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Orders for Durable Goods Increased Slightly in August

September 25, 2013 by

A separate report on Wednesday showed that Americans increased purchases of new homes in August after cutting back in July, suggesting that higher mortgage rates are not yet slowing the housing recovery.

The Commerce Department reported that orders for durable goods, items expected to last at least three years, edged up 0.1 percent in August. Such orders plunged 8.1 percent in July, largely because of a steep drop in volatile commercial aircraft orders.

The August orders were held back by a decline in demand for military aircraft and other military goods. That could be related to steep government spending cuts that took effect in March. Excluding military spending, orders rose 0.5 percent.

Auto factories reported a 2.4 percent increase in orders, the biggest in six months.

And demand for so-called core capital goods rose 1.5 percent, after falling 3.3 percent the previous month. Core capital goods are a good measure of businesses’ confidence in the economy and include items that point to expansion, like machinery.

Still, economists said the gains were not enough to reverse the declines in previous months.

“It was definitely a mixed month,” Jennifer Lee, an economist at BMO Capital Markets, said. “The gains in core orders and shipments in the month do not offset weakness in the last couple of months.”

Durable goods shipments rose 0.9 percent in August, after two months of declines. The shipment figures are used to calculate economic growth.

The pickup in core capital goods orders suggests production and shipments could rise in the final three months of the year.

“Third-quarter growth in equipment investment will be pretty weak, but the fourth quarter should be notably better,” said Paul Ashworth, an economist at Capital Economics.

In its separate report, the Commerce Department said sales of new homes increased 7.9 percent last month to a seasonally adjusted annual rate of 421,000. That comes after sales plunged 14.1 percent in July to a 390,000 annual rate.

The rebound in sales could ease worries that higher mortgage rates have started to damp sales. It coincided with the best month of sales for previously occupied homes in more than six years.

Some buyers may be racing to close deals before rates rise further. The average rate on the 30-year fixed mortgage has risen more than a full percentage point, to about 4.5 percent, since May.

New-homes sales were 12.6 percent higher in August than a year earlier, although the pace remains well below the 700,000 consistent with a healthy market.

The median price of a new home sold in August fell 0.7 percent from July to $254,600.

Sales rose in all but one region of the country in August, increasing 19.6 percent in the Midwest, 15.3 percent in the South and 8.8 percent in the Northeast. Sales plunged 14.6 percent in the West, the second month of declines.

Article source: http://www.nytimes.com/2013/09/26/business/economy/orders-for-durable-goods-rose-slightly-in-august.html?partner=rss&emc=rss

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Advertising: Stalled Budget Talks Cast Long Shadow

December 4, 2012 by Leave a Comment

The executives spoke on Monday at the start of the 40th annual global media and communications conference, sponsored by UBS, in Midtown Manhattan. They addressed the possibility of a fiscal crisis in January as part of discussions about issues that could significantly curb growth in ad spending, among them the continued economic difficulties in the euro zone.

Widespread gloom about an inability to avert the fiscal crisis is one of four “gray swans” that are roiling markets, and marketers, said Martin Sorrell, chairman of WPP, the largest advertising holding group by revenue. The phrase is a play on the expression black swans, meaning highly improbable like the global financial crisis of 2008.

“I would err on the side of caution at the moment,” said Mr. Sorrell, whose hundreds of agencies include Grey, JWT, MEC, Mindshare, Ogilvy Mather and YR.

“Whichever way it comes out, it creates tremendous uncertainty,” he added. “It’s much tougher sledding.”

For instance, Mr. Sorrell said, “clients used to look at calendar years” in their planning processes, but “now they look at quarters.”

“We had lunch with the C.E.O. of one of our major packaged-goods clients in New York last week,” he said, and the executive talked about “how hard it is to predict the behavior of consumers month to month.”

“This is packaged goods, not capital goods,” he added for emphasis, almost shaking his head in wonderment.

As a result, Mr. Sorrell said, as WPP agencies go through their fourth-quarter planning for the new year, they are “being told to be cautious” and to budget smaller gains in revenue for 2013 than might otherwise be expected.

Another gray swan influencing Mr. Sorrell’s outlook for next year is, of course, the tumult in the euro zone. He seemed more sanguine about that problem, saying, “By and large, we’ll muddle through.”

Mario Draghi, president of the European Central Bank, has “done a brilliant job,” Mr. Sorrell said, quoting approvingly a remark Mr. Draghi made on Friday that European governments had been “living in a fairy world.”

Mr. Sorrell expressed optimism for the year after next, pointing to a “strong ray of hope” that could shine on the ad industry in 2014 as a result of spending related to the Winter Olympics, the World Cup and, he added, laughing, “would you believe, we have another U.S. Congressional election.”

Another speaker, Michael I. Roth, chairman and chief executive of the Interpublic Group of Companies, repeatedly used the word uncertainty in his remarks, but also said he saw opportunity amid the question marks.

“When clients are faced with this economic uncertainty,” said Mr. Roth, whose agencies include Deutsch, Draftfcb, Initiative, Lowe Partners and McCann Erickson, it is a chance for Interpublic to demonstrate that “we have the resources to move the needle” in selling goods and services for them.

Also, the current environment is not like the fourth quarter of 2008, Mr. Roth said, when the financial crisis led marketers to sharply and quickly cut their ad budgets.

“In this environment, our clients have plenty of cash,” he added. “The tone right now is O.K. and hopefully, we’ll see a good, vibrant December.”

“We don’t see a wholesale cutback in 2013,” Mr. Roth said, “at least so far,” adding that growth in American ad spending in the low single digits compared with this year “is a fair assumption to make.”

The Magna Global unit of Interpublic forecast on Monday that ad spending in the United States next year would increase 0.6 percent from 2012. That prediction assumes “we don’t fall off the fiscal cliff,” said Vincent Letang, executive vice president and director for global forecasting at Magna Global.

Also on Monday, the GroupM unit of WPP predicted a gain of 2.7 percent for American ad spending in 2013 and the ZenithOptimedia division of the Publicis Groupe forecast an increase of 3.5 percent. By comparison, their predictions for worldwide ad spending in 2013 compared with 2012 were somewhat stronger: Magna Global, up 3.1 percent; GroupM, up 4.5 percent; and ZenithOptimedia, up 4.1 percent.

Steve King, worldwide chief executive of ZenithOptimedia, said that in addition to the potential for a fiscal crisis, he was worried about “continued unrest in the Middle East and its impact on oil prices.”

Mr. Roth said that a possible fiscal crisis loomed larger as a “challenge” for Interpublic because Interpublic derived more of its revenue from the United States than did competitors like WPP, the Omnicom Group or Publicis.

To help insulate Interpublic, he said, “we will continue to invest in emerging markets” and “make sure we have powerful offerings” in fields like advertising, media services and digital marketing.

In a research note last week, Brian Wieser, an analyst at the Pivotal Research Group, estimated that an inability to resolve the fiscal crisis could result in American ad spending declining next year by 4 percent, or $9 billion, rather than growing by 1 percent as he has forecast.

“While economists’ consensus and our model speaks of optimism that this won’t happen,” Mr. Wieser wrote, “our brain increasingly thinks it just might.”

The UBS conference continues through Wednesday afternoon.

Article source: http://www.nytimes.com/2012/12/04/business/media/stalled-budget-talks-cast-long-shadow.html?partner=rss&emc=rss

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U.S. Durable Goods Orders Decline

September 28, 2011 by Leave a Comment

The Commerce Department said durable goods orders dipped 0.1 percent after a 4.1 percent jump in July.

Economists polled by Reuters had forecast durable goods orders unchanged last month. Orders were held back by an 8.5 percent drop in bookings for motor vehicles, the largest decline since February last year.

The drop in orders came despite a 23.5 percent rise in orders for civilian aircraft last month. Boeing received 127 orders for aircraft, according to the plane maker’s website, up from 115 in July. Delta Airlines placed an order for 100 aircraft.

Excluding transportation, orders slipped 0.1 percent after rising 0.7 percent in July. Economists had expected this category would also be unchanged.

But non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, increased 1.1 percent last month after a revised 0.2 percent fall in July.

This suggested that businesses, sitting on about $2 trillion in cash, had not responded to the recent financial market volatility by curtailing spending on capital goods. Economists had expected a 0.3 percent rise after a previously reported 0.9 percent decline in July.

Manufacturing, which has done the heavy lifting for the fragile economy recovery in the United States, has slowed in recent months, but August’s durable goods report pointed to underlying resilience and offered hope that a another downturn might be avoided.

Outside of transportation and primary metals, which fell 0.8 percent, details of the durable goods report were relatively strong. Orders for machinery edged up 0.1 percent, while computers and electronic products rose 1.3 percent. Demand for capital goods increased 4.2 percent and electrical equipment and appliances rose 1.3 percent.

Shipments of non-defense capital goods orders excluding aircraft, which go into the calculation of gross domestic product, increased 2.8 percent after rising 0.4 percent in July.

Article source: http://feeds.nytimes.com/click.phdo?i=82b212a35255f066c29424e6e45482c4

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Anemic Growth, and Some Slowing, Seen in Fed Data

July 28, 2011 by Leave a Comment

The Federal Reserve said Wednesday that the recovery lost steam in eight of 12 regions it tracks in recent weeks, with hiring modest, wages soft and price pressures subdued.

“Economic activity continued to grow; however, the pace has moderated in many districts,” the Fed said in its report, known as the beige book.

Separately, the Commerce Department said weak receipts for transportation equipment pushed down durable goods orders 2.1 percent last month after a 1.9 percent increase in May. A closely watched reading on business spending plans also fell.

Excluding transportation, orders edged up just 0.1 percent.

“We’re getting confirmation that this is more than just a soft patch in the first part of the year, that it’s a more fundamental slowdown triggered in part by the political environment and jittery markets,” said Michelle Meyer, an economist at Bank of America Merrill Lynch.

Economists said the drop in the so-called core category of factory orders that is used as a proxy for business spending plans was troubling and could yield slower growth in spending by businesses on equipment and software in the third quarter.

That measure — nonmilitary capital goods orders excluding aircraft — slipped 0.4 percent last month after a 1.7 percent rise in May.

“The June decline is somewhat worrisome regarding the vigor of the trend in capital spending,” said Michael Feroli, an economist at JPMorgan Chase Company in New York. “This is particularly so given that the June data probably predates any debt ceiling-driven precaution on the part of business behavior.”

Durable goods are items ranging from toasters to aircraft that are meant to last three years or more. Though orders tend to be volatile, last month’s unexpected decline suggested factory activity was slowing.

The Fed report, based on comments by business contacts in the central bank’s 12 districts, also presented a glum picture.

While most districts saw modest hiring gains, labor markets remained soft, the Fed said. Home sales were little changed since the beige book issued in early June, and most districts reporting on home prices found them flat or declining.

Against that backdrop, wage pressures were subdued and price pressures moderated somewhat, the Fed said.

The economy has been hurt by high gasoline costs and supply chain disruptions after the March earthquake and tsunami in Japan, but economists had hoped the recovery would be picking up speed by now.

Businesses, sitting on $2 trillion in cash, have been spending heavily on equipment and software. Economists said businesses still had pent-up demand, but much would depend on developments in the debt ceiling negotiations in Washington over the next days.

A range of American companies — like Emerson Electric and Corning — on Wednesday warned that demand was weakening.

Emerson Electric said American and European economies had “clearly slowed” in the last two months, sending its own shares down. Other industrial shares were also lower across the board.

Brian Levitt, an economist at OppenheimerFunds in New York, said a resolution of the budget standoff in Washington ahead of an impending deadline for Congress to raise the nation’s borrowing limit could help lift the cloud hanging over the economy.

“We’re going to need some clarity over the next week, and if events turn out as the market hopes it will, there is still some impetus for growth as we head out into year-end,” he said.

Article source: http://feeds.nytimes.com/click.phdo?i=80ad5cc75b8b9004bc5b0e536666c1da

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