Gold prices, after settling at a record high of $1,259.30 an ounce on Tuesday, retreated later in the week as investors appeared slightly calmer about the health of European banks and the global economy. Still, renewed worries about Europe’s sovereign debt situation pressured the world’s stock markets, although U.S. stocks were mostly up during this post-Labor Day week. Also this week, mortgage rates increased for the first time since June, with the 30-year fixed rate rising slightly to 4.35%.
U.S. economic news
Trade deficit narrows in July
The nation’s trade deficit fell 14% in July to $42.8 billion from $49.8 billion in June, according to a report from the U.S. Department of Commerce. The figure is well below the $47.3 billion gap that had been forecast by economists. Led by aircraft and capital goods, exports reached a record $153.3 billion in July, up 2% from June and 18% from one year earlier. Imports fell 2% from June to $196.1 billion. A smaller trade deficit is potentially good news for the economy because it suggests trade will have less negative impact on growth in the third quarter than it had in the second quarter.
Credit card debt plummets
According to the U.S. Federal Reserve Board, revolving credit outstanding (almost entirely credit card debt) fell $4.4 billion to $827.8 billion in July from June. That figure represents a decline of 15% from the peak of $973.6 billion reached in August 2008.
Unexpected gas glut
Gasoline stockpiles increased by a record 5% during July and August. Supplies typically fall 6% in these two months. One benefit to gas buyers from the unexpected surplus: prices at the pump have remained largely the same during the summer months. The extreme gains in gasoline supplies are a result of record refinery output and high imports more than making up for robust consumption.
Fed's Beige Book reports uneven growth and signs of deceleration
The Fed reported in its Beige Book survey of economic conditions in the central bank’s 12 districts that recovery is occurring unevenly across the country. The report stated that regions dependent on manufacturing and farming were making the most progress while those reliant on housing were struggling. The report also said that while the U.S. economy maintained its expansion overall, five Fed districts have experienced “mixed conditions or a deceleration in overall economic activity” in mid-July through the end of August. The other seven regions all reported modest growth or conditions that were improving.
New unemployment claims fall
The U.S. Department of Labor reported that applications for unemployment benefits fell by 27,000 to 451,000 in the week ended September 4. Economists had predicted a much smaller drop of just 2,000 claims. While total initial jobless claims are still much higher than they would be in a healthy economy, they are now at their lowest level since July 10.
U.S. and global corporate news
Bristol-Myers Squibb announced that it is acquiring biotechnology company ZymoGenetics for $735 million. The deal is the latest in a series of small-to-midsize acquisitions and partnerships that Bristol has made over the past few years in an attempt to strengthen its product lineup.
British Airways and American Airlines, which won approval for their joint venture in July, will start their alliance on flights across the Atlantic in October. The two airlines will align their frequent-flier programs, allowing travelers to earn and use their miles on both airlines.
Talbots reported a profit of $941,000 for the quarter ended July 31, a considerable turnaround from a prior-year loss of $24.5 million. The women’s clothing and accessories retailer cited lower costs and resistance to markdowns as reasons for its improved earnings. Despite posting a profit, net sales decreased 1.3% to $300.7 million and same-store sales fell 1.4%, following a 25% drop in same-store sales one year earlier.
McDonald’s said same-store sales rose 4.9% in August from a year earlier, narrowly falling short of analyst estimates. Analysts projected global sales would increase 5%. The world’s largest restaurant chain reported that sales increased 4.6% in the United States, thanks in part to the popularity of its higher-margin smoothies and frappes.
Global economic news
OECD predicts slowdown in global economy
The Paris-based Organization for Economic Cooperation and Development projected that the pace of global economic expansion during the second half of 2010 will be slower than previously estimated. In its short-term forecast for the Group of Seven leading industrial nations, the think tank said annualized growth in G-7 gross domestic product will slow to 1.4% in the third quarter and 1% in the fourth quarter. That comes on the heels of growth of 3.2% and 2.5% in the first and second quarters of the year, respectively. Saying there is great uncertainty surrounding the world economy in the months ahead, the OECD added that central banks around the world may need to be prepared to provide additional economic stimulus.
Bank of Canada lifts benchmark rate
Canada’s central bank increased its benchmark interest rate for the third time this year, raising its target rate for overnight loans between commercial banks to 1% from 0.75%. Canada’s increases are the first among Group of Seven countries following last year’s global recession. The country seems to be recovering from the global economic downturn faster than most countries, as Canada has already returned to pre-recession employment levels. In addition, “consumption and investment have ‘evolved’ as anticipated and are expected to remain buoyant,” the Bank of Canada said.
Ireland’s state-owned bank to be split
Ireland’s troubled banking system became the latest victim in Europe’s continuing economic crisis, as the government said it would break up the weakest of its major banks to try to prevent a run by depositors. Anglo Irish Bank, which was nationalized by Ireland’s government last year, will likely be divided into a government-backed bank that would hold customer deposits and an “asset recovery” bank that would hold the bank’s increasingly bad loans. The intention is that eventually the recovery bank’s assets will be sold off in whole or in part. The move is being made as Ireland attempts to restore the reputation of its financial system.
Friday, September 10, 2010
Friday, September 3, 2010
U.S. Economic News Week Ending September 3, 2010
Stocks got a lift this week after more modest-than-expected job losses and an unexpected jump in home sales eased some concern that the economic rebound is weakening. Adding to the more buoyant mood among investors were Wednesday's reports of strong manufacturing data from China and the United States, which further relieved concerns about a global slowdown.
U.S. economic news
Job losses moderate
Job losses continued to rise in August but at a more modest pace than expected. Nonfarm payrolls fell by 54,000 last month, matching the level of losses recorded in July. Private employers added 42,000 jobs in August, while a reduction in census workers dragged total payrolls down by 100,000 and pushed the unemployment rate up to 9.6%. Earlier in the week, reports showed that initial jobless claims fell by 6,000; that level indicates that the labor market has not improved this year even as the economy expanded.
Manufacturing gains add to enthusiasm
The Institute for Supply Management said its manufacturing index rose to 56.3 in August from 55.5 the prior month. Faster growth in production, employment, and inventories pushed the U.S. manufacturing index higher last month.
Unexpected jump in pending home sales
Pending home sales unexpectedly grew 5.2% in July. The jump was seen as a sign that the market may be starting to stabilize after the expiration of a homebuyer tax credit.
U.S. and global corporate news
Canadian banks miss expectations
The Bank of Nova Scotia's third-quarter earnings rose 14% as the internationally diverse bank posted a record quarter in its domestic banking business. Still, its results missed analysts' expectations. Toronto-Dominion Bank also missed analysts' expectations, despite a 29% jump in profit. That increase was powered by strong retail results in Canada and the United States and lower loan-loss provisions.
Heinz profits rise 13%
H.J. Heinz's fiscal first-quarter earnings rose 13%, helped by strong sales of ketchup and staples such as Classico pasta sauces. During a conference call to announce its results, the Pittsburgh-based company again signaled its interest in making acquisitions in emerging markets.
Global economic news
ECB extends emergency lending measures
European Central Bank President Jean-Claude Trichet extended emergency lending measures for banks into 2011 as the risk of a renewed U.S. recession put the eurozone's rebound in crisis. The ECB said it will keep offering banks unlimited one-week and one-month loans at least until January 18. The ECB will also offer banks three-month loans in October, November, and December at interest rates linked to the ECB's average benchmark rate over the maturity of the loan.
Japan expands lending program and announces $10.8 billion stimulus
In an effort to combat the rising yen, which analysts have blamed for slower export growth and a sputtering economy, the Bank of Japan announced that it would expand its lending program and that the government would implement a $10.8 billion stimulus package.
U.S. economic news
Job losses moderate
Job losses continued to rise in August but at a more modest pace than expected. Nonfarm payrolls fell by 54,000 last month, matching the level of losses recorded in July. Private employers added 42,000 jobs in August, while a reduction in census workers dragged total payrolls down by 100,000 and pushed the unemployment rate up to 9.6%. Earlier in the week, reports showed that initial jobless claims fell by 6,000; that level indicates that the labor market has not improved this year even as the economy expanded.
Manufacturing gains add to enthusiasm
The Institute for Supply Management said its manufacturing index rose to 56.3 in August from 55.5 the prior month. Faster growth in production, employment, and inventories pushed the U.S. manufacturing index higher last month.
Unexpected jump in pending home sales
Pending home sales unexpectedly grew 5.2% in July. The jump was seen as a sign that the market may be starting to stabilize after the expiration of a homebuyer tax credit.
U.S. and global corporate news
Canadian banks miss expectations
The Bank of Nova Scotia's third-quarter earnings rose 14% as the internationally diverse bank posted a record quarter in its domestic banking business. Still, its results missed analysts' expectations. Toronto-Dominion Bank also missed analysts' expectations, despite a 29% jump in profit. That increase was powered by strong retail results in Canada and the United States and lower loan-loss provisions.
Heinz profits rise 13%
H.J. Heinz's fiscal first-quarter earnings rose 13%, helped by strong sales of ketchup and staples such as Classico pasta sauces. During a conference call to announce its results, the Pittsburgh-based company again signaled its interest in making acquisitions in emerging markets.
Global economic news
ECB extends emergency lending measures
European Central Bank President Jean-Claude Trichet extended emergency lending measures for banks into 2011 as the risk of a renewed U.S. recession put the eurozone's rebound in crisis. The ECB said it will keep offering banks unlimited one-week and one-month loans at least until January 18. The ECB will also offer banks three-month loans in October, November, and December at interest rates linked to the ECB's average benchmark rate over the maturity of the loan.
Japan expands lending program and announces $10.8 billion stimulus
In an effort to combat the rising yen, which analysts have blamed for slower export growth and a sputtering economy, the Bank of Japan announced that it would expand its lending program and that the government would implement a $10.8 billion stimulus package.
Friday, August 27, 2010
U.S. Economic News Week Ending August 27, 2010
Stocks fell throughout the week amid further evidence that the U.S. economic recovery is losing steam. On Thursday, the Dow Jones Industrial Average closed below the psychologically important 10,000 level. Friday's pledge by U.S. Federal Reserve Board Chairman Ben Bernanke to safeguard the U.S. economic recovery sparked a rally early Friday but did not seem to provide investors enough encouragement to erase earlier losses.
U.S. economic news
Bernanke pledges Fed to do all it can to ensure recovery
U.S. Federal Reserve Board Chairman Ben Bernanke said Friday that the U.S. central bank "will do all that it can" to ensure economic recovery continues. He outlined steps the Fed might take if the economy slows. In his opening remarks to the world's central bankers in Jackson Hole, Wyoming, Bernanke said the Fed is prepared to provide additional monetary accommodation through unconventional measures if necessary.
GDP grows more slowly than thought
The U.S. economy grew more slowly that initially estimated in the second quarter and corporate profits nearly dried up. Gross Domestic Product rose from April through June at an annualized seasonally adjusted rate of 1.6%. A month ago, the government estimated the rate at 2.4% after a 3.7% expansion in the first quarter. After-tax earnings rose 0.1%, off the previous quarter's 11.4% gain.
Weak durable goods orders, drop in home sales show recovery losing pace
Weakness in durable goods orders and a drop to historic lows in new-home sales offered more signs that the economy is losing momentum. Durable goods orders rose 0.3% in July from June, mostly on the back of an increase in aircraft orders. Excluding the volatile transportation sector, orders tumbled 3.8%.
Also this week, reports showed that sales of new single-family homes fell 12.4% in July from June to a seasonally adjusted rate of 276,000, the lowest level since the data series began in 1963. Many purchasers seem to have left the markets since the expiration on April 30 of a federal tax credit for homebuyers. Existing home sales suffered a similar decline, dropping a record 27.2% to their lowest level in 15 years, as inventories soared to their highest level in more than a decade. Adding to the discouraging news were reports by the Federal Reserve Bank of Kansas City that manufacturing activity in the district stalled.
Initial jobless claims decline more than expected
More encouragingly, initial jobless claims declined by 31,000 to 473,000, more than the 10,000 drop predicted by economists. However, new claims for the previous week were revised upward, and the four-week moving average rose to the highest level since November 2009.
U.S. and global corporate news
Toyota Motor announced it will recall about 1.13 million Corolla and Matrix cars for an engine defect that U.S. regulators said could cause stalling. The recall will affect model years 2005 to 2008 in the United States and Canada and comes after three reported accidents linked to the defect. GM will recall approximately 200,000 of the Pontiac Vibe, which was designed and engineered by Toyota and built alongside the Matrix at a joint manufacturing plant in California.
Johnson & Johnson pulled two hip-repair implants off the market because of quality problems. That recall, administered through J&J's DePuy Orthopaedics unit, came the same week that J&J's Vision Care unit withdrew about 100,000 boxes of contact lenses sold in Asia and Europe because of a manufacturing problem.
Spirits giant Diageo reported its net profit rose 1.5% for the year ended June 30. Sales increased 5% but were up only 2% when stripping out the effects of currency fluctuations, acquisitions, and disposals. During the fiscal year, Diageo benefited from an 11% jump in organic net sales in emerging markets, including China and India, but suffered a 2% sales decline in the developed world.
Global economic news
U.K. economy expands 1.2%
The U.K. economy expanded 1.2% in the second quarter, marking its biggest growth spurt since 2001, as companies rebuilt inventories and construction work surged.
Standard & Poor's downgrades Ireland; Fitch upgrades Rwanda
Standard & Poor's Ratings Services cut its long-term sovereign credit rating on Ireland one notch to AA-. The company said the projected fiscal cost to the Irish government of supporting the financial sector has increased significantly above prior estimates. Ireland's banks were hit by the property market crash; as a result, the Irish government was forced to pump billions of euros into the banks.
Meanwhile, Fitch Ratings upgraded Rwanda, citing the African nation's "strong growth" and an improvement in its business environment. It noted that the country has posted an "uninterrupted" period of strong economic growth that has more than doubled its per capita income since 1994, when genocide killed some 800,000 people. The rating was upgraded to B, five steps below investment grade.
Japan's exports rise, albeit at a slower rate
Japan's exports rose in July for the eighth month in a row as sales of products, such as cars and electronic components, in emerging markets were still solid. However, the rate of growth slowed for the fifth month in a row. That pace is expected to slow even more if the yen, which this week surged to a 15-year high against the dollar, continues to appreciate.
U.S. economic news
Bernanke pledges Fed to do all it can to ensure recovery
U.S. Federal Reserve Board Chairman Ben Bernanke said Friday that the U.S. central bank "will do all that it can" to ensure economic recovery continues. He outlined steps the Fed might take if the economy slows. In his opening remarks to the world's central bankers in Jackson Hole, Wyoming, Bernanke said the Fed is prepared to provide additional monetary accommodation through unconventional measures if necessary.
GDP grows more slowly than thought
The U.S. economy grew more slowly that initially estimated in the second quarter and corporate profits nearly dried up. Gross Domestic Product rose from April through June at an annualized seasonally adjusted rate of 1.6%. A month ago, the government estimated the rate at 2.4% after a 3.7% expansion in the first quarter. After-tax earnings rose 0.1%, off the previous quarter's 11.4% gain.
Weak durable goods orders, drop in home sales show recovery losing pace
Weakness in durable goods orders and a drop to historic lows in new-home sales offered more signs that the economy is losing momentum. Durable goods orders rose 0.3% in July from June, mostly on the back of an increase in aircraft orders. Excluding the volatile transportation sector, orders tumbled 3.8%.
Also this week, reports showed that sales of new single-family homes fell 12.4% in July from June to a seasonally adjusted rate of 276,000, the lowest level since the data series began in 1963. Many purchasers seem to have left the markets since the expiration on April 30 of a federal tax credit for homebuyers. Existing home sales suffered a similar decline, dropping a record 27.2% to their lowest level in 15 years, as inventories soared to their highest level in more than a decade. Adding to the discouraging news were reports by the Federal Reserve Bank of Kansas City that manufacturing activity in the district stalled.
Initial jobless claims decline more than expected
More encouragingly, initial jobless claims declined by 31,000 to 473,000, more than the 10,000 drop predicted by economists. However, new claims for the previous week were revised upward, and the four-week moving average rose to the highest level since November 2009.
U.S. and global corporate news
Toyota Motor announced it will recall about 1.13 million Corolla and Matrix cars for an engine defect that U.S. regulators said could cause stalling. The recall will affect model years 2005 to 2008 in the United States and Canada and comes after three reported accidents linked to the defect. GM will recall approximately 200,000 of the Pontiac Vibe, which was designed and engineered by Toyota and built alongside the Matrix at a joint manufacturing plant in California.
Johnson & Johnson pulled two hip-repair implants off the market because of quality problems. That recall, administered through J&J's DePuy Orthopaedics unit, came the same week that J&J's Vision Care unit withdrew about 100,000 boxes of contact lenses sold in Asia and Europe because of a manufacturing problem.
Spirits giant Diageo reported its net profit rose 1.5% for the year ended June 30. Sales increased 5% but were up only 2% when stripping out the effects of currency fluctuations, acquisitions, and disposals. During the fiscal year, Diageo benefited from an 11% jump in organic net sales in emerging markets, including China and India, but suffered a 2% sales decline in the developed world.
Global economic news
U.K. economy expands 1.2%
The U.K. economy expanded 1.2% in the second quarter, marking its biggest growth spurt since 2001, as companies rebuilt inventories and construction work surged.
Standard & Poor's downgrades Ireland; Fitch upgrades Rwanda
Standard & Poor's Ratings Services cut its long-term sovereign credit rating on Ireland one notch to AA-. The company said the projected fiscal cost to the Irish government of supporting the financial sector has increased significantly above prior estimates. Ireland's banks were hit by the property market crash; as a result, the Irish government was forced to pump billions of euros into the banks.
Meanwhile, Fitch Ratings upgraded Rwanda, citing the African nation's "strong growth" and an improvement in its business environment. It noted that the country has posted an "uninterrupted" period of strong economic growth that has more than doubled its per capita income since 1994, when genocide killed some 800,000 people. The rating was upgraded to B, five steps below investment grade.
Japan's exports rise, albeit at a slower rate
Japan's exports rose in July for the eighth month in a row as sales of products, such as cars and electronic components, in emerging markets were still solid. However, the rate of growth slowed for the fifth month in a row. That pace is expected to slow even more if the yen, which this week surged to a 15-year high against the dollar, continues to appreciate.
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