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U.S. Consumer Spending Rise Is Slim

December 23, 2011 by Leave a Comment

WASHINGTON (Reuters) — Consumer spending in the United States rose less than expected in November as tepid income growth put a squeeze on households, according to a government report on Friday that suggested slowing momentum in demand.

A separate report showed that new orders for manufactured goods soared in November on strong demand for aircraft, but a gauge of business spending plans fell for a second month, suggesting a cooling in investment. The Commerce Department said consumer spending ticked up 0.1 percent after rising by the same margin in October.

Economists polled by Reuters had expected spending, which accounts for two-thirds of the nation’s economic activity, to rise 0.3 percent last month.

When adjusted for inflation, spending rose 0.2 percent last month after a similar gain in October. The government on Thursday revised downward third-quarter consumer spending growth to a 1.7 percent annual pace, from 2.3 percent, because of a slump in spending at hospitals.

November’s anemic consumer spending is unlikely to change views that economic growth in the fourth quarter could top a 3 percent pace, accelerating from the July-September period’s 1.8 percent rate.

Income ticked up 0.1 percent last month, the weakest reading since August, after increasing 0.4 percent in October. Last month’s increase was below economists’ expectations for a 0.2 percent rise.

Taking inflation into account, disposable income was flat after rising 0.3 percent in October.

The saving rate dipped to 3.5 percent last month from 3.6 percent in October. Savings slowed to an annual rate of $400.9 billion from $419.1 billion the prior month.

The report showed subsiding inflation pressures, which should help to support spending.

The Personal Consumption Expenditures index, a price index for personal spending, was flat last month after falling 0.1 percent in October. In the 12 months through November, the P.C.E. index was up 2.5 percent, the smallest rise since April. That followed a 2.7 percent increase in October.

A core inflation measure, which strips out food and energy costs, edged up 0.1 percent last month after a similar gain in October. In the 12 months through November, the core index rose 1.7 percent after increasing 1.7 percent in September.

The Federal Reserve would like this measure close to 2 percent.

The Commerce Department’s report on durable goods, meanwhile, showed that orders jumped 3.8 percent after being flat in October. Economists had forecast orders rising 2 percent from a previously reported 0.5 percent fall.

Durable goods range from toasters to big-ticket items, like aircraft, that are meant to last three years or more.

Excluding transportation, orders rose 0.3 percent after rising 1.5 percent in October. Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 1.2 percent.

The category had dropped 0.9 percent in October. Economists’ had expected a 1.0 percent gain last month.

Business spending, which has helped the economy to recover from the 2007-09 recession, is slowing, but analysts still expect corporations holding about $2 trillion in cash to continue investing in capital.

Orders for durable goods last month were buoyed by a 14.7 percent increase in bookings for transportation equipment, as orders for civilian aircraft surged 73.3 percent.

Boeing received 96 orders for aircraft, according to the plane maker’s Web site, up from 7 in October.

Orders for motor vehicles, however, fell 0.5 percent after rising 5.9 percent the prior month.

Outside transportation, details of the report were mixed, with machinery orders rising, but demand for computers and related products falling.

The decline in orders for motor vehicles, computers and electrical equipment could be related to supply chain disruptions following flooding in Thailand.

Shipments of nondefense capital goods orders excluding aircraft, which go into the calculation of gross domestic product, fell 1.0 percent after declining 0.8 percent in October.

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U.S. Retail Sales Rose 0.5% in October

November 15, 2011 by Leave a Comment

WASHINGTON (AP) — Americans spent more on autos, electronics and building supplies in October, pushing retail sales up for a fifth straight month, the Commerce Department said Tuesday. The report suggests the economy maintained solid growth at the start of the fourth quarter.

Retail sales increased 0.5 percent from the previous month, the Commerce Department said.

Healthy auto sales helped. But even without them, sales rose 0.6 percent — the best showing since March. And when excluding autos and sales at gasoline stations, sales rose 0.7 percent, also the biggest increase since March.

Sales increased even though department stores and specialty clothing store sales fell in October.

The retail sales report is the government’s first look each month at consumer spending, which accounts for 70 percent of economic activity.

A rebound in consumer spending was the key reason the economy expanded at an annual rate of 2.5 percent in the July-September quarter, the best quarterly growth in a year.

Stronger economic growth helped calm fears that the economy could slide back into a recession. Still, growth would need to be nearly double the third-quarter rate — consistently — to make a significant dent in unemployment.

Another concern is that the growth came after consumers spent more while earning less, a trend that economists fear can’t be sustained.

Without more jobs and higher pay, consumers may be forced to cut back on spending.

The outlook for hiring is mixed. The economy added just 80,000 jobs last month, the fewest in four months. But the government also said employers added more jobs in August and September than it had initially reported and the unemployment rate dipped to 9 percent.

And employers advertised more jobs in September than at any other point in the past three years, a hopeful sign that hiring will pick up.

Americans are buying more cars. The auto industry had its best October in four years. Purchases of S.U.V.’s and trucks offset a loss in momentum for car sales.

Sales have rebounded from the earthquake and tsunami in Japan, which disrupted distribution of parts to American factories and made it harder to obtain some popular models.

Retailers hope consumers will keep spending during the all-important holiday shopping period.

The National Retail Federation, the nation’s largest retail group, predicts revenues in November and December will rise 2.8 percent this year compared with last year. That would be smaller than last year’s 5.2 percent increase. But it would be higher than the average increase over the past 10 years.

The uptick in retail sales came as the Labor Department reported that wholesale prices declined in October for the first time since June, as companies paid less for gas, new cars and other goods. The report indicates inflation pressures are easing as the cost of oil and other commodities has declined.

The Labor Department said the Producer Price Index, which measures price changes before they reach the consumer, dropped 0.3 percent in October, after a rise of 0.8 percent in September. Excluding the volatile food and energy categories, the core index was unchanged for the first time in 11 months.

Falling energy prices drove the overall decline. Wholesale gas prices dropped 2.4 percent, while home heating oil fell 6 percent, the most in over a year.

Food prices ticked up 0.1 percent, after four months of much larger increases.

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In Rare Miss, Apple Earnings Disappoint

October 18, 2011 by Leave a Comment

After several record quarters, the July-to-September period saw Apple biding its time, with no new iPhone or iPad releases.

Earnings and revenue rose from last year at rates that would be the envy of any large company, but investors had expected the seemingly unstoppable company to do even better.

Net income in the fiscal fourth quarter was $6.62 billion, or $7.05 per share. That was up 54 percent from $4.31 billion, or $4.64 per share, a year ago.

Analysts polled by FactSet were expecting earnings of $7.28 per share.

Revenue was $28.3 billion, up 39 percent. Analysts were expecting $29.4 billion.

Apple sold 17.1 million iPhones in the quarter, which ended Sept. 24. That was well below analyst expectations and the 20.3 million sold in the third quarter.

IPhone buyers had been holding off and waiting for the new model that was launched last week, after the end of the quarter. Still, analysts expected the older models to keep much of their appeal.

Laptops were Apple’s strongest category in the quarter, with sales up 30 percent from the previous quarter thanks to the release of a new operating system, Lion. Total Mac sales set an all-time record at 4.9 million.

Apple’s forecast for the current quarter was more pleasing to investors. It said it expects earnings of $9.30 per share and revenue of $37 billion. Apple usually low-balls its forecasts, and analyst figures are usually higher. But in this case, analysts have had lower figures, expecting earnings of $9 per share and revenue of $36.7 billion.

Jobs relinquished his position as CEO in August, after going on medical leave in January. He died Oct. 5 after years of battling pancreatic cancer.

Apple’s stock was down $24.33, or 5.8 percent, at $397.91 in afterhours trading, losing one week of gains. At the close of regular trading, it was the world’s most valuable company, but the stock drop means it’s yielding the position to Exxon Mobil Corp.

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PepsiCo Plans Higher Prices on Drinks and Snacks

October 13, 2011 by Leave a Comment

Those increases, on top of other increases taken earlier this year, are helping the company stand by its full-year earnings growth target, despite a smaller-than-expected boost from foreign exchange rates.

The company — whose brands include Pepsi-Cola, Frito-Lay snacks and Quaker oatmeal — also reported slightly better-than-expected third-quarter earnings on Wednesday.

The company cited a lower tax rate and cost savings from acquisitions, which are helping it endure higher costs for commodities like corn and wheat and weak consumer spending.

PepsiCo executives also sought to quell recent speculation on Wall Street about a possible breakup of the company, saying it had considered that option and did not find it to be in shareholders’ best interest.

In addition to price increases put through in the third quarter, PepsiCo said it would impose more in the fourth quarter, primarily on Gatorade and single-serve bags of Frito-Lay snacks, but also on select products sold overseas.

PepsiCo stood by its full-year outlook, which calls for 2011 earnings to grow at a high single-digit rate. Because of a recent strengthening of the dollar, that forecast now only includes a rise of one percentage point from foreign exchange, whereas the company earlier expected a two-point increase.

PepsiCo still expects to see a rise in commodity costs this year at the high end of a $1.4 billion to $1.6 billion range.

The company reported that its third-quarter net income rose to $2 billion, or $1.25 a share, from $1.92 billion, or $1.19 a share a year earlier. Excluding one-time items, earnings were $1.31 a share, topping analysts’ average estimate by a penny, according to Thomson Reuters.

Revenue climbed to $17.58 billion from $15.51 billion a year ago. Analysts on average were expecting $17.18 billion.

Total sales volume rose 8 percent in the snacks business and 4 percent in the drinks business.

Volume in the Americas Foods business rose 1 percent as gains of 1 percent at Frito-Lay North America and 3.5 percent in Latin America offset a 4.5 percent decline at Quaker Foods North America.

PepsiCo Americas Beverages volume was flat. Net revenue in that business rose 1.5 percent, helped by price increases.

The company’s shares were up nearly 3 percent, or $1.75, to $62.70.

Coca-Cola will report earnings next Tuesday.

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Productivity Falls for 2nd Quarter in a Row

August 10, 2011 by Leave a Comment

The measure of employee output per hour fell at a 0.3 percent annual rate in the second quarter after a revised 0.6 percent drop in the previous three months, figures from the Labor Department showed Tuesday. The median estimate of economists surveyed by Bloomberg News was a 0.9 percent decrease. Expenses per employee rose 2.2 percent.

With higher labor costs, “profitability will come under pressure,” said Eric Green, chief market economist at TD Securities in New York, who had forecast a decline in productivity. “This would create more caution in expanding payrolls, especially at a time when there is so much uncertainty.”

Economists’ productivity forecasts in the Bloomberg survey ranged from a decrease of 2 percent to a 2.2 percent gain. Efficiency in the first quarter was previously reported as having increased 1.8 percent.

The back-to-back drop in productivity was the first since the third and fourth quarters of 2008.

Unit labor costs, which are adjusted for efficiency gains, were projected to rise 2.4 percent. Labor expenses in the first quarter were revised to 4.8 percent, the biggest gain since the fourth quarter of 2008, from a previously reported 0.7 percent advance.

From the second quarter of 2010, productivity rose 0.8 percent compared with a 1.2 percent year-over-year increase in the first quarter. Labor costs rose 1.3 percent from the year-earlier period after a 1.1 percent increase in the 12 months ended in the first quarter.

The productivity report incorporated revisions to previous years. Worker efficiency growth was revised to 4.1 percent in 2010 from a previously reported 3.9 percent. For 2009, it was revised to 2.3 percent from 3.7 percent.

Labor costs fell 2 percent in 2010, the biggest decline since records began in 1948.

A lack of productivity gains, combined with stagnant growth, may slow hiring and wages, hurting Americans’ living standards. Employment grew by 117,000 in July and the jobless rate fell to 9.1 percent, the Labor Department reported last week.

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Charging a Premium for Movies, at a Cost

August 1, 2011 by Leave a Comment

“Yes, absolutely,” said Sarah Galvin. “We go twice a month, we’d go every single weekend.”

Ms. Galvin had shown up to see “Captain America: The First Avenger,” in 3-D, at the AMC Santa Monica 7 theater here on Wednesday.

She had a little one in tow, in superhero costume. Adult tickets were $15.75, children’s, $12.75. “It costs so much,” Ms. Galvin said.

After years of grumbling about steadily rising ticket prices, consumers achieved the nearly unthinkable earlier this year: they forced a momentary drop in the average cost of a movie ticket, to $7.86 in the first quarter, down from $8.01 in the fourth quarter of last year, partly by opting out of costly 3-D tickets for movies like “Mars Needs Moms,” and watching films in cheaper 2-D.

But prices started rising again this summer. In a conference call with investors on Thursday, executives of the Regal Entertainment Group, the nation’s largest theater chain, predicted the usual average price increase of 3 percent or more across the industry by year’s end.

If so, it will be the 17th consecutive annual increase in a business whose prices have outpaced the effect of general inflation by more than half since 1999. Theater attendance has fallen by about 10 percent in that period, or even more when measured as a share of the growing population.

Executives from Hollywood’s major studios are generally reluctant to discuss prices. But with domestic box office down 5.55 percent — to $6.42 billion from $6.80 billion — from last year at this time, according to Hollywood.com, even some of the best-compensated players are beginning to wonder whether exhibitors and studios are pushing their luck with consumers.

At the Comic-Con International fantasy convention in San Diego last month, Steven Spielberg and Peter Jackson, two of Hollywood’s most prominent directors, voiced a strong hope that ticket prices for 3-D films would ultimately fall into line with the lower charge for 2-D movies. Consumers are being charged an extra $5 to see a movie only to find out it is “as bad as the one you saw in 2-D,” Mr. Jackson said.

Their plea brought a sharp response last week from Jeffrey Katzenberg, the DreamWorks Animation chief executive, who has been an advocate of 3-D and the increased price that comes with it.

“They’re not getting complaints at the box office about pricing, it’s just not happening,” said Mr. Katzenberg, who spoke by telephone on Thursday. Mr. Katzenberg said his own company’s recent experience with “Kung Fu Panda 2,” which took in about 45 percent of $161 million in domestic ticket sales from the higher priced 3-D tickets, showed that a substantial number of consumers would still pay a premium for good films.

“Whatever Peter and Steven are talking to, maybe they’re following their instincts,” Mr. Katzenberg said of the Spielberg-Jackson pricing critique. “But there’s actually no factual data.”

Asked whether 3-D pricing had been too aggressive, David Passman, the chief executive of Carmike Cinemas, said by e-mail: “Perhaps in some markets, but generally, no.”

Historically, the big theater chains like Regal, AMC Entertainment, Cinemark Theatres and Carmike or their predecessors have been reluctant to raise ticket prices because their profit margins were higher on the sale of popcorn and other concessions than from tickets. Thus, they had an interest in raising the number of attendees, rather than maximizing film revenue that would be shared with studios. (The studios and exhibitors typically split the proceeds from each ticket sale, although the exhibitors alone set the price to consumers.) Patrick Corcoran, the director of media and research for the National Association of Theatre Owners, points out that a ticket purchased for the average price of $1.65 in 1971 would cost $9.20 today — higher than the actual industry average, if adjusted according to the general inflation rate.

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Off the Charts: The Boom and Crash Cycle of I.P.O.’s

July 8, 2011 by Leave a Comment

In just a few months, the market has gone from raising record amounts of money to reaching a 10-year high in the number of proposed offerings withdrawn because there was no market.

During this year’s second quarter, 98 offerings — which had been projected to raise $21 billion — were withdrawn, according to calculations by Dealogic. The number of canceled offerings was the highest since 129 proposed offerings were canceled in the fourth quarter of 2000, as it became clear that the technology bubble had burst.

The recent boom in initial public offerings was spread much wider than the one that ended in 2000. The earlier boom was concentrated in the United States, but the latest included many more companies from booming developing markets, particularly in China.

In the fourth quarter of 1999, the total amount raised by I.P.O.’s hit $66.1 billion, which was then the highest level ever. More than three-quarters of that was raised in the American market and most of it was for technology companies. In the final quarter of 2010, $127 billion was raised and less than one-quarter of that was raised by offerings in the United States.

In the latest quarter, the total raised was about half the level of the fourth quarter of 2010, although the decline in the number of completed offerings, to 406 from 516, was not as sharp.

As can be seen from the accompanying graphic, the market for initial public offerings virtually collapsed in 2002 and 2003, but then began to recover as stock markets rose and many countries reported strong growth. Thanks to strong volumes of foreign offerings, the I.P.O. market had become strong before the financial crisis killed the market in 2008 and 2009.

The volume of withdrawn offerings provides a clear indication of rapid changes in markets. Those are deals that underwriters thought they could sell. They went to the expense of preparing offering documents but then were unable to sell, at least at prices acceptable to the companies.

The failed offerings cover the spectrum, both geographically and in the nature of the business. In June, three proposed I.P.O.’s that had been expected to yield more than $1 billion each were withdrawn. One was a Hong Kong company that mines iron ore in Australia, another a French company that makes glass containers and the third an Indian company that builds and leases communications towers for cellular telephone service providers.

Unlike the collapse of the market in 2000, the latest decline does not follow a widespread collapse in the prices of previously hot new offerings. During the final three months of 2010, when the total amount raised by new offerings set a record, Dealogic counted nine offerings that doubled in price on the first day of trading. This week, all of those stocks were still trading above the offering price, although only two — Youku.com, a Chinese Internet television company, and TPK Holding, a Taiwanese maker of screens for smartphones and other devices — traded for more than they did on the first day.

Floyd Norris comments on finance and the economy on his blog at nytimes.com/norris.

Article source: http://www.nytimes.com/2011/07/09/business/the-boom-and-crash-cycle-of-ipos.html?partner=rss&emc=rss

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Toyota Profit Slips 77 Percent

May 11, 2011 by Leave a Comment

TOKYO — Toyota Motor posted a 77 percent fall in quarterly net profit, to 25.4 billion yen, or $314 million, on Wednesday and gave no annual forecasts, as expected, as it struggled to measure the scope of the disruption to production after the March 11 earthquake.

The world’s biggest automaker is facing another tough year, with a severe shortage of parts hammering production just as it was putting its recall problems behind it.

Toyota’s president, Akio Toyoda, said Wednesday the automaker should see a pickup in output beginning in June to 70 percent of volume planned before the quake. It is now operating at less than half capacity. Last month, it forecast a return to full production by November or December.

On Tuesday, Toyota denied a report in The Nikkei newspaper that normal production would come two to three months earlier than planned.

The massive hit to production will almost certainly mean Toyota will fall behind General Motors and possibly Volkswagen to rank third in global vehicle sales this year.

With inventory tight and supply short for popular models like the Prius hybrid, Toyota is losing consumers to rivals like Hyundai Motor, which has been nipping at its heels for the past several years.

Toyota said Wednesday that its operating profit for the January-to-March period — its financial fourth quarter — fell 52 percent, to 46.1 billion yen, or $570 million, compared with an average estimate of 94.6 billion yen from 17 analysts who revised their numbers after the quake, according to Thomson Reuters I/B/E/S.

For Toyota’s current business year, which ends next March, analysts forecast an average operating profit of 307.5 billion yen, down 34 percent from 468 billion yen last year. Uncertainties over the broken supply chain have yielded a wide range, from a loss of 25 billion yen to a profit of 846 billion yen.

Analysts say the disruption is a temporary one caused by the shortage of supply, not demand, and that Japanese automakers should reverse the trend next business year.

Toyota’s shares have led a fall in Japanese auto stocks since the disaster, losing 11 percent, compared with 9.9 percent at Honda and 5.8 percent at Nissan as of the Tuesday close.

Article source: http://www.nytimes.com/2011/05/12/business/global/12toyota.html?partner=rss&emc=rss

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Fee Revenue Grows at Top Custody Banks

April 20, 2011 by Leave a Comment

Fee revenue climbed 16 percent, to $1.79 billion, at State Street Corporation while Bank of New York Mellon, the world’s top custody bank, reported a 12 percent increase, to $2.83 billion.

At Northern Trust, another large custody bank, noninterest income slipped 0.6 percent, to $663.5 million.

These companies, known as trust banks, earn the bulk of their profit from keeping records and providing accounting and other services to investment managers.

State Street’s earnings beat analyst expectations, extending a profit streak intact for 18 of the last 19 quarters.

State Street and Bank of New York benefited from recent acquisitions and stronger financial markets, which helped increase assets under custody and administration.

But each company still suffered from low interest rates and felt the effects of low volatility, which held down currency trading.

State Street said its foreign exchange revenue rose 19 percent as higher volumes offset lower volatility. At Bank of New York Mellon, foreign exchange revenue dropped 1 percent from a year ago and 16 percent from the 2010 fourth quarter because of lower volatility.

The companies’ foreign exchange business has come under criticism recently. Pension fund customers have sued the companies, charging they were cheated on trades.

The companies have denied the accusations, and their chief executives said on Tuesday that business has not been hurt by the lawsuits.

“Foreign exchange makes up only 6 percent of our revenue but it has been a topic of interest recently,” Robert Kelly, the Bank of New York Mellon chief executive, said in an interview. “It is an extremely competitive segment.”

Mr. Kelly said his bank hoped to attract new business in the area by spending more time with customers and being more “creative and aggressive” in developing new products.

The bank’s earnings from continuing operations, excluding special items, rose to $699 million, or 55 cents a share, from $601 million, or 49 cents a share, a year earlier. Assets under custody and administration rose 2 percent from the 2010 fourth quarter to a record $25.5 trillion.

Analysts had expected earnings of 57 cents a share, according to Thomson Reuters.

At State Street, earnings excluding special items rose to $444 million, or 88 cents a share, from $371 million, or 75 cents a share, a year earlier, beating analysts’ forecast of 86 cents a share. Assets under custody and administration rose 5 percent to $22.6 trillion.

Both banks recently announced plans to raise their dividends and execute share buybacks after passing the Federal Reserve’s second round of stress tests.

Northern Trust said net income slipped to $151 million, or 61 cents a share, from $157.2 million, or 64 cents a share, a year earlier.

State Street’s stock rose 2.3 percent, to $45.69, but share prices of other trust banks declined. Bank of New York Mellon dipped 2.9 percent after its profit fell short of expectations, and Northern Trust dropped 5.3 percent.

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Mutual Funds Report: Fourth Quarter

March 27, 2011 by Leave a Comment


After a Long Ascent, Turbulence for Bonds

By JAN M. ROSEN

The bond market, jolted in December, could have a bumpy road in 2011. But an analyst says that is no reason to abandon bonds as part of a long-term investment strategy.

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