subscribers and ships about two million of its trademark red mailers per day from 58 distribution centers across the United States.

The company’s DVD library spans more than 100,000 titles, including more than 1,300 that are available in high-definition on Blu-ray.

Earlier this week, Netflix said it will raise prices about 20 percent for subscribers who rent Blu-ray discs rather than standard DVDs.

The new prices go into effect on or after April 27, the company told subscribers in an email free business cards. Prices for standard definition service will remain the same, the company said.

Netflix members can disable the Blu-ray preference on their online accounts to avoid the price increase and receive standard definition DVDs, the company said.

The price increase comes as nearly 10 percent of Netflix’s 10 million-plus subscribers have switched to the “substantially more expensive” Blu-ray discs, the company said.

Netflix said it will use the additional revenue to add to its selection of more than 1,300 Blu-ray titles and to keep up with costs associated with the growing Blu-ray contingent.”

(Reporting by Susan Zeidler; editing by Carol Bishopric)

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