Major U.S. stock indices were mixed this week as more signs of a slowing global economy contrasted with optimism that European leaders were making headway on plans to manage the region's sovereign debt crisis.
U.S. and global economic news
Germany agrees to increase bailout contribution
Germany's parliament approved legislation to increase the eurozone bailout fund's lending capacity to 440 billion, from around 250 billion, and to make the fund more flexible. The move was lauded as the clearing of a major hurdle in the path to the containment of Europe's sovereign debt crisis. Also this week, the Greek Parliament approved a new property tax law in a closely watched vote, a key step in the country's efforts to secure further aid.
Standard & Poor's and Fitch downgrade New Zealand's debt
Standard & Poor's and Fitch Ratings downgraded New Zealand's local currency debt amid concern that government and household debt are expanding. New Zealand is the first Asia-Pacific nation in a decade to have its debt cut from AAA. S&P cut the local currency debt one level to AA+. Foreign currency debt was cut to AA from AA+.
Eurozone inflation hits three-year high
European inflation unexpectedly accelerated at the fastest pace in almost three years; the rate for September jumped to 3% from 2.5% in August. The increase further complicated the work of the European Central Bank as it fights to contain the region's debt crisis. Germany's inflation rate rose in September to 2.8%, from 2.5% in August.
Chinese manufacturing shrinks for third month
Chinese manufacturing shrank for the third month in a row as measures of new orders and export demand fell.
U.S. consumer spending, new home sales fall
U.S. consumer spending slowed in August as incomes unexpectedly dropped for the first time in almost two years; that drop forced households to dig into their savings. Purchases rose 0.2% after a 0.7% increase the previous month. Also in August, sales of new homes fell to a seasonally adjusted annual rate of 295,000, which was down from 302,000 a month earlier. The inventory of new homes fell to 162,000, the lowest level on record since 1963. In July U.S. home prices rose for a fourth month but remain lower than they were a year ago.
U.S. and global corporate news
Amazon debuts Kindle Fire
Amazon, the world's largest online retailer, debuted its e-reader Kindle Fire. The company is betting that its device, which is smaller and less than half the price of Apple's iPad, can present a challenge to that popular product.
BofA to charge for debit card use
Bank of America announced plans to charge customers $5 per month to use their debit cards. Other banks are expected to follow with similar moves, which are intended to make up for funds lost to a new regulation that puts a cap on how much banks can charge merchants for debit card transactions.
Friday, September 30, 2011
Thursday, September 29, 2011
U.S. economic news for the week ended September 23, 2011
Global stocks tumbled this week in response to evidence that global growth is decelerating and increasing fears of a Greek debt default. As investors dumped all things considered risky, the yield on the 10-year U.S. Treasury note fell to a record low, and oil dipped below $80 per barrel. Fresh data, showing a decline in manufacturing activity in both China and Europe, added to the worries, and World Bank President Robert Zoellick warned that the global economy is in a "danger zone." Vows by G20 officials to preserve banking stability and markets and new efforts by the U.S. Federal Reserve Board to reduce borrowing costs failed to significantly buoy sentiment as banks across the eurozone and the United States were downgraded and data everywhere showed a downturn.
U.S. and global economic news
IMF cuts global growth forecast
The International Monetary Fund cut its forecast for global growth to 4% and warned that severe repercussions to the global economy can be avoided only if eurozone nations strengthen their banking system and the United States gets its fiscal house in order. The IMF said the U.S. and European economies face recession and a lost decade of growth similar to what happened in Japan if they fail to take concerted action to revamp their economic policies.
Fed debuts "Operation Twist" to push interest rates lower
The U.S. Fed said on Wednesday that in a move to further reduce borrowing costs to keep the economy from falling into recession, it will replace much of the short-term debt in its portfolio with longer-term Treasuries. In what economists have dubbed "Operation Twist," the Fed will actively sell Treasuries with maturities of three years and less and buy Treasuries with maturities of six- to 30-years.The Fed will spend $400 billion on the program that is intended to put downward pressure on longer-term interest rates to make it cheaper for consumers to finance long-term purchases.
S&P cuts debt rating of Italy and some of its banks
Standard & Poor's Ratings Services cut Italy's sovereign debt rating one notch, saying the nation's weak economic growth and fragile government coalition will make it harder to head off the crisis sweeping the eurozone. The agency went so far as to say that paralysis in Prime Minister Silvio Berlusconi's governing coalition has become an obstacle to overhauling the country's stagnant economy. In the wake of the sovereign downgrade, S&P also cut the ratings of several Italian lenders. The ratings agency cut the long-term ratings of Italian banking giant Intesa Sanpaolo SpA and investment bank Mediobanca SpA to single-A from A-plus to bring the lenders' credit rating in line with the host country. S&P also cut its rating of the Italian subsidiaries of French bank BNP Paribas. The long-term rating of BNP's Findomestic Banca was cut to A from A+, while the long- and short-term rating on the French lender's Banca Nazionale del Lavoro subsidiary was lowered to A+/A-1 from AA-/A-1+.
Eurozone data shows slowdown
Business activity in the eurozone contracted in September for the first time in more than two years. The contraction is seen as the strongest evidence to date that the global slowdown and European debt crisis are pushing the eurozone to the brink of recession. The eurozone PMI (Purchasing Managers' Index) for September dropped 1.5 points to 49.2, according to data provider Markit. A drop below 50 signals contraction.
German investor confidence drops to lowest level in two-and-a-half years
German investor confidence fell to the lowest level in more than two-and-a-half years in September as Europe's debt crisis and global slowdown damped the outlook for growth. The ZEW Centre for European Economic Research said its index of investor and analyst expectations, which aims to predict developments six months in advance, fell to minus 43.3 from minus 37.6 in August.
U.S. housing starts fall to three-month low
U.S. housing starts dropped 5% to a 571,000 annual rate, a three-month low. Residential construction has been constrained by foreclosures, declining prices, and a lack of employment. Still building permits, which are proxies for future construction, climbed 3.2% to a 620,000 annual rate in August. That was the highest level this year.
U.S. and global corporate news
Moody's downgrades U.S. and Greek banks
Moody's Investor's Service cut the long-term credit ratings of Bank of America and Wells Fargo. Moody's cited a decreasing possibility that the United States would support the lenders in an emergency. Citigroup's short-term rating was also cut. Bank of America's ratings were cut to Baa1 from A2 for long-term debt and to Prime 2 from Prime 1 for short-term debt. The outlook on long-term senior ratings remains negative. Wells Fargo's senior debt was downgraded to A2 from A1; the outlook remains negative on the senior long-term ratings. The ratings agency also downgraded eight Greek banks by two notches Friday, citing expected losses from the banks' holdings of Greek government bonds. National Bank of Greece, EFG Eurobank Ergasias, Alpha Bank, Piraeus Bank, Agricultural Bank of Greece, and Attica Bank were downgraded by Moody's to Caa2 from B3. Emporiki Bank of Greece and General Bank of Greece were downgraded to B3 from B1.
Tyco to break up
Tyco International said it will break up into three companies, another sign that the era of the conglomerate is drawing to a close.
Oracle's profit jumps 36%
Oracle's first-quarter profit climbed 36% on strong sales in its core software business. Sales of the company's hardware systems dropped, however.
U.S. and global economic news
IMF cuts global growth forecast
The International Monetary Fund cut its forecast for global growth to 4% and warned that severe repercussions to the global economy can be avoided only if eurozone nations strengthen their banking system and the United States gets its fiscal house in order. The IMF said the U.S. and European economies face recession and a lost decade of growth similar to what happened in Japan if they fail to take concerted action to revamp their economic policies.
Fed debuts "Operation Twist" to push interest rates lower
The U.S. Fed said on Wednesday that in a move to further reduce borrowing costs to keep the economy from falling into recession, it will replace much of the short-term debt in its portfolio with longer-term Treasuries. In what economists have dubbed "Operation Twist," the Fed will actively sell Treasuries with maturities of three years and less and buy Treasuries with maturities of six- to 30-years.The Fed will spend $400 billion on the program that is intended to put downward pressure on longer-term interest rates to make it cheaper for consumers to finance long-term purchases.
S&P cuts debt rating of Italy and some of its banks
Standard & Poor's Ratings Services cut Italy's sovereign debt rating one notch, saying the nation's weak economic growth and fragile government coalition will make it harder to head off the crisis sweeping the eurozone. The agency went so far as to say that paralysis in Prime Minister Silvio Berlusconi's governing coalition has become an obstacle to overhauling the country's stagnant economy. In the wake of the sovereign downgrade, S&P also cut the ratings of several Italian lenders. The ratings agency cut the long-term ratings of Italian banking giant Intesa Sanpaolo SpA and investment bank Mediobanca SpA to single-A from A-plus to bring the lenders' credit rating in line with the host country. S&P also cut its rating of the Italian subsidiaries of French bank BNP Paribas. The long-term rating of BNP's Findomestic Banca was cut to A from A+, while the long- and short-term rating on the French lender's Banca Nazionale del Lavoro subsidiary was lowered to A+/A-1 from AA-/A-1+.
Eurozone data shows slowdown
Business activity in the eurozone contracted in September for the first time in more than two years. The contraction is seen as the strongest evidence to date that the global slowdown and European debt crisis are pushing the eurozone to the brink of recession. The eurozone PMI (Purchasing Managers' Index) for September dropped 1.5 points to 49.2, according to data provider Markit. A drop below 50 signals contraction.
German investor confidence drops to lowest level in two-and-a-half years
German investor confidence fell to the lowest level in more than two-and-a-half years in September as Europe's debt crisis and global slowdown damped the outlook for growth. The ZEW Centre for European Economic Research said its index of investor and analyst expectations, which aims to predict developments six months in advance, fell to minus 43.3 from minus 37.6 in August.
U.S. housing starts fall to three-month low
U.S. housing starts dropped 5% to a 571,000 annual rate, a three-month low. Residential construction has been constrained by foreclosures, declining prices, and a lack of employment. Still building permits, which are proxies for future construction, climbed 3.2% to a 620,000 annual rate in August. That was the highest level this year.
U.S. and global corporate news
Moody's downgrades U.S. and Greek banks
Moody's Investor's Service cut the long-term credit ratings of Bank of America and Wells Fargo. Moody's cited a decreasing possibility that the United States would support the lenders in an emergency. Citigroup's short-term rating was also cut. Bank of America's ratings were cut to Baa1 from A2 for long-term debt and to Prime 2 from Prime 1 for short-term debt. The outlook on long-term senior ratings remains negative. Wells Fargo's senior debt was downgraded to A2 from A1; the outlook remains negative on the senior long-term ratings. The ratings agency also downgraded eight Greek banks by two notches Friday, citing expected losses from the banks' holdings of Greek government bonds. National Bank of Greece, EFG Eurobank Ergasias, Alpha Bank, Piraeus Bank, Agricultural Bank of Greece, and Attica Bank were downgraded by Moody's to Caa2 from B3. Emporiki Bank of Greece and General Bank of Greece were downgraded to B3 from B1.
Tyco to break up
Tyco International said it will break up into three companies, another sign that the era of the conglomerate is drawing to a close.
Oracle's profit jumps 36%
Oracle's first-quarter profit climbed 36% on strong sales in its core software business. Sales of the company's hardware systems dropped, however.
Friday, September 16, 2011
U.S. economic news for the week ended September 16, 2011
Stocks made significant gains this week after investors were encouraged by central banks vowing to pump dollars into the European banking system to avert a liquidity crisis. All eyes remain on Europe and its leaders' determination to control its debt crisis. On Friday, as concern intensified about Greek debt and the eurozone's financial stability, European finance ministers and U.S. Treasury Secretary Timothy Geithner began a two-day meeting in Wroclaw, Poland, to tackle the crisis.
U.S. and global economic news
Central banks join forces to stem liquidity crisis
The European Central Bank said it will lend dollars to euro-area banks in a series of three-month loans to ensure that the banks have enough U.S. currency through the end of the year. The ECB will coordinate the action with the U.S. Federal Reserve Board and other central banks. The move came this week after two banks borrowed from the ECB's seven-day offerings. The announcement was seen as a sign that the banks are having difficulty accessing U.S. currency as Europe's debt crisis makes financial institutions wary of lending. Earlier in the week, French and German leaders confirmed that they will support Greece's continued participation in the shared euro currency.
SNB vows to defend currency; leaves rate at zero
The Swiss National Bank left its three-month Libor target rate at zero after unexpectedly lowering the benchmark from 0.25% last month. The bank said it is ready to take "further measures" if needed to cap gains in the Swiss franc against the euro.
U.S. economic data show continued slowing
U.S. retail sales remained unchanged in August as the sluggish labor market and limited income growth took a toll on consumers. Prices paid by producers were also unchanged in August, according to the U.S. Department of Labor, while the so-called core costs that exclude food and fuel rose less than forecast. The Consumer Price Index for August showed an inflation rate of 0.4%, with a core rate of 0.2%. Meanwhile, a report from the U.S. Department of Commerce showed inventories rose less than forecast in July. Initial claims for unemployment benefits were worse than expected last week.
Container trade points to weakening global economy
The Port of Long Beach's total container trade fell 6.9% in August. The drop was the largest in five months. Weaker global trade could push the economy closer to recession.
U.S. and global corporate news
Moody's downgrades Société Générale and Crédit Agricole
Moody's Investors Service downgraded its long-term ratings of Société Générale and Crédit Agricole by one notch. Moody's cited the level of state support that SocGen received and Crédit Agricole's significant Greek holdings as reasons behind the downgrade.
UBS trader loses $2 billion; BofA to cut 30,000 jobs; Morgan Stanley's Mack to exit post
UBS shares lost ground after the Swiss bank said it would likely post a third-quarter loss after a rogue trader racked up as much as $2 billion in losses using the firm's own money. The incident raised fears among investors about the bank's ability to manage risk and global regulators' ability to monitor it. Bank of America announced a $5 billion cost reduction plan that would include the elimination of 30,000 jobs. The job cuts represent the largest single work force reduction in a U.S.-based company so far this year. Morgan Stanley's shares got a boost after the firm disclosed that Chairman and Chief Executive John Mack will step down from the board at the end of the year.
Best Buy reports 30% drop in profit
Best Buy, the world's largest electronics chain, reported a 30% drop in quarterly profit and cut its full-year earnings forecast. Best Buy's sales have come under pressure as shoppers, in search of better deals, shift to online rivals. The retailer said market share gains in smartphones and tablets did not offset declines in sales of televisions and computers.
RIM loses ground
Research in Motion's stock tumbled after the maker of BlackBerry announced it saw a year-over-year decline in shipments of its smartphones, the first decline in nearly a decade. RIM shares have lost more than one-half of their value this year as the company loses market share to Apple's iPhone and devices that run off Google's Android system. For the quarter ended August 27, RIM posted a profit 59% lower than for the same quarter last year.
U.S. and global economic news
Central banks join forces to stem liquidity crisis
The European Central Bank said it will lend dollars to euro-area banks in a series of three-month loans to ensure that the banks have enough U.S. currency through the end of the year. The ECB will coordinate the action with the U.S. Federal Reserve Board and other central banks. The move came this week after two banks borrowed from the ECB's seven-day offerings. The announcement was seen as a sign that the banks are having difficulty accessing U.S. currency as Europe's debt crisis makes financial institutions wary of lending. Earlier in the week, French and German leaders confirmed that they will support Greece's continued participation in the shared euro currency.
SNB vows to defend currency; leaves rate at zero
The Swiss National Bank left its three-month Libor target rate at zero after unexpectedly lowering the benchmark from 0.25% last month. The bank said it is ready to take "further measures" if needed to cap gains in the Swiss franc against the euro.
U.S. economic data show continued slowing
U.S. retail sales remained unchanged in August as the sluggish labor market and limited income growth took a toll on consumers. Prices paid by producers were also unchanged in August, according to the U.S. Department of Labor, while the so-called core costs that exclude food and fuel rose less than forecast. The Consumer Price Index for August showed an inflation rate of 0.4%, with a core rate of 0.2%. Meanwhile, a report from the U.S. Department of Commerce showed inventories rose less than forecast in July. Initial claims for unemployment benefits were worse than expected last week.
Container trade points to weakening global economy
The Port of Long Beach's total container trade fell 6.9% in August. The drop was the largest in five months. Weaker global trade could push the economy closer to recession.
U.S. and global corporate news
Moody's downgrades Société Générale and Crédit Agricole
Moody's Investors Service downgraded its long-term ratings of Société Générale and Crédit Agricole by one notch. Moody's cited the level of state support that SocGen received and Crédit Agricole's significant Greek holdings as reasons behind the downgrade.
UBS trader loses $2 billion; BofA to cut 30,000 jobs; Morgan Stanley's Mack to exit post
UBS shares lost ground after the Swiss bank said it would likely post a third-quarter loss after a rogue trader racked up as much as $2 billion in losses using the firm's own money. The incident raised fears among investors about the bank's ability to manage risk and global regulators' ability to monitor it. Bank of America announced a $5 billion cost reduction plan that would include the elimination of 30,000 jobs. The job cuts represent the largest single work force reduction in a U.S.-based company so far this year. Morgan Stanley's shares got a boost after the firm disclosed that Chairman and Chief Executive John Mack will step down from the board at the end of the year.
Best Buy reports 30% drop in profit
Best Buy, the world's largest electronics chain, reported a 30% drop in quarterly profit and cut its full-year earnings forecast. Best Buy's sales have come under pressure as shoppers, in search of better deals, shift to online rivals. The retailer said market share gains in smartphones and tablets did not offset declines in sales of televisions and computers.
RIM loses ground
Research in Motion's stock tumbled after the maker of BlackBerry announced it saw a year-over-year decline in shipments of its smartphones, the first decline in nearly a decade. RIM shares have lost more than one-half of their value this year as the company loses market share to Apple's iPhone and devices that run off Google's Android system. For the quarter ended August 27, RIM posted a profit 59% lower than for the same quarter last year.
Tuesday, September 13, 2011
U.S. economic news for the week ended September 9, 2010
Stocks were volatile this week as President Barack Obama's $447 billion plan to generate jobs failed to bolster investor confidence in the U.S. economy, and U.S. Federal Reserve Board Chairman Ben S. Bernanke disappointed markets by not detailing new plans to boost growth. Weakness in overseas markets added to the jitters as concerns over the likelihood of a Greek default mounted ahead of a meeting of finance ministers and central bankers from the Group of Seven leading economies in Marseilles, France. The euro fell to a nine-month low against the U.S. dollar, and Greek credit default swaps soared to record levels. Further unnerving markets this week were reports that the United States had received specific and "credible" information that al Qaeda is planning car and truck bombings in New York and Washington to coincide with the 10-year anniversary of the September 11 terrorist attacks.
U.S. and global economic news
Obama calls for extension of unemployment benefits
In the announcement of his $447 billion plan to spur growth, President Obama called on U.S. lawmakers to pass $62 billion in spending to extend unemployment insurance benefits through 2012 and fund programs to alleviate long-term joblessness.
Swiss central bank caps franc
The Swiss National Bank effectively put a cap on its currency, the Swiss franc. The bank said it would buy euros in "unlimited quantities" whenever the eurozone currency falls below 1.20 francs.
ECB and BOE keep rates unchanged
The European Central Bank and the Bank of England kept interest rates unchanged this week. ECB President Jean Claude Trichet warned that the eurozone's economy will grow more slowly than previously expected, between 1.4% and 1.8% in 2011, and between 0.4% and 2.2% in 2012. Trichet also said that risks to medium-term inflation have moderated, but he stopped short of signaling a change in the bank's interest rate path.
Greek credit default swaps hit record
Credit default swaps insuring Greek sovereign bonds jumped 212 basis points to a record 3,238 this week. The surge, which signals that investors believe there is more than a 90% chance that Greece will default, came after reports that the Greek economy shrank more than previously reported. The country's gross domestic product contracted 7.3% in the second quarter.
U.S. trade deficit posts biggest drop in over two years
In July the U.S. trade deficit posted its biggest drop in nearly two-and-one-half years as exports surged to a record high and oil prices fell from the near-three-year highs reached in May.
U.S. jobless claims rise
U.S. jobless claims rose more than expected last week, by 2,000 to 414,000, as the labor market continues its struggle to recover.
U.S. and global corporate news
Groupon cancels roadshow
Groupon canceled its investor roadshow and is reevaluating plans for an initial public offering amid the current market volatility.
Twitter boasts 100 million users
Twitter, the largest U.S. microblogging service, announced that it now has more than 100 million active users worldwide. Usage has increased more than 80% since the beginning of the year.
Google to buy Zagat
Google agreed to buy restaurant review company Zagat Survey as the Internet giant moved to take a share of revenue from local businesses. Earlier this year, Google entered into a two-year agreement with Local.com to implement certain advertising and search services.
Saab Automobile vowed to appeal the refusal of a Swedish court to grant the carmaker protection from creditors. The ruling essentially opens the way for labor unions representing unpaid workers to petition for bankruptcy and reclaim wages.
U.S. and global economic news
Obama calls for extension of unemployment benefits
In the announcement of his $447 billion plan to spur growth, President Obama called on U.S. lawmakers to pass $62 billion in spending to extend unemployment insurance benefits through 2012 and fund programs to alleviate long-term joblessness.
Swiss central bank caps franc
The Swiss National Bank effectively put a cap on its currency, the Swiss franc. The bank said it would buy euros in "unlimited quantities" whenever the eurozone currency falls below 1.20 francs.
ECB and BOE keep rates unchanged
The European Central Bank and the Bank of England kept interest rates unchanged this week. ECB President Jean Claude Trichet warned that the eurozone's economy will grow more slowly than previously expected, between 1.4% and 1.8% in 2011, and between 0.4% and 2.2% in 2012. Trichet also said that risks to medium-term inflation have moderated, but he stopped short of signaling a change in the bank's interest rate path.
Greek credit default swaps hit record
Credit default swaps insuring Greek sovereign bonds jumped 212 basis points to a record 3,238 this week. The surge, which signals that investors believe there is more than a 90% chance that Greece will default, came after reports that the Greek economy shrank more than previously reported. The country's gross domestic product contracted 7.3% in the second quarter.
U.S. trade deficit posts biggest drop in over two years
In July the U.S. trade deficit posted its biggest drop in nearly two-and-one-half years as exports surged to a record high and oil prices fell from the near-three-year highs reached in May.
U.S. jobless claims rise
U.S. jobless claims rose more than expected last week, by 2,000 to 414,000, as the labor market continues its struggle to recover.
U.S. and global corporate news
Groupon cancels roadshow
Groupon canceled its investor roadshow and is reevaluating plans for an initial public offering amid the current market volatility.
Twitter boasts 100 million users
Twitter, the largest U.S. microblogging service, announced that it now has more than 100 million active users worldwide. Usage has increased more than 80% since the beginning of the year.
Google to buy Zagat
Google agreed to buy restaurant review company Zagat Survey as the Internet giant moved to take a share of revenue from local businesses. Earlier this year, Google entered into a two-year agreement with Local.com to implement certain advertising and search services.
Saab Automobile vowed to appeal the refusal of a Swedish court to grant the carmaker protection from creditors. The ruling essentially opens the way for labor unions representing unpaid workers to petition for bankruptcy and reclaim wages.
Monday, September 12, 2011
U.S. economic news for the week ended September 2, 2011
U.S. job growth fizzled in August, according to both the U.S. Department of Labor’s monthly nonfarm jobs report and the private sector jobs report. In a very disappointing setback, the Labor Department showed no change in payrolls in August, far below expectations. U.S. and European stocks fell sharply in response to the report. Overall, however, major global stock indices showed gains for the week, which marked the end of the worst month in a decade for the U.S. stock market. Chinese stocks had their worst week in three months, as economic and earnings growth slumped while inflation remained at its highest level in three years. In Europe, the Stoxx Europe 600 Index had its strongest weekly rally since July. The U.S. 10-year Treasury yield fell to 2.05% as recessionary fears rose. Oil prices fell below $86 a barrel.
Globally, manufacturing activity appears to be sluggish, with Chinese and U.K. manufacturing activity dropping to multi-year lows. However, Germany’s economy continued to shine in contrast to many neighboring European countries, with bullish news on manufacturing and jobs.
The week began with some relief that the worst fears regarding Hurricane Irene had failed to materialize. The storm blew through Manhattan with little disruption to stock market operations. However, millions of households were affected throughout the eastern United States, a development that could at least temporarily weigh down economic activity.
U.S. and global economic news
U.S. job growth fizzles
U.S. employment stagnated in August, with no job growth, according to the monthly nonfarm payroll report released by the Labor Department Friday morning. It was the first time in 11 months there was no net increase in U.S. jobs. The disappointing news, however, was influenced by the 45,000 Verizon workers who were out of work because they were on strike at the time the report was compiled. Still, the report's employment picture fell far short of the 60,000- to 65,000-job gain that had been anticipated by economists, and the U.S. unemployment rate remained at 9.1%.
More significantly, the weak showing reflected a lack of confidence among U.S. employers following the debt-ceiling showdown in Washington, the S&P downgrade of U.S. debt, the plummeting stock market, and ongoing concerns about Europe’s sovereign debt crisis. While the report conveyed a flat employment picture, it did indicate an increase of 17,000 jobs in the private sector.
ADP reports 91,000 more private sector jobs
Private businesses added 91,000 jobs in August, on a seasonally adjusted basis, according to a report released by payroll giant Automatic Data Processing (ADP) and Macroeconomic Advisers, a consultancy. Almost all the hiring occurred at small businesses (a gain of 58,000) and medium-size businesses (30,000 new jobs). Businesses with 500 or more employees added only 3,000 jobs.
U.S. manufacturing growth stays surprisingly strong
U.S. manufacturing activity grew slightly in August, according to the Institute for Supply Management’s factory index, which fell slightly to 50.6 from 50.9 in July. Economists had expected a drop to 48.5.
Weekly jobless claims ease slightly in United States
Initial claims for unemployment benefits by U.S. workers fell by 12,000 to a seasonally adjusted 409,000 in the week ended August 27, according to the Labor Department. However, the four-week moving average of new claims rose by 1,750 to 410,250.
Consumer confidence indices slip
U.S. consumers lost confidence in August, according to several confidence gauges. The Conference Board’s index of consumer confidence dropped to 44.5 from 59.2 in July, its lowest reading since April 2009. The survey also showed that consumers expect inflation to rise to 5.8% in the next 12 months. Bloomberg’s Consumer Confidence Index fell to -49.1 from -47.0 in July, its second lowest level in two years. The Thomson Reuters/University of Michigan final index of consumer confidence in August slipped to its lowest level since November 2008.
Consumer spending rose in July
U.S. consumers spent more than expected in July, on the basis of a report from the U.S. Department of Commerce, which showed that consumer spending rose 0.8%, the largest gain in five months. Income rose 0.3%, and the savings rate slowed to 5.0% from 5.5% in June, a trend that suggests a rise in confidence about the economy.
Eurozone confidence fades
Economic confidence among Eurozone businesses and consumers fell in August. The Economic Sentiment Indicator declined for the sixth-straight month, to 98.3 in August from 103.0 in July, the European Commission reported. It was the weakest reading since March 2010 and far below the 100.5 expected by economists. The consumer confidence index slid to -16.5 from -11.2, its largest one-month decline since 1990. In a separate report, Eurostat, the European Union statistics office, reported that inflation remained at 2.5% in August and unemployment stood unchanged at 10.0% in July.
Global manufacturing activity slumps
Manufacturing activity slumped across much of the world in August, according to various reports. Manufacturing in the Eurozone contracted, U.K. factory activity hit a two-year low, and a Chinese manufacturing index straddled the line between expansion and contraction, at 50.9, just above its 29-month low recorded in July. South Korea’s purchasing managers' index fell into negative territory, to 49.7 from 51.3 in July.
German economic resilience a positive sign for Europe
Bullish reports from Germany indicate that Europe’s largest and strongest economy continues to grow. Unemployment remained at its lowest level in two decades in August as unemployment fell for the twenty-sixth consecutive month. The unemployment rate remained at 7%, its lowest level since German reunification in 1991. Machine orders grew 9% in July from a year earlier.
Canadian economy shrinks
Canada’s economic output shrank unexpectedly in the second quarter, its first contraction in two years. Canada depends heavily on international trade and has been hurt by the U.S. and European economic slowdown. Canadian GDP declined 0.1% in the second quarter, for an annualized 0.4% contraction. Among the G-7 nations, only Japan and Canada had a contraction in economic activity in the second quarter.
U.S. and global corporate news
U.S. auto sales rise
Sales rose in August for U.S. car manufacturers. Chrysler Group reported a 31% jump in sales, while General Motors and Nissan Motor each reported close to a 20% increase and Ford Motor had an 11% gain. Because of a slow recovery in production after the March tsunami, Japan’s Honda Motor and Toyota Motor reported decreases in U.S. sales of 24.3% and 12.7%, respectively.
U.S. Justice Department a hard sell on merger
The U.S. Department of Justice filed an antitrust lawsuit to block a proposed $39-billion merger between AT&T and T-Mobile USA, saying that it would substantially decrease competition, lead to higher prices, and reduce product innovation.
Bombardier profit soars Canada’s transportation giant Bombardier posted a 53% jump in second-quarter profit as revenue grew in both its aerospace and transportation divisions.
Globally, manufacturing activity appears to be sluggish, with Chinese and U.K. manufacturing activity dropping to multi-year lows. However, Germany’s economy continued to shine in contrast to many neighboring European countries, with bullish news on manufacturing and jobs.
The week began with some relief that the worst fears regarding Hurricane Irene had failed to materialize. The storm blew through Manhattan with little disruption to stock market operations. However, millions of households were affected throughout the eastern United States, a development that could at least temporarily weigh down economic activity.
U.S. and global economic news
U.S. job growth fizzles
U.S. employment stagnated in August, with no job growth, according to the monthly nonfarm payroll report released by the Labor Department Friday morning. It was the first time in 11 months there was no net increase in U.S. jobs. The disappointing news, however, was influenced by the 45,000 Verizon workers who were out of work because they were on strike at the time the report was compiled. Still, the report's employment picture fell far short of the 60,000- to 65,000-job gain that had been anticipated by economists, and the U.S. unemployment rate remained at 9.1%.
More significantly, the weak showing reflected a lack of confidence among U.S. employers following the debt-ceiling showdown in Washington, the S&P downgrade of U.S. debt, the plummeting stock market, and ongoing concerns about Europe’s sovereign debt crisis. While the report conveyed a flat employment picture, it did indicate an increase of 17,000 jobs in the private sector.
ADP reports 91,000 more private sector jobs
Private businesses added 91,000 jobs in August, on a seasonally adjusted basis, according to a report released by payroll giant Automatic Data Processing (ADP) and Macroeconomic Advisers, a consultancy. Almost all the hiring occurred at small businesses (a gain of 58,000) and medium-size businesses (30,000 new jobs). Businesses with 500 or more employees added only 3,000 jobs.
U.S. manufacturing growth stays surprisingly strong
U.S. manufacturing activity grew slightly in August, according to the Institute for Supply Management’s factory index, which fell slightly to 50.6 from 50.9 in July. Economists had expected a drop to 48.5.
Weekly jobless claims ease slightly in United States
Initial claims for unemployment benefits by U.S. workers fell by 12,000 to a seasonally adjusted 409,000 in the week ended August 27, according to the Labor Department. However, the four-week moving average of new claims rose by 1,750 to 410,250.
Consumer confidence indices slip
U.S. consumers lost confidence in August, according to several confidence gauges. The Conference Board’s index of consumer confidence dropped to 44.5 from 59.2 in July, its lowest reading since April 2009. The survey also showed that consumers expect inflation to rise to 5.8% in the next 12 months. Bloomberg’s Consumer Confidence Index fell to -49.1 from -47.0 in July, its second lowest level in two years. The Thomson Reuters/University of Michigan final index of consumer confidence in August slipped to its lowest level since November 2008.
Consumer spending rose in July
U.S. consumers spent more than expected in July, on the basis of a report from the U.S. Department of Commerce, which showed that consumer spending rose 0.8%, the largest gain in five months. Income rose 0.3%, and the savings rate slowed to 5.0% from 5.5% in June, a trend that suggests a rise in confidence about the economy.
Eurozone confidence fades
Economic confidence among Eurozone businesses and consumers fell in August. The Economic Sentiment Indicator declined for the sixth-straight month, to 98.3 in August from 103.0 in July, the European Commission reported. It was the weakest reading since March 2010 and far below the 100.5 expected by economists. The consumer confidence index slid to -16.5 from -11.2, its largest one-month decline since 1990. In a separate report, Eurostat, the European Union statistics office, reported that inflation remained at 2.5% in August and unemployment stood unchanged at 10.0% in July.
Global manufacturing activity slumps
Manufacturing activity slumped across much of the world in August, according to various reports. Manufacturing in the Eurozone contracted, U.K. factory activity hit a two-year low, and a Chinese manufacturing index straddled the line between expansion and contraction, at 50.9, just above its 29-month low recorded in July. South Korea’s purchasing managers' index fell into negative territory, to 49.7 from 51.3 in July.
German economic resilience a positive sign for Europe
Bullish reports from Germany indicate that Europe’s largest and strongest economy continues to grow. Unemployment remained at its lowest level in two decades in August as unemployment fell for the twenty-sixth consecutive month. The unemployment rate remained at 7%, its lowest level since German reunification in 1991. Machine orders grew 9% in July from a year earlier.
Canadian economy shrinks
Canada’s economic output shrank unexpectedly in the second quarter, its first contraction in two years. Canada depends heavily on international trade and has been hurt by the U.S. and European economic slowdown. Canadian GDP declined 0.1% in the second quarter, for an annualized 0.4% contraction. Among the G-7 nations, only Japan and Canada had a contraction in economic activity in the second quarter.
U.S. and global corporate news
U.S. auto sales rise
Sales rose in August for U.S. car manufacturers. Chrysler Group reported a 31% jump in sales, while General Motors and Nissan Motor each reported close to a 20% increase and Ford Motor had an 11% gain. Because of a slow recovery in production after the March tsunami, Japan’s Honda Motor and Toyota Motor reported decreases in U.S. sales of 24.3% and 12.7%, respectively.
U.S. Justice Department a hard sell on merger
The U.S. Department of Justice filed an antitrust lawsuit to block a proposed $39-billion merger between AT&T and T-Mobile USA, saying that it would substantially decrease competition, lead to higher prices, and reduce product innovation.
Bombardier profit soars Canada’s transportation giant Bombardier posted a 53% jump in second-quarter profit as revenue grew in both its aerospace and transportation divisions.
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