A measure of U.S. business activity showed expansion at the fastest pace in more than a year, as production accelerated the most since October 2004.
The National Association of Purchasing Management-Chicago said today its business index rose to 57.9 this month, the highest level since June 2007, from 50.8 in July. Fifty is the dividing line between growth and contraction. The index averaged 54.4 last year.
Demand from abroad is keeping American assembly lines moving as a weak dollar makes U.S. goods cheaper overseas. That's helping offset weakness in sales at home, as house prices and elevated fuel costs squeeze consumers.
“Sky-high exports clearly appear to be bolstering confidence,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “But with consumer demand falling for a second straight month, and auto sales at decade lows, it remains an open question whether business confidence can stay at these elevated levels.''
Economists surveyed by Bloomberg News had projected the index would fall to 50, according to the median of 62 forecasts. Estimates ranged from 48 to 52.5.
Earlier today, a Commerce Department report showed spending by U.S. consumers slowed in July as the impact of the tax rebates faded and a pickup in inflation eroded Americans' buying power. The 0.2 percent rise in purchases matched economists' forecasts and followed a 0.6 percent increase in June, the department said. Prices rose by the most in 17 years.
The Chicago report's measure of new orders increased to 60.2, the highest level since September, from 53.5 in July cash advance. The production gauge rose to 63.4, the highest since June 2007 and biggest jump since October 2004, from 49.2 in July.
Order backlogs gained to 63 from 45.7, while the employment index decreased to 39.2 from 45.9 a month ago.
The group's inventories index fell to 52.2 from 54.9.
The purchasing managers' measure of prices paid for raw materials declined to 80.6 from 90.7 the prior month, when it reached its highest since March 1980.
Rising costs have hurt some companies. Eastman Kodak Co., which has invested heavily to focus on digital cameras and inkjet printers, reported a 14 percent decline in second quarter net income, on rising costs to buy raw materials and develop electronic cameras and printers.
“It's hard to deal rapidly with the rising commodity costs in a declining business,'' said Chief Executive Officer Antonio Perez on a July 21 conference call from Rochester, New York.
Economists monitor the Chicago index for an early reading on the outlook for U.S. manufacturing, which makes up about 12 percent of the economy.
Manufacturing in the U.S. probably contracted in August for a fifth time in eight months, economists project a report Sept. 2 will show. The Institute for Supply Management's factory index probably dropped to 49.5 from 50 in July, according to the survey median.
In the second quarter, the economy expanded at a 3.3 percent annual pace, faster than the prior estimate of 1.9 percent, as exports grew faster, the government said yesterday.
Chances of bankrupt U.S. auto parts maker Delphi Corp being liquidated are increasing, with some U.S. plants being taken over by its former parent General Motors Corp, the Wall Street Journal said, citing people involved in the bankruptcy process.
Even if that doesn’t happen, GM’s financial obligation could grow by billions of dollars, the paper said.
The report, however, quoted a Delphi spokesperson saying it doesn’t intend to liquidate.
“We’ve not thrown that word around,” the paper quoted Delphi spokesman Lindsey Williams.
“If that were our intent, we would not be working as feverishly as we are. We’ve been going down a lot of avenues to emerge from bankruptcy,” Williams told the paper faxless payday loan.
Delphi’s Williams was not immediately available for comments.
Delphi, which filed for bankruptcy protection in October 2005, was about to exit bankruptcy protection in April when hedge fund Appaloosa Management LP and other investors pulled out of a plan that would have provided up to $2.55 billion to support Delphi’s reorganization.
That left Delphi scrambling for alternatives, delaying its emergence from bankruptcy protection, and raised the cost of the reorganization process for GM.
Bank of Japan Governor Masaaki Shirakawa said the country's low interest rates will help the economy avoid slipping into a “deep'' slump.
“Japan's economy is unlikely to experience a deep adjustment phase,'' Shirakawa said at a speech in Osaka today. The country's “accommodative environment for corporate finance is expected to continue to support business activity.''
The central bank last week described growth as “sluggish'' for the first time in a decade, indicating it's unlikely to raise the benchmark interest rate from 0.5 percent anytime soon. The world's second-largest economy is slowing because higher prices of oil and raw materials are eroding incomes and the global slowdown is weakening exports, Shirakawa said today.
“The economy may emerge from a recession phase early next fiscal year, but the central bank won't be able to raise rates before mid-2009,'' said Hideo Kumano, chief economist at Dai- Ichi Life Research Institute, who used to work for the central bank. Kumano predicts a rate increase “in the third quarter of next year at the earliest.''
Japan is more resilient than in previous slowdowns because companies have shed excess workers, capacity and debt, Shirakawa said. The country's financial institutions incurred “limited'' losses from the U.S. subprime loan problem compared with their U.S. and European peers, he added.
The governor said he's seen little sign of inflation spreading from fuel and food products because wage growth has been “relatively weak.'' He said he's watching consumers' inflation expectations and how companies set prices to determine whether “second-round effects'' of inflation will emerge.
Toyota Motor Corp., Japan's largest automaker, said today that it will raise prices on some domestic models for the first time in 16 years to pass on higher costs, paving the way for smaller rivals to do the same guaranteed approval cash advance loans. Prices businesses pay for fuel and raw materials surged 7.1 percent in July, the most since the wake of the second oil crisis 27 years ago.
Consumer prices excluding fresh food probably climbed 2.3 percent in July from a year earlier, economists estimate an Aug. 29 report will show. That would be the fastest in a decade, breaching the zero to 2 percent range the bank considers represents stable prices.
“The current situation requires the Bank of Japan to carefully monitor both downside risks to economic growth and upside risks to inflation,'' Shirakawa, 58, said.
Shirakawa reiterated that his policy board is watching the risk that keeping rates low for a long time may overstimulate the economy should it pick up. Japan's key rate, the lowest among major economies, was last raised in February 2007.
“If the downside risks to the economy turn out to decrease, there is a risk that prolonging the period of accommodative financial conditions will lead to swings in economic activity and prices,'' he said.
Interest rates will stay unchanged through next June at least, according to 21 of 26 economists surveyed by Bloomberg this month. Four estimated higher rates and one predicted a cut.
“The chance for a rate cut is very slim,'' said Kyohei Morita, chief economist at Barclays Capital in Tokyo. “The central bank has emphasized that the current monetary conditions are accommodative.''
The bank shelved its two-year policy of calling for rate increases in April, the month Shirakawa assumed the bank's top position.
Following is a summary of the July producer price report from the Labor Department. ===============================================================================
July June May April March Feb. 3-mo. July
Weight 2008 2008 2008 2008 2008 2008 Annual YOY% ===============================================================================
———————Finished Goods———————– Total finished 100.0% 1.2% 1.8% 1.4% 0.3% 0.9% 0.3% 18.9% 9.8% ex food & energy 57.05% 0.7% 0.2% 0.2% 0.6% 0.1% 0.4% 4.7% 3.5% ex food 78.70% 1.4% 1.9% 1.5% 0.4% 0.7% 0.6% 21.3% 10.1% ex energy 78.35% 0.6% 0.6% 0.4% 0.4% 0.4% 0.2% 6.6% 4.9% Consumer goods 78.28% 1.2% 2.3% 1.8% 0.2% 1.1% 0.4% 23.4% 11.9% Women's Apparel(*) n/a 0.1% -0.4% -0.2% 0.1% -0.1% 0.2% -2.0% -0.4% Res. electricity n/a 2.0% 0.8% 0.6% 1.2% 1.1% -0.4% 31.2% 6.3% Residential gas n/a 8.8% 6.6% 3.8% 5.4% 4.2% 5.7% 92.4% 23.5% Gasoline n/a -0.2% 9.0% 9.3% -4.6% 1.3% 2.9% 122.5% 36.0% Prescriptions (*) n/a 0.7% -0.1% 0.2% 0.7% 0.4% 1.3% 3.6% 6.9% Passenger cars n/a 1.4% 2.2% -1.0% 0.4% -0.2% 0.8% 1.6% 3.1% Tobacco goods(*) n/a 0.0% 0.0% 2.2% 0.1% 0.0% 0.1% 9.2% 4.7% ===============================================================================
July June May April March Feb. 3-mo. July
Weight 2008 2008 2008 2008 2008 2008 Annual YOY% =============================================================================== Capital equipment 21.72% 0.8% 0.3% 0.1% 0.6% 0.0% 0.4% 4.8% 3.0% Computers (*) n/a -1.5% -0.2% -1.9% -0.5% -3.2% -1.1% -13.5% -18.9% Light motor truck n/a 0.8% -1.8% -0.9% 1.3% -0.3% 0.8% -17.2% -1.7% Civilian aircraft n/a 0.3% 0.4% 1.1% 0.1% 0.1% 0.6% 9.2% 4.7% Foods 21.30% 0.3% 1.5% 0.8% -0.1% 1.4% -0.6% 10.9% 8.7% Energy 21.65% 3.1% 6.0% 4.9% -0.2% 2.5% 1.0% 72.6% 28.0%
——————-Intermediate Goods——————— Total intermediate 100.0% 2.7% 2.1% 2.9% 0.7% 2.4% 0.9% 36.0% 16.6% ex food & energy 72.70% 2.0% 1.3% 2.0% 0.9% 1.3% 0.6% 23.2% 10.2% ex food 96.01% 2.6% 2.2% 2.9% 0.8% 2.4% 0.8% 35.6% 16.3% ex energy 76.69% 2.2% 1.2% 2.1% 0.7% 1.3% 0.8% 24.5% 11.0% ——————————————————————————- Containers 2.92% 1.7% 0.3% 0.5% 0.6% 0.1% 0.3% 10.4% 6.3% Foods 3.99% 4.0% 1.0% 3.2% -0.9% 3.0% 2.4% 38.3% 24.8% Energy 23.31% 4.3% 5.0% 6.2% 0.1% 6.0% 1.2% 82.9% 37.4%
———————–Crude Goods———————— Total crude 100.0% 4.2% 3.7% 6.7% 4.6% 6.7% 3.9% 76.5% 51.2% ===============================================================================
July June May April March Feb cash advance loan no fax. 3-mo. July
Weight 2008 2008 2008 2008 2008 2008 Annual YOY% =============================================================================== ex food & energy 16.37% 3.4% -0.2% 5.0% 7.7% 3.7% 3.6% 37.9% 36.3% ex food 66.55% 6.1% 3.9% 10.6% 6.6% 9.3% 5.7% 120.3% 70.6% ex energy 49.03% 1.3% 2.1% 3.1% 1.5% 2.7% 2.0% 29.0% 25.2% Foods 32.76% 0.1% 3.5% 1.8% -1.6% 2.2% 1.2% 23.5% 19.5% Energy 50.87% 6.9% 5.4% 13.1% 5.7% 11.5% 6.6% 164.0% 84.9% =============================================================================== NOTE: (*) denotes unadjusted figures. All monthly percentage changes are seasonally adjusted unless noted. All yearly percentage changes are not seasonally adjusted.
U.S. Treasury Secretary Henry Paulson, battling the deepest credit crisis in decades, will lose another domestic finance aide this week as the Bush administration approaches the end of its term.
Matthew Abbott, the deputy assistant secretary for federal finance, will serve his last day on Aug. 20, Treasury spokeswoman Jennifer Zuccarelli told Bloomberg News today. Abbott is leaving for a job in the private sector, she said, without being more specific.
Abbott oversaw the Office of Federal Finance, which develops, analyzes and coordinates policies on debt management and financial-market regulation. He “recused himself and followed ethics guidelines'' when pursuing the post outside government, Zuccarelli said.
His departure will create another gap in Treasury's domestic finance team as it tries to cushion the economy from the collapse of the mortgage market and $503 billion in losses at major financial institutions since the beginning of 2007. Paulson lost his senior domestic finance adviser last month, when Robert Steel stepped down to become chief executive officer of Wachovia Corp.
Steel, a former undersecretary, was vice chairman of Goldman Sachs Group Inc. from 2002 until 2004. Assistant secretary Anthony Ryan now holds Steel's Treasury post in an acting capacity.
Even after the departures, Zuccarelli said the Treasury isn't concerned about a staffing shortage before January 2009, when the next administration will take office faxless cash advance.
`Until the End'
“Secretary Paulson has built a strong team of professionals at Treasury who plan to stay with him until the end,'' she said.
This month Paulson, former chief executive officer at Goldman Sachs, recruited as a Treasury adviser Kendrick Wilson, a former Goldman Sachs executive who spent more than two decades counseling U.S. banks. He is serving as a Treasury contractor.
Abbott has held his current position since November 2006. He previously served as a senior adviser to the undersecretary for domestic finance. He worked in the fixed income division of Credit Suisse First Boston from 1999 to 2004, according to his official Treasury biography.
Abbott earned his undergraduate degree from the College of the Holy Cross in 1993, followed by a master's in business administration from Northwestern University's Kellogg School of Management in 1999. Before entering graduate school, he served in the airborne 10th Special Forces Group, Treasury said.
Advanced Micro Devices Inc’s (AMD.N: Quote, Profile, Research, Stock Buzz)future depends on still-murky details of a plan to overhaul its manufacturing, and Wall Street is impatient.
AMD now lags far-larger rival Intel Corp (INTC.O: Quote, Profile, Research, Stock Buzz) in chipmaking technology and could be about nine months behind Intel when it introduces chips with elements as small as 45 nanometers in the second half of this year.
The company has also reported seven straight quarterly net losses in a row, and it’s hard-pressed to afford building a new, next-generation chip plant, which can cost $3.5 billion, with $5.6 billion in long-term debt on its books.
Together, Intel and AMD control virtually the entire market for microprocessors, the electronic brains of personal computers and server computers that comprise corporate networks.
AMD’s future hinges on what it calls Asset-Smart strategy: whether it adds capacity by striking a deal to use foundries of an Asian contract chipmaker such as Taiwan Semiconductor Manufacturing Co Ltd (2330.TW: Quote, Profile, Research, Stock Buzz), or perhaps signing an agreement with longtime partner International Business Machines Corp
(IBM.N: Quote, Profile, Research, Stock Buzz).
“I don’t know what Asset-Smart looks like, but anything is better than today overnight payday loans. Anything is better than going out of business because you run out of money” said Stifel Nicolaus analyst Cody Acree. “It might be a partnership with IBM or TSMC or it might be an outright sale of their manufacturing.”
Executive Chairman Hector Ruiz, who led AMD as its CEO for more than six years and stepped aside in mid-July to hand the reins to Dirk Meyer, is driving the plan to completion and has repeatedly promised answers by the end of the year.
Food distributor Sysco Corp. said Monday its fourth-quarter profit jumped 10%, helped by managing costs and a boost in sales.
For the quarter ended June 28, net income rose to $334.1 million, or 55 cents per share, from $303.4 million, or 49 cents per share in the prior year quarter.
Analysts polled by Thomson Financial expected profit of 52 cents per share.
The company said it was able to grow its profit because it effectively managed costs in the quarter.
Revenue rose 5% to $9.73 billion from $9.23 billion in the fourth quarter of 2007. Analysts predicted revenue of $9.87 billion.
For the year, net income climbed nearly 11% to $1.11 billion, or $1.81 per share, from $1 billion, or $1.60 per share in 2007.
Revenue jumped 7% to $37.52 billion from $35.04 billion.
Sysco (SYY, Fortune 500) sells and distributes food products to restaurants, health care facilities, schools and hotels faxless payday advance. The company also distributes equipment and supplies.
When Merrill Lynch announced last month that it would sell back its long-held stake in financial data provider Bloomberg L.P., chief executive John Thain was praised for moving aggressively to restore the firm’s capital position and slim its bloated balance sheet.
But a look at new Merrill (MER, Fortune 500) SEC filings suggests that enthusiasm for the $4.43 billion deal is misplaced, as the transaction adds virtually no cash to Merrill’s depleted pocketbook.
According to Merrill’s quarterly earnings report, filed Tuesday, the giant brokerage received just $110 million in cash in the sale of its 20% stake in Bloomberg back to its parent company, which is owned by New York City mayor Michael Bloomberg.
That means Merrill is getting less than 3% of the value of its Bloomberg stake in cash, despite the widely-held belief on Wall Street that the investment was increasingly profitable and - unlike so many assets on Merrill’s balance sheet - posed little risk to the firm.
In addition to the paltry cash payment, Merrill will receive $4.3 billion in 10-year and 15-year notes. Thain had indicated on Merrill’s quarterly earnings conference call last month that Merrill would be financing the sale of the Bloomberg stake, though he didn’t describe the terms.
Merrill has been under intense pressure since last fall’s disclosure that the firm stood to take huge losses on its holdings of collateralized debt obligations, which are risky debt tied in many cases to the imploding U.S. mortgage market.
Since then, Merrill has raised some $30 billion in new capital to fill holes created by more than $40 billion in writedowns. Share issuances tied to various capital-raising moves have diluted the stake of existing shareholders by more than 30%.
The disclosure of the Bloomberg financing terms comes as the market continues to puzzle over another deal Merrill struck last month to reduce its CDO exposure payday loan. The company sold securities once valued at $30.6 billion to Lone Star Funds for $6.7 billion, or 22 cents on the dollar.
Merrill agreed to finance 75% of that transaction, meaning it got $1.7 billion in cash while extending $5 billion in loans to Dallas-based Lone Star.
While some investors have criticized Merrill for agreeing to finance the sale of the CDO portfolio - they argue the deal’s structure essentially gives Lone Star the upside on a recovery in the CDO market, while potentially saddling Merrill with any losses beyond the cash payment - it’s striking that the broker is receiving more cash upfront in its CDO distress sale than it is in the sale of an appreciating, safe asset.
Why Merrill agreed to finance so much of the Bloomberg deal isn’t immediately apparent. A Merrill spokeswoman declined comment, and a Bloomberg representative didn’t return an e-mail seeking comment.
Merrill purchased a 30% stake in Bloomberg in 1985 for just $30 million, then later sold a third of that back to Bloomberg at a substantial premium. Since then, Bloomberg has become the leading provider of financial data to Wall Street and has branched into television and magazine publishing.
One common criticism of Merrill’s asset transactions - that because of Merrill’s financing involvement, the deals don’t effectively insulate the firm from losses and therefore aren’t truly sales - doesn’t seem to hold water.
Merrill "relinquished control of the assets to the buyer, who now bears the risk of loss and who has the right to pledge or re-sell the assets as they wish," notes accounting consultant Robert Willens. Accounting rules, he adds, "don’t say this has to be a good deal for the seller."
Following is a summary of the Aug. 2 initial jobless claims report from the Labor Department. ======================================================================== Week Ending Aug. 2 July 26 July 19 Prior Year ======================================================================== Initial Claims (SA) 455,000 448,000 403,000 318,000
Change 7,000 45,000 31,000 137,000
Percent change 1.6% 11.2% 8.3% 43.1% 4-Wk moving average 419,500 392,750 381,750 312,000 ———————————————————————— Initial Claims (NSA) 381,529 375,150 411,408 270,563
Change 6,379 -36,258 -72,573 110,966
Percent change 1.7% -8.8% -15.0% 41.0% ======================================================================== Week Ending July 26 July 19 July 12 Prior Year ======================================================================== Continuing claims (SA) 3,311,000 3,280,000 3,097,000 2,553,000
Change 31,000 183,000 -19,000 758,000
Percent change 0.9% 5.9% -0.6% 29.7% ======================================================================== Week Ending July 26 July 19 July 12 Prior Year ======================================================================== 4-Wk Moving average (SA) 3,201,000 3,174,000 3,131,750 2,549,750 ———————————————————————— Ins fast payday loan no faxing. Unemployment Rate (SA) 2.5% 2.5% 2.3% 1.9% Ins. Unemployment Rate (NSA) 2.4% 2.4% 2.4% 1.9% ———————————————————————— Continuing claims (NSA) 3,175,663 3,211,067 3,164,970 2,445,524
Change -35,404 46,097 46,246 730,139
Percent change -1.1% 1.5% 1.5% 29.9% ========================================================================
July 19 July 12 July 5 Prior Year ======================================================================== Extended benefits (NSA) 1,483 1,777 1,298 0
Change -294 479 -428 1,483 ======================================================================== (SA) = Seasonally adjusted figures. (NSA) = Not seasonally adjusted.
The Bank of Korea may keep interest rates unchanged tomorrow after the economy grew at the slowest pace in more than a year and oil retreated to a three-month low.
Governor Lee Seong Tae and his six colleagues will leave the seven-day repurchase rate at a seven-year high of 5 percent tomorrow, according to 13 of 19 economists surveyed by Bloomberg News. Six expect a quarter-point increase.
Lee must balance signs of a slowdown in domestic demand against his objective of controlling inflation that is running at the fastest pace in a decade. Ssangyong Motor Co. and Hyundai Motor Co. are among companies that have reported declining sales as Korean consumers rein in discretionary spending because of a surge in fuel and food costs.
“The central bank still faces a big dilemma between growth and inflation,'' said Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul. “A rate hike seems unlikely this year as oil prices fall and domestic demand weakens.''
Oil has lost more than $28 since touching a record of $147.27 a barrel in New York on July 11.
The Federal Reserve yesterday kept its benchmark rate at 2 percent and signaled that weak employment and financial instability will delay any increase in borrowing costs. The European Central Bank and Bank of England, also beset by faster inflation and slower growth, are forecast by economists to stand pat this week.
The won rose 0.2 percent to 1,016.10 won versus the dollar at 9:30 a.m. in Seoul. The five-year government bond yield declined 5 basis points to 5.75 percent. The Kospi stock index climbed 2.2 percent to 1,568.66.
South Korea's economy grew 4.8 percent last quarter from a year earlier, the weakest pace in more than a year. Spending by households, which are burdened with record debt, fell 0.1 percent in the quarter, the first decline in four years.
Reports since the Bank of Korea's July meeting have provided more evidence of a slowdown. Households were at their most pessimistic in almost four years in June and manufacturers' confidence for August sank to the lowest in three years easy fast cash.
Factory output advanced 6.7 percent in June from a year earlier, the smallest gain in nine months. A leading index of economic indicators, a gauge of future business activity, rose 1.2 percent, the least in five years.
Ssangyong Motor, the South Korean unit of China's biggest automaker, reported that domestic sales slumped 67 percent in June from a year earlier. Local sales at Hyundai Motor, the nation's largest car producer, slipped 0.6 percent in the second quarter.
Still, six of the 19 economists surveyed expect the Bank of Korea to raise interest rates tomorrow to keep inflation expectations in check.
Consumer prices in South Korea surged 5.9 percent in July from a year earlier. That was the ninth consecutive breach of the central bank's target of keeping inflation between 2.5 percent and 3.5 percent, on average, for the three years to 2009.
Policy makers in India, Indonesia, Taiwan, the Philippines and Thailand have all raised interest rates this year even as the Asian region faces fallout from a global slowdown.
“We expect one token rate hike in August as a reaction to the massive inflation pressure in July,'' said Chun Chong Woo, an economist at SC First Bank Korea Ltd. in Seoul. “A further rate hike is unlikely as downside risks to the economy will be more severe going forward.''
Shipments to China, the Middle East and Latin America, buoyed in part by a weaker won, have helped South Korea weather the domestic slowdown and a U.S. economic slump. Exports surged 37.1 percent in July from a year earlier, the most in four years.
The won has fallen 8 percent this year against the dollar, helping Korea's exporters by making their products cheaper overseas.
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