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China Reports Increase in Manufacturing

July 31, 2013 by

HONG KONG — A manufacturing index published by the Chinese authorities on Thursday provided an unexpectedly solid reading for July but did little to dispel the picture of an economy that has left the days of double-digit growth well behind it.

The reading, published by the National Bureau of Statistics, edged up slightly, to 50.3 from 50.1 in June, indicating that recent small-scale economic support measures announced by the authorities in Beijing may be having some effect on demand.

The slight increase confounded analyst expectations that the index would slip below the 50-point mark that separates expansion from contraction.

Underlining the lingering malaise within the world’s second-largest economy, however, a separate manufacturing activity gauge published by the British bank HSBC came in at an eleven-month low of 47.7. The figure, which was unchanged from the initial reading published last month, highlighted the tough domestic and international demand that many Chinese companies are confronted with.

“With weak demand from both domestic and external markets, the cooling manufacturing sector continued to weigh on employment,” said Qu Hongbin, chief China economist at HSBC, in a statement accompanying the release.

On the upside, he noted, the string of recent weak data has prompted Beijing to introduce more targeted support measures, which “should boost confidence and reduce downside risks to growth.”

The leadership that took the helm in Beijing in March has been insisting that the slowdown is not only desirable — as part of their efforts to rein in excessive lending and bring about more balanced growth — but also stable and sufficient to meet its target of 7.5 percent this year.

But it has also prescribed a steady stream of small-scale, targeted support measures in a bid to ensure that growth does not cool too rapidly.

These have included tax cuts for small and micro enterprises and measures aimed at speeding up railway construction in inland and poor areas. In a bid to raise the economy’s overall efficiency the authorities have also issued instructions to more than 1,400 companies in 19 industries to cut excess production capacity this year.

Meanwhile, the central bank on July 19 said it would no longer set a minimum interest rate for corporate loans – a symbolically important first step toward wider interest rate liberalization.

“All of these things amount to a small-scale stimulus,” said Dariusz Kowalczyk, a senior economist and strategist at Crédit Agricole in Hong Kong. These steps, combined with more fine-tuning moves that are likely to follow in the next few months, are likely to lift economic growth to just above the official 7.5 percent growth target this year, Mr. Kowalczyk said.

“The new leadership cannot afford politically to miss that target during their first year,” he said, adding that he expected moves aimed at spurring consumer demand, such as subsidies for big-ticket items or consumption-tax cuts, as well as a modest depreciation in the renminbi in the coming months.

Article source: http://www.nytimes.com/2013/08/02/business/global/chinese-manufacturing-unexpectedly-strengthens.html?partner=rss&emc=rss

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Stocks Finish the Day Mixed After Weak Housing Report

January 28, 2013 by Leave a Comment

Stocks were mixed on Monday, lifted by good economic data on the manufacturing industry but held down by a report that the rate of home sales fell short of expectations.

The government said before trading began that orders for long-lasting goods rose in December by 4.6 percent, helped by a 10 percent gain in orders for new aircraft. The durable goods report was a sign of strength for the manufacturing sector, a crucial driver of economic growth.

A half-hour after trading began, the National Association of Realtors said its index of pending home sales fell in December, suggesting sales of previously occupied homes could slow. The report was weaker than many economists had expected.

The Dow closed down 14.05 points, or 0.1 percent, at 13,881.93. The Standard Poor’s 500-stock index fell 2.78 points, or 0.2 percent, to 1,500.18. The Nasdaq composite index added 4.59 points, or 0.15 percent, to 3,154.30.

The heavy equipment maker Caterpillar said separately that its fourth-quarter net income exceeded analysts’ expectations after adjusting for the cost of a soured deal to buy a Chinese maker of roofing supports for mines. Caterpillar said it took a big charge in the quarter because the Chinese company had misrepresented its finances.

Caterpillar was the biggest gainer in the Dow Jones industrial average, closing up $1.87, or 2 percent, at $97.45.

The Dow and the S. P. 500 are approaching their closing highs, reached on Oct. 9, 2007. The Dow is about 282 points below its high of 14,164.53; the S. P. is 65 points below its record of 1,565.

Economic data may be less likely to support the indexes because traders have become harder to impress as the data strengthened in recent weeks, said Bill Stone, chief investment strategist with the PNC Asset Management Group.

“Before, even if you came in just at expectations, that was like a victory,” he said. Because of the market’s recent upturn, he said, “you get less of a pop for just making the numbers.”

The oil company Hess was the biggest gainer in the S. P. 500, adding 6.1 percent after the company said it planned to sell its terminal network in the United States, close its New Jersey refinery and shift its focus to exploration and production.

Interest rates were steady. The Treasury’s benchmark 10-year note fell 4/32, to 97 flat, and the yield rose to 1.97 percent from 1.95 percent late Friday.

Article source: http://www.nytimes.com/2013/01/29/business/daily-stock-market-activity.html?partner=rss&emc=rss

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U.S. Adds 146,000 Jobs; Jobless Rate Falls to 7.7%

December 7, 2012 by Leave a Comment

The report released Friday by the Labor Department also showed the unemployment rate fell to 7.7 percent, the lowest level in four years. But the drop came largely from a decline in the number of people seeking work and counted as officially unemployed.

Among specific industries, the retail sector was especially healthy, adding 53,000 jobs as the holiday shopping season approached. In the last three months, retail employment has increased by 140,000.

One notable point of weakness was the manufacturing sector, which lost 7,000 jobs in the month. Demand from Europe and other overseas markets has weakened recently, while some manufacturing companies have held off on spending as political leaders square off in Washington over how to cut the deficit.

The Labor Department revised job growth in previous months downward somewhat. October growth fell to 138,000 from an initial estimate 171,000, and September’s declined to 132,000 from 148,000. Average hourly earnings in November rose 0.2 percent, the report showed.

By the widest measure of joblessness, unemployment also eased slightly: after factoring in people looking for work as well as those forced to take part-time positions because full-time work wasn’t available, the total unemployed fell to 14.4 percent in November from 14.6 percent in October.

The report for November was relatively strong, economists said, and showed fewer effects from Hurricane Sandy that had been expected. In Friday’s announcement, the Bureau of Labor Statistics said the storm did “not substantively impact the national employment and unemployment estimates for November.”

Ethan Harris, co-head of global economics at Bank of America of Merrill Lynch, said, “It’s a pretty solid report. It’s consistent with a slow recovery in the job market.”

“It’s encouraging that with the fiscal cliff looming, the corporate sector seems willing to hire even with the worries about what’s going in Washington,” Mr. Harris said.

If the budget impasse can’t be resolved this month, however, it’s likely that jobs growth will weaken early next year, he added. “The fiscal cliff is a very dangerous game,” he said.

Indeed, other economists remained cautious about the jobs outlook.

  “It’s not something to get too excited about,” said Nigel Gault, chief United States economist for IHS Global Insight. “The number is 146,000 and the average so far this year is 151,000. We’re pretty much in line with what we’ve been doing.”

 Mr. Gault said Hurricane Sandy’s impact may have been seen in construction, where the number of jobs fell by 20,000, as well as in manufacturing.

The labor participation rate, which represents the proportion of the adult population that is either employed or actively looking for work, remains very low by historical standards.

At 63.6 percent in November, Mr. Gault said, it was just 0.1 percent above the low point for the current economic cycle, which was reached in August 2012.

“We’re not at the point in which the jobs market is strong enough to pull discouraged workers back into the labor market,” he said.


Article source: http://www.nytimes.com/2012/12/08/business/economy/us-creates-146000-new-jobs-as-unemployment-rate-falls-to-7-7.html?partner=rss&emc=rss

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Pullback in Manufacturing in November

December 4, 2012 by Leave a Comment

The Institute for Supply Management, a trade group of purchasing managers, said on Monday that its index of manufacturing conditions fell to a reading of 49.5. That is down from 51.7 in October.

Readings above 50 in the institute’s survey signal growth, while readings below indicate contraction. Manufacturing grew in October for only the second time since May.

A gauge of new orders dropped to its lowest level since August, a sign that production could slow in the coming months. Manufacturers also sharply reduced their stockpiles, indicating companies expect weaker demand.

“Today’s report suggests that the manufacturing sector is likely to remain a weak point in the recovery for a few months yet,” Jeremy Lawson, an economist at BNP Paribas, said in a note to clients.

The weak manufacturing survey overshadowed other positive economic reports. An uptick in home building increased construction spending in October by the most in five months. Manufacturing activity in China grew in November for the second consecutive month. And American auto sales rebounded last month after Hurricane Sandy held sales back in October.

American manufacturers are concerned about what happens when trillions of dollars in tax increases and automatic spending cuts take effect in January if Congress and the Obama administration fail to strike a budget deal before then.

Those worries have led many companies to pull back this year on purchases of machinery and equipment, which signal investment plans. The decline could slow economic growth and hold back hiring in the October to December quarter.

A measure of hiring in the I.S.M. survey fell to 48.4, the lowest reading since September 2009.

Companies “are just backing off and not making any moves until things clear up a bit,” said Bradley Holcomb, chairman of the I.S.M.’s survey committee.

The American economy expanded from July through September at an annual rate of 2.7 percent, largely because of strong growth in inventories.

Separately, the Commerce Department said Monday that construction spending rose 1.4 percent in October, for its largest gain since a 1.7 percent increase in May.

The increase raised spending to a seasonally adjusted annual rate of $872.1 billion. That is nearly 17 percent higher than a 12-year low hit in February 2011. Still, even with the gain, the level of spending on construction remains only about half of what’s considered healthy.

Housing construction spending jumped 3 percent in October. Nonresidential building rose 0.3 percent. The government said Hurricane Sandy, which hit New Jersey, New York and Connecticut in late October, had only a minimal effect on the figures.

Sales of new homes fell slightly in October, dragged lower by steep declines in the Northeast partly related to Hurricane Sandy. New-home sales were still 17 percent higher in October than a year earlier.

Article source: http://www.nytimes.com/2012/12/04/business/economy/pullback-in-manufacturing.html?partner=rss&emc=rss

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Stocks & Bonds: Relief Rally Vanishes After New Data

August 2, 2011 by Leave a Comment

On Monday, the three main indexes jumped then slumped for most of the day and closed lower as the reality of the challenges ahead for the economy set in.

This is a trend that some analysts say is likely to persist, even after any resolution in the debt ceiling debate and its prospects for downgrade or default. The main reason is worry about the nation’s economic recovery, which recent data shows to be more fragile than originally thought. On Monday, the manufacturing sector showed signs of losing steam in July.

“Now that the debt ceiling deal, assuming it passes, has averted an imminent catastrophe, attention can return to the underlying state of the economy,” said Nigel Gault, the IHS Global Insight chief United States economist.

“The news there isn’t good.”

On Monday, the stock market in the United States briefly followed European and Asian markets higher, lifting more than 1 percent shortly after the opening. But any relief over the last-minute agreement on the debt deal framework was fleeting.

After the first half-hour of trading, the three main Wall Street indexes turned negative and mostly stayed in the red, bringing the broader market as measured by the Standard Poor’s 500-stock index down more than 4 percent over the past six consecutive days of declines.

Much of the slump was attributed to a report from the Institute for Supply Management showing a slowdown in the nation’s factories. The index registered 50.9 percent in July, down from 55.3 percent in June. A reading over 50 percent means the manufacturing sector expanded for the 24th consecutive month. Production and employment showed continued growth in July, but at slower rates than in June. However, the new orders component fell to 49.2 percent, hitting a notch below 50 percent for the first time since June, 2009, when it was 48.9 percent.

The news was particularly bad on the heels of the Friday report that the nation’s gross domestic product grew at an annual rate of less than 1 percent in the first half of 2011, with the first quarter and the second quarter at 0.4 percent and 1.3 percent, respectively. The G.D.P. data was revised going back to 2003, showing the recession was deeper and the recovery weaker than originally thought.

“July’s I.S.M. report was a shocker,” said economists from Capital Economics in a research note. “The index is not flagging up another recession, at least not yet, but it suggests that the easing in G.D.P. growth in the first half of the year is looking more and more like a sustained slowdown than a short-lived soft patch.”

Nick Kalivas, vice president for financial research at MF Global, said the weekend’s debt deal developments took some risk and “a little” uncertainty from the market.

The deal, he said, “kind of pushes the longer-term issues out to be taken up at another time.”

The S. P. was down 5.34 points, or 0.41 percent, to 1,286.94. The Dow Jones industrial average was off 10.75 points, or 0.09 percent, to 12,132.49, and the Nasdaq index fell 11.77 points, or 0.43 percent, to 2,744.61.

Noting that the American stock market has performed well this year largely because of record corporate profits, James Swanson, the chief investment strategy for mutual-fund company MFS Investment Management in Boston, said that “the economy is disappointing investors because the general assumption has been that U.S. growth would be in the twos to threes and it’s clearly not.”

While bond markets may rally in response to the fact the debt ceiling crisis was averted, some analysts say the size of the agreement is likely to disappoint investors over the long term.

“Foreigners, in particular, are going to look at this deal and say, ‘I thought the U.S. was capable of more than this,’ ” said Zane Brown, the fixed-income strategist at Lord Abbett. “We may find that foreign owners of U.S. Treasury securities may look for opportunities to move elsewhere.”

Another issue weighing on investors is whether America will retain its sterling credit rating.

“I think we’re going to be watching for the reactions of the rating agencies,” said G. David MacEwen, chief investment officer at mutual-fund company American Century Investments in Kansas City, Mo. Pointing to the stance of Standard and Poor’s that suggested it may downgrade the country to a AA rating from a AAA if spending was not reduced by about $4 trillion, Mr. MacEwen said it was a “big question” whether it and the other rating agencies will be satisfied with this deal.

Noting that the manufacturing report followed “terrible” G.D.P. and jobs data, Matt Freund, the senior vice president of investment portfolio management for USAA Investment Management, said, “We think it is a glass half-full economy, but it is getting harder to tell where the water line is.”

Yields have fallen as a result, he noted. The benchmark 10-year Treasury was down slightly at 2.75 percent.

In addition, there have been continued concerns about the outlook for Europe. Stefan de Schutter, an asset manager at Alpha Trading in Frankfurt, said the initial reaction in Europe to the news in the United States was one of relief but he also said European investors remained cautious.

“If we look ahead,” he said, “we’ll see a return to the focus on the economic problems in Europe.” The FTSE 100 in London was down 0.70 percent to 5,774.43, the CAC 40 in Paris lost 2.27 percent to 3,588.05, and the DAX in Frankfurt was off 2.86 percent to 6,953.98, its biggest percentage drop since March.

The key index in Japan jumped 1.3 percent, and the Hang Seng index in Hong Kong added 1 percent, picking up steam after the deal in Washington was announced by President Obama.

Julie Creswell contributed reporting.

Article source: http://www.nytimes.com/2011/08/02/business/asian-markets-rally-after-us-debt-deal.html?partner=rss&emc=rss

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Chinese Manufacturing Slows Down

July 21, 2011 by Leave a Comment

HONG KONG — The vast Chinese manufacturing sector appears to have contracted in July for the first time in a year, according to a survey released Thursday, adding to the mounting evidence that a series of official regulatory and policy measures is having the desired effect of cooling the red-hot Chinese economy.

The initial results of a closely watched survey of purchasing managers produced reading of 48.9 in July, the lowest level in 28 months — down from 50.1 in June, said HSBC, which published the index.

Readings below 50 represent contraction, so the slide below that level indicated that manufacturers had seen business slow markedly over the past few months, thanks to a combination of feeble global demand and tighter conditions at home.

For the past year and a half, policy makers have used a wide variety of tools to rein in booming growth and limit the rising prices that have accompanied it. Formerly free-flowing bank credits have become harder to obtain, for example, as banks were instructed to lend less.

Those measures have slowed the economy, but at a gradual pace that leaves room for still more tightening by Beijing in coming months, most analysts say.

The below-50 P.M.I. reading does not imply a “hard landing” for China, said Qu Hongbin, chief China economist at HSBC.

Industrial growth is likely to continue to decelerate in coming months as tightening measures filter through, Mr. Qu noted, but “resilient consumer spending and continued investment in ongoing mass infrastructure projects should support a G.D.P. growth rate of almost 9 percent for the rest of this year.”

The International Monetary Fund echoed that sentiment in its latest assessment of the Chinese economy
, published Thursday, noting that “China’s near-term growth prospects continue to be vigorous and are increasingly self-sustained, underpinned by structural adjustment.”

“Wage and employment increases have fueled consumption, the expansion in infrastructure and real estate construction has driven investment upward, and net exports are once again contributing positively to economic growth,” the fund said.

The I.M.F. projects 9.6 percent economic growth for China this year, and 9.5 percent expansion for 2012, in line with forecasts by many other economists. That is down from 10.3 percent last year, but well above what developed nations like the United States are managing.

But an aging population and gradually shrinking labor force risks fanning inflation in the longer term, the I.M.F. said, while low interest rates and a lack of places for savers to invest their cash mean there is a lingering risk of bubbles in the already hot property sector.

Those factors could lead to potential “significant risks” to financial and macroeconomic stability in China, the fund said, and it urged Beijing to address the challenges by raising interest rates further and allowing the renminbi to strengthen.

Beijing has so far relied heavily on so-called reserve requirement ratios for lenders as a policy tool. Successive increases in the ratio since early last year have gradually restricted the amount of money banks have been able to lend. Interest rate increases came into the policy mix relatively late: the central bank began nudging rates up again in October 2010.

“While the central bank’s monetary goals are the right ones, the means by which these targets are being achieved is moving in the wrong direction, relying on an increasingly complicated array of tools and administrative controls that will be difficult to effectively sustain,” the I.M.F. said in its report.

“The central bank should, instead, rely more on higher interest rates and open market operations.”

Article source: http://feeds.nytimes.com/click.phdo?i=203c39b99e0bd3b161f1914cb3746c55

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Japan Ponders Its New Normal

May 11, 2011 by Leave a Comment

Their boats washed away by the tsunami, fishermen in the town of Higashi-Matsushima say they will start over, but on a smaller scale.

And with electricity still in tight supply from the Fukushima Daiichi nuclear crisis, a landmark building in Tokyo has dimmed its famous lights.

Across Japan, there is a shared realization that the natural and nuclear disasters unleashed on March 11 have exposed the fragility of Japan’s postwar economic order — and that a recovery will not be a return to the status quo.

The disasters have dealt another blow to a manufacturing sector already battered by cheaper rivals, deepening fears of a “hollowing out” of Japanese industry long feared in this country. Japan’s aging, shrinking population will also make an energetic bounce-back more difficult. And Japan’s economy relies heavily on precarious nuclear energy, for which alternatives are likely to be more expensive.

Rebuilding will require a national rethinking if Japan is to achieve an economic rebirth, rather than sink further into the stagnation that has plagued it for two decades, many experts say. And reconstruction will define the nation’s place in a global order where Japan is no longer the rising economic star of a generation ago.

“We cannot have recovery for recovery’s sake,” said Hiroko Ota, a former economy minister and vice president at the National Graduate Institute for Policy Studies. “We must make this the starting point for a new economy.”

Japan is no stranger to disasters and rebuilding. Its economy largely shook off the effects of a disastrous quake that struck the city of Kobe in 1995, thanks to an all-out recovery effort.

But even compared with the Kobe crisis, Japan is a weaker nation that now faces the task of reconstruction.

The average age for the population has advanced since then by about six years — to 44.6 years in 2009, which weighs on economic growth and means mounting medical and pension payouts. And the Japanese government is saddled with a public debt more than twice the size of its economy, limiting its spending options.

“In many ways, this is an unprecedented disaster,” said Takayoshi Igarashi, a professor in politics at Hosei University in Tokyo and a member of a council the government has asked to draft a long-term reconstruction plan. “Japan is at a crossroads.”

So, it seems, is Japanese manufacturing.

Take Meiko Electronics, which supplies circuit boards to some of the world’s biggest makers of smartphones. Soon after the quake and tsunami ravaged Meiko’s circuit board factory here in Ishinomaki, mangling machines and sweeping a mountain of debris onto the factory floor, officials at the company knew its days of manufacturing in its home country were limited. A second Meiko factory was also damaged.

Meiko already makes 80 percent of its parts overseas. With the damage to two of its five Japanese factories — and the uncertainties of Japan’s power supply — it does not make sense to rebuild in the country, said Hidetaka Maruyama, a company spokesman.

“Without a doubt, there will be a shift toward production overseas,” he said. A new factory in Wuhan, China, completed in April, has already started producing many of the most sophisticated Meiko circuit boards once made in Japan.

To be sure, government surveys show that many manufacturers have rebounded quickly in the quake’s aftermath. But analysts warn that even a short hiatus in Japanese output, and electricity disruptions, are enough to give overseas competitors an opportunity. And the disaster has shown that even some of the country’s biggest multinationals remain dangerously dependent on domestic suppliers, a realization that could spur more corporations to move production offshore.

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G.E. Tops Forecasts and Raises Dividend

April 21, 2011 by Leave a Comment

Net income was $3.4 billion in the first three months of 2011, or 31 cents a share, compared with $1.9 billion and 17 cents in the quarter a year ago.

Excluding one-time items, earnings were 33 cents a share, topping the average estimate of 28 cents from analysts surveyed by Thomson Reuters. Earnings from continuing operations were $3.5 billion compared with $2.4 billion in the quarter a year ago.

With the results, G.E. joins other companies in the manufacturing sector that have topped forecasts this quarter, including United Technologies, Eaton and Honeywell.

The chief executive of G.E., Jeffrey R. Immelt, said in a statement that the company had emerged from the recession a stronger company.

“GE Healthcare, Transportation and Aviation delivered strong results,” Mr. Immelt said. “Strategic investments in high-growth segments have strengthened the company’s energy portfolio and position that business to return to growth in the second half of this year. We ended the quarter with a record high backlog of $177 billion.”

“GE Capital also had a strong first quarter, earning $1.8 billion after tax,” he said.

Over all, revenue rose 6 percent, to $38.45 billion in the first quarter, exceeding analysts forecasts of $34.64 billion. Revenue in the same quarter a year ago was $36.2 billion.

The company also raised its quarterly dividend by a penny, to 15 cents, beginning in the third quarter, the report said. It had increased its dividend twice in 2010. In July, it rose to 12 cents a share from 10 cents, and in December it rose further, to 14 cents. The company paid 31 cents a share until February 2009, when, for the first time since the Great Depression, the board cut its dividend to conserve cash.

G.E. also completed the sale of 51 percent of NBC Universal to the Comcast cable network in the quarter, which resulted in an after-tax gain of 4 cents a share. In the deal, Comcast paid General Electric just under $6.2 billion in cash and contributed its pay TV channels like E Entertainment Television and the Golf Channel, worth $7.25 billion, to NBC Universal.

While G.E. is a household name as a manufacturer of everyday products like lights bulbs and electric fans, but it also has a diverse portfolio of finance and business units.

Its lending division, GE Capital, is the nation’s largest nonbank financial institution, and it has provided more than half of the company’s profit in some recent years. But the unit was struggling amid the fallout from the collapse of the real estate market, and Mr. Immelt has tried refocus G.E. more toward the industrial sector.

The company said GE Capital reported net income of $1.8 billion in the first quarter of 2011, up from $583 million in the quarter a year ago.

“With losses having peaked, we are originating new business at attractive margins and our funding costs continue to be favorable,” Mr. Immelt said of GE Capital.

General Electric said when announcing its last results in January that it had a backlog of orders that positioned it for growth in 2011, with the transportation, health care and finance units expected to lead in earnings. On Thursday, Mr. Immelt said the company’s backlog, a gauge of future results, was $177 billion.

The company has continued to diversify and make acquisitions, while trying to build its businesses in crucial sectors like energy. Early this month G.E. announced plans to build the nation’s largest photovoltaic panel factory, with the goal of becoming a major player in the market.

Article source: http://www.nytimes.com/2011/04/22/business/22electric.html?partner=rss&emc=rss

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