On the heels of 150 layoffs in January, General Motors Corp.’s Wentzville plant will suffer another hit in the coming months — and this one will be harder.
The automaker plans to slow the local plant’s production speed by this summer, which will spur job cuts for the second time this year, a senior plant official said.
"The initial estimation … is between 250 and 300" layoffs, said Bob Wheeler, the plant’s communications manager.
Compounding the news for GM’s nearly 2,000 local employees on Thursday was the company’s announcement that it will temporarily close 13 of its North American assembly plants, including Wentzville, for several weeks at a time. Wentzville’s operations will be idled for an extra three weeks beyond its typical two-week summer shutdown, but other plants could be face even longer closures.
In all, the moves mean GM will make 190,000 fewer vehicles.
"These are tough decisions but … we are moving faster and deeper" on changes, said Troy Clarke, GM’s North America president, in a conference call.
The automaker said it is making the changes for reasons that include aligning production with demand and reducing dealers’ high inventories.
GM’s sales were down 49 percent from a year ago through March, battered by a global economic recession, low consumer confidence and credit-availability troubles. Dealers had about 767,000 vehicles in inventory at the end of March, GM said Thursday, but the automaker hopes its production cuts will whittle that supply to 525,000 vehicles by the end of July.
GM’s plan is "one of the biggest (production) cuts we’ve seen," said Jesse Toprak, senior industry analyst for the automotive information website Edmunds.com. Given the economy, though, it’s not surprising, he added.
But whether the cuts are deep enough will depend on the next few weeks, Toprak said instant payday loans completely online.
If GM files for bankruptcy, that could further diminish consumer confidence, perpetuate even lower demand and require more cuts. A GM bankruptcy is "more likely to happen than not, but I don’t think it’s a certainty," Toprak said.
The administration of President Barack Obama has given GM until June 1 to cut costs and come to concessions with bondholders and the United Auto Workers. Thursday’s production announcement is related to those efforts, Toprak said. Wentzville’s plant, which makes full-sized vans, had been forced to cut back earlier this year. Since Jan. 4, the plant has been idled for five weeks.
The additional weeks of closure mean the plant will be idled from June 6 through July 26. GM announced the weeks of June 8, June 15 and June 22 on Thursday. The weeks of June 29 and July 6 are the typical summer shutdown. The final two weeks, starting July 13 and July 20, were already announced as time to shift work to Wentzville from a plant in Grand Rapids, Mich., Wheeler said.
During the idle, workers will receive state unemployment and supplemental benefits, Wheeler said.
Some workers, however, will face a more permanent layoff. GM plans to reduce the Wentzville plant’s production speed during the seven-week shutdown, Wheeler said. When workers return, they will assemble 32 vehicles an hour, slower than the current speed of 38 vehicles. With a slower line speed, the plant will need fewer workers.
The automaker changed the plant’s line speed once this year. About 150 workers were laid off when the speed was cut in January to 38 vehicles an hour from 42 vehicles.
Apple Inc’s quarterly profit soared past Wall Street expectations on strong sales of iPhones and iPods, underscoring the popularity of the company’s relatively expensive products even in the midst of a weak economy.
Known for giving conservative outlooks, Apple projected profit and revenue for the current quarter below average Wall Street estimates, but that did not discourage investors, who drove its shares up 3 percent after-hours on Wednesday.
“As the world economy began to spiral the big question on investors’ minds was if the Apple brand was going to be resilient or particularly susceptible,” said Oppenheimer analyst Yair Reiner. “I think that what these results show is that Apple and this brand are relatively resilient.”
In the first quarter since Chief Executive Steve Jobs went on medical leave, net profit rose to $1.21 billion, or $1.33 a share, compared to $1.05 billion, or $1.16 a share, a year ago. Analysts had expected earnings of $1.09 a share, according to Reuters Estimates.
Revenue rose 8.7 percent to $8.16 billion in the fiscal second quarter ended March 28, beating the average Street forecast of $7.96 billion.
“I think in a better economy our sales certainly would have been higher but … we have just reported the best non-holiday quarter in Apple’s history despite the economy that we find ourselves in,” Chief Financial Officer Peter Oppenheimer told Reuters in a telephone interview.
When asked about Jobs on a conference call, he said, “We look forward to Steve returning to Apple at the end of June.”
LOWER COMPONENT COSTS
Apple’s gross margin rose to a higher-than-expected 36 faxless payday loans.4 percent, from 32.9 percent a year ago, benefiting from favorable commodity and component costs.
The company forecast fiscal third-quarter earnings of 95 cents to $1.00 a share on revenue of $7.7 billion to $7.9 billion. That compared to Street estimates for earnings of $1.12 a share on revenue of $8.3 billion.
Apple said the revenue outlook reflects its decision to delay revenue recognition for iPhones sold on or after March 17 until its new iPhone operating system is released. Apple did the same thing last year when it updated software.
While some analysts said it may be prudent for Apple to be conservative given the economy, Pacific Crest Securities analyst Andy Hargreaves pointed to some worries that sales may slow as consumers anticipate new products coming to the market, including a possible new iPhone.
“There is going to be concern in this quarter due to purchasing delays in front of new June product releases, but outside of that, it’s really clean,” he said of the results.
Apple shipped 3.79 million iPhones in the March quarter, better than the roughly 3.3 million units analysts were expecting but down from 4.4 million in the December period.
Chief Operating Officer Tim Cook said Apple was happy with its relationship with AT&T Inc, the exclusive U.S. carrier for the iPhone, and had no plans to change it. Apple also said it would like to begin selling the iPhone in China in the next year.
LG Electronics Inc posted a smaller-than-expected 25 percent drop in first-quarter operating profit, and said it expected increased sales of mobile phones and air conditioners to drive a recovery in the quarters ahead.
LG, the world’s No.3 mobile phone maker, said its handset margins held up well in the three months ended March, while sales of flat screen LCD TVs jumped by more than a third from a year ago.
An improving brand image and price competitiveness from a weaker won are helping the South Korean company expand market share in mobile phones and LCD TVs at the expense of struggling foreign rivals, even in the midst of the current downturn.
“The results are much better than expected, and its strong line-up in cellphones, home appliances and TVs appears to have helped it gain market share against rivals and outperform in a tough global economic environment,” said Chung Sung-Ho, an analyst at KB Investment & Securities.
“A weaker won has also helped it boost sales and LG is likely to continue to perform well this year.”
LG said it expected to increase total sales by more than 10 percent in the second quarter from the first, boosted by strong revenues from air conditioners, a key unit. LG also said it aimed to increase mobile phone sales by more than 10 percent in the second quarter from the first.
PHONE MARGINS RESILIENT
LG, which trails Nokia and Samsung Electronics in mobile phones, sold 22 faxless payday loan guaranteed.6 million handsets in the first quarter, down from 25.7 million units sold in October-December.
LG posted a 6.7 percent operating profit margin in handsets, up from 5.2 percent in the fourth quarter. Market leader Nokia’s margin was 10.4 percent.
Last week, Nokia reported a 27 percent fall in January-March sales and its first-ever quarterly loss while repeating its forecast for market volumes to decline around 10 percent in 2009.
Fourth-ranked Sony Ericsson posted a 5 percent loss margin from their cell phone operations in the fourth quarter, while No.5 Motorola posted an abysmal 25 percent loss margin.
LG’s global-basis operating profit was 455.6 billion won ($337.1 million) for the quarter to end-March, beating a 307.4 billion won average profit forecast from nine analysts polled by Reuters.
That was down 25 percent from a 605.2 billion won profit a year earlier but improved from a 101.4 billion won profit in the fourth quarter last year.
LG’s first-quarter net loss of 197.6 billion won was also narrower than a 671.3 billion won net loss in the previous quarter when it was hit by sharp losses at its flat-screen joint venture, LG Display Co Ltd.
Its global-basis sales were 12.85 trillion won, in line with forecasts.
South Korean flat-screen maker LG Display Co Ltd, posted on Thursday a second straight quarter of losses due to weak panel prices and depressed demand for electronics.
The world’s second-biggest LCD maker posted a 412 billion won ($310.7 million) operating loss for January-March, worse than a 399 billion won loss forecast by Reuters Estimates.
That contrasted with a 881 billion won operating profit a year ago and a 288 billion won loss in the previous quarter.
Its first-quarter net loss came at 255 billion won, better than a forecast for a 330 billion won loss, and compared to a 717 billion won profit a year ago. The net loss narrowed from a record 684 billion won in October-December, when LG was also hit by a U cash loans.S. price-fixing fine.
The liquid crystal display (LCD) industry has suffered from a steep fall in screen prices, forcing makers to slash output sharply in the second half of last year.
But hopes are growing for a turnaround in the 2009 second half as lower prices have boosted demand for LCD TVs, helping shares in LG Display jump by more than a third in the first quarter, beating the broader market’s 14 percent gain.
(Reporting by Rhee So-eui; Editing by Jonathan Hopfner)
Wal-Mart Stores reported March sales Thursday that were much softer than analysts’ forecasts, citing an "Easter calendar shift" that it expects to push holiday-related purchases into April.
Wal-Mart (WMT, Fortune 500), the world’s largest retailer, said sales at its stores open at least a year, a key measure of performance known as same-store sales, rose 1.4% last month.
Analysts, on average, had expected the company to post an increase of 3.2% in March, according to sales tracker Thomson Reuters.
Although comparable store traffic increased in the month, the retailer said the average checkout total was lower, "mostly due to the Easter shift and, to a lesser degree, inflation at a lower rate than last year in grocery."
Health and wellness items, home products, and grocery items were Wal-Mart’s strongest performing categories in March.
"The Easter shift does matter. There’s no question that it is a legitimate concern for retailers," said Scott Hoyt, senior director of consumer economics for Moody’s Economy.com.
But Scott added, "whether Easter is a complete explanation of the disappointment from retailers last month is an open question. I think it explains part of the weakness."
Wal-Mart also raised its first-quarter profit guidance, saying it expects earnings per share for the period "will be toward the high end of the range" it provided of between 72 to 77 cents a share. Analysts expect the company to post a profit of 76 cents a share.
"The combined 3.1% comparable sales for Wal-Mart [U.S.] and Sam’s Club we reported for the past nine weeks shows the strength of our underlying operations," Tom Schoewe, Wal-Mart’s chief financial officer said in a statement.
More Easter fallout?
Thomson Reuters retail analyst Jharonne Martis said stores were expected to blame a later Easter this year - with the holiday falling on April 12 versus March 23 last year - pushing holiday shopping into this month.
Overall, Thomson Reuters said March same-store sales for a group of 31 retailers that includes Wal-Mart declined to a worse-than-forecast 1.8%, versus an initial forecast for a 0 cash loans with bad credit.9% drop, and following a 0.3% increase in February.
February’s gain had fueled hope that the hard-hit retailing sector was starting to see some signs of recovery.
Unfortunately, the underlying [economic] conditions are still not good enough to support a full-fledged recovery, Hoyt said.
"We’re losing 600,000 to 700,000 jobs every month. That takes a severe toll on wages" and on consumers’ ability to make discretionary purchases, he said.
Still, Hoyt said he expects some government incentives - including adjustments to unemployment insurance benefits, increases in food stamp payments and reduced employer tax withholdings under the stimulus package - will benefit both consumers and sellers.
"Retailers always say you have to look at March and April sales together. I think that’s true," he said.
As far as March goes, the disappointments were widespread. Thomson Reuters said 54% of retailers beat analysts’ expectations for the month, but 46% missed forecasts.
Several teen specialty stores took a hit last month. Wet Seal sales fell 11.4% while Zumiez sales tumbled 17.9%.
Limited Brands (LTD, Fortune 500), parent company of the Victoria’s Secret and Bath & Body Works chains, suffered a 9% drop in its March sales.
Sales at leading apparel seller Gap (GPS, Fortune 500) fell 8% while J.C. Penney’s sales slumped 7.2%. In the high-end area, Saks reported a stunning 23.6% drop in March sales.
Wholesale club operator Costco (COST, Fortune 500) delivered a mixed performance. The retailer, which also sells gasoline at its stores reported a 5% same-store sales decline, including gasoline sales, due to falling prices at the pump. But excluding gasoline purchases, the company said its sales increased 3% at its U.S. stores.
There were some positive performances. Specialty fashion stores The Buckle and Hot Topic continued to show strength, with The Buckle registering a 14.7% sales gain last month while Hot Topic logged an increase of 7.1%.
Vowing a new wave of meritocracy and tighter links between pay and performance, Anheuser-Busch plans to give high-performing salaried staffers bigger rewards while reducing contributions to the health care and pensions of salaried retirees.
The brewer outlined the changes Wednesday in a memo to salaried employees from James Brickey, A-B’s vice president of people. The sweeping changes are the latest in a series of shake-ups at the top U.S. brewer in the five months since InBev bought the St. Louis company.
More than half of Anheuser-Busch’s 4,400 St. Louis-area employees may be affected by the changes; unionized employees are not affected.
A-B plans to push more of the cost of retiree health care onto the retirees themselves, who will have to pick up more of the costs of doctor visits and treatments.
Salaried retirees under age 65 will have to pick up 50 percent of the health care cost-sharing next year and 60 percent in 2011. They are responsible for 40 percent today. For retirees age 65 and older, the cost-sharing will rise every year until 2015. That’s when the company-provided supplement to Medicare will be phased out completely.
InBev’s culture is moving into the halls of Anheuser-Busch, and the changes have been swift. Offices have been demolished to make way for conference rooms and open desks. Storied advertising agencies have been dropped as A-B tightens its roster. After several rounds of layoffs and retirements, remaining employees are trying to make do with fewer personnel. "Accountability" is a hot word. Observers say shareholders’ interests — not necessarily those of employees — are the driving forces now at Anheuser-Busch.
Explaining the changes to its compensation system, Anheuser-Busch appealed to a jury of its peers — large U.S. companies of comparable size — many of whom want to get out of the business of supplying retirees’ health care.
Fewer than half of all companies of A-B’s size in the United States offer any type of retiree health care, according to data from Mercer, a human resources consulting group. Even among companies that offer health care coverage, the retirees have to shoulder a "substantially higher" portion of the cost than do Anheuser-Busch retirees, Brickey wrote in the memo instant credit report.
The company said it planned to pay its salaried employees between 80 percent and 100 percent of each position’s "market rate," a median figure for comparable jobs. In the past, Brickey wrote, high performers "might have seen fewer rewards as dollars were spread more evenly among all employees."
In the new regime, before a salaried employee is allowed to have base pay above the industry average, "special justification and approvals" will have to be made. Put another way: The base pay of nearly all salaried workers at Anheuser-Busch will be below the national median for their respective jobs. How does that fit with A-B’s stated goal of rewarding top performers? Answer: Employees are being told that extra pay is available for high performers — but in the form of bonuses and special awards, not base pay.
"The focus on cutting costs and making it completely a performance-based company is absolutely how InBev was being run," said Morningstar analyst Ann Gilpin. "And now, it’s at Anheuser-Busch. You could be 60 years old with tons of experience at InBev, and if you don’t perform, you don’t get paid and you don’t get promoted."
Gilpin predicted that this will be part of a string of cutbacks as Anheuser-Busch’s culture gets transformed into one in which recent performance is valued above experience.
The company noted that almost everyone had more responsibilities because of hundreds of recent retirements and layoffs. Employees who took on the most added work will be given more consideration for this month’s annual increase in base pay. About 40 percent of salaried employees will get those raises. Previously, just about everybody got them.
Meanwhile, Anheuser-Busch wants to bring its retirement plans — both pensions and 401(k) plans — "more in line with other businesses and with our global company," Brickey wrote. Contributions to the pension plan will be frozen on Jan. 1, 2012. Benefits from A-B’s retirement plans will fall to the 50th percentile of the U.S. market.
Stocks fell Tuesday, retreating for a second straight session after a four-week advance, on worries about banks and autos and the start of the quarterly reporting period.
The Dow Jones industrial average (INDU) lost 186 points, or 2.3%. The S&P 500 (SPX) index dipped 20 points, or 2.4%. The Nasdaq composite (COMP) fell 45 points, or 2.8%.
After the close, Alcoa (AA, Fortune 500) reported a first-quarter loss of 59 cents per share, wider than the 56 cents per share loss analysts surveyed by Thomson Reuters were expecting. The aluminum maker earned 44 cents a year earlier.
Revenue fell to $4.1 billion from $7.375 billion a year ago, versus forecasts for a steeper drop to $4.077 billion. Alcoa is typically the first Dow component and major company to report results. Shares fell 3% in extended-hours trading after rising just after the release of the report.
Alcoa is just the start of what is going to be a poor earnings reporting period, with results set to slump at least 35% versus a year ago, said Ram Kolluri, director and chief investment officer at ICICI Group Global Private Clients.
Stocks have been retreating this week in the aftermath of a swift rally that propelled the major gauges more than 20% off multi-year lows.
"We had this rally on optimism that the banking system is stabilizing, but the advance was somewhat premature," Kolluri said. "Now the reality of the earnings is going to hit us."
Tuesday’s market: General Motors is preparing for the possibility of filing for bankruptcy, if it can’t meet the government’s reorganizing deadline of June 1, according to a source familiar with the company’s plans. The news dragged on investor sentiment and sent GM (GM, Fortune 500) shares down by 12%. Healthier rival Ford Motor (F, Fortune 500) lost 7.5%.
Chevron (CVX, Fortune 500), Exxon Mobil (XOM, Fortune 500) and other oil services stocks slipped along with the price of oil, which closed below $50 a barrel.
Meanwhile, a number of bank stocks weakened for a second straight session. The KBW Bank (BKX) index lost 3.5%.
Beyond the corporate news, stocks were vulnerable to a pull back anyway, following a big four-week rally that saw all three major gauges jump at least 20%.
Since bottoming at a 12-year low on March 9, the Dow has rallied 21%, its best four-week run since 1933, when it added 31%. The advance was driven in part by optimism that the economy and financial sector are close to stabilizing.
But after such a run, a turnaround was fairly typical, said Tom Schrader, managing director at Stifel Nicolaus. He said stocks could even go back to "retest" those March lows, before making a bigger move higher direct faxless payday loans.
"I think the lows will hold this time," he said, noting that the outlook was a lot more grim in the fall during previous attempts at finding a floor.
"The doomsday scenario has gone by the wayside," he said. "There’s still a long way to go, in terms of the economy, the housing market, the banks, but there’s definitely more optimism in the market than in those previous attempts."
On Monday, a breakdown in merger talks between IBM and Sun Microsystems weighed on techs. Bank shares were bludgeoned after an influential analyst said the default rate on loans will approach the percentages seen during the Great Depression.
GM prepares for bankruptcy: As GM struggles to meet the government’s June 1 restructuring deadline, it is also preparing for bankruptcy, a source told CNNMoney.com.
The company is still trying to get concessions from its unions and creditors ahead of the Obama administration deadline, but it is also in "intense and earnest" preparations for a possible filing, the source said.
GM and privately-held Chrysler have both received billions in government aid. (Full story)
Separately, GM said that it has paired with Segway to create a two-wheeled, two-seat, electrically powered vehicle for city navigation. Project P.U.M.A. - Personal Urban Mobility and Accessibility - was unveiled Tuesday in New York.
Economic news: Borrowing costs slipped, following a one-month advance, the Federal Reserve said Tuesday. Consumer credit fell 3.5% in February after rising 1.8% in January. Economists surveyed by Briefing.com thought it would fall 1.5%.
Bonds: Treasury prices rallied, lowering the yield on the benchmark 10-year note to 2.75% from 2.87% Monday. Treasury prices and yields move in opposite directions.
Lending rates were little changed. The 3-month Libor rate fell to 1.15% from 1.16% Monday, according to Bloomberg.com. The overnight Libor rate inched higher to 0.28% from 0.27% Monday. Libor is a bank-to-bank lending rate.
Other markets: In global trading, Asian and European markets tumbled.
In currency trading, the dollar gained versus the euro and the yen.
U.S. light crude oil for May delivery fell $1.90 to settle at $49.15 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery rose $10.50 to settle at $883.30 an ounce.
President Barack Obama warned recently that small business lending had declined so sharply that the Small Business Administration was on track to back only half as many loans this year as it did last year. The SBA’s lending data for the just-ended quarter bears out that bleak forecast: The number of loans the agency backed though its flagship program declined 57%.
The SBA backed $1.59 billion worth of loans in the three months ended March 31, a 47% drop from the same quarter last year. The total number of loans made through the 7(a) program was 8,278, down from more than 19,000 issued a year ago. In the first half of its 2009 fiscal year, the SBA’s total 7(a) loan volume was $3.5 billion, down from the $6.2 billion lent in the first half of last year.
Small businesses seeking loans are fighting a number of opposing forces. "SBA lending is down due to the credit crunch, the economic crisis, and the frozen secondary market," said Jonathan Swain, an SBA assistant administrator.
Though the numbers for the quarter are grim, Swain says the agency sees hope in the data collected since March 16, when two stimulus provisions - temporarily waiving fees for the SBA’s loan programs and increasing to as much as 90% the portion of each loan it will insure against default - were implemented.
The weekly average 7(a) loan volume from January until that point was $120 million. But in weeks following March 16, that average has jumped to $146 million, Swain said.
"We have seen an increase in the loan program in just two weeks," he said. "This indicates that these pieces are doing what they were designed to do and helped curb the downslide in lending."
But Swain warns that more still needs to be done for the loan numbers to get back to where they were before the recession health insurance quote. "I don’t think there’s one silver bullet. One of these initiatives alone won’t solve the problem. It’s a combination of efforts, from the Treasury and the SBA to work at the overall problem."
The SBA’s loan programs guarantee a portion of qualifying loans made by banks to small businesses, a system intended to make loans available for ventures that would otherwise be considered too risky. But stiff collateral requirements and other restrictions have put even SBA loans out of reach for many entrepreneurs, while banks also clamp down on other small business funding channels like credit cards, credit lines and non-SBA loans.
Several banking institutions that have pulled out of the SBA’s lending program have blamed the secondary market, where banks resell to investors bundles of the loans they’ve made. Since the fall, that market has been nearly frozen, and banks unable to resell their loans say they lack the liquidity to make news ones.
In her confirmation hearing on Wednesday before the Senate Small Business Committee, incoming SBA administrator Karen Gordon Mills emphasized the importance of quickly implementing the Treasury’s planned $15 billion program to purchase SBA loan bundles on the secondary market. She also pledged to swiftly plan and get into operation the remainder of the stimulus provisions, which are designed to provide relief to small businesses seeking capital.
"Our folks are focused on how important these programs are and what these programs and resources can mean for small businesses across the country," the SBA’s Swain said. "With more coming online soon, this is a good early indication that the measures thus far are working. We’re glad to see it."
A record 32.2 million people — one in every 10 Americans — received food stamps at the latest count, the government said Thursday, a reflection of the recession now in its 16th month.
Food stamps, the major U.S. anti-hunger program, help poor people buy groceries. The average benefit was $112.82 per person in January.
The January figure marks the third time in five months that enrollment set a record.
"A weakened economy means that many more individuals are turning to SNAP/Food Stamps," said the Food Research and Action Center, an anti-hunger group, using the acronym for the renamed food stamp program, the Supplemental Nutrition Assistance Program.
The U.S. unemployment rate was 8.1% in February, the highest in 25 years. New claims for jobless benefits totaled 669,000 last week, the highest in 26 years, the government said Thursday.
Food stamp enrollment rose in 46 of the 50 states during January as the national total rose by 580,000 people, or 1 free car insurance quotes.3%, from December, when the previous record was set, said Agriculture Department figures.
Vermont, Alaska and South Dakota had increases of more than 5%. Texas had the largest enrollment, 2.984 million, down 65,000, followed by California at 2.545 million, up 43,000, and New York with 2.211 million, up 37,000.
"It is a very difficult time for low-income families and individuals and also a difficult time for the groups that serve them," said Valentine Breitbarth of Bread for the City, a group that works with poor families in Washington.
Food stamp benefits get a temporary 13% increase, beginning with this month, under the economic stimulus law signed by President Barack Obama. The increase equals $80 a month for a household of four.
Leaders of the most powerful nations meet today amid signs that the world economy is stabilizing after months of freefall.
The Group of 20 summit convenes in London as some reports suggest the pace of decline is easing. U.S. durable-goods orders and home sales rose in February, Chinese urban investment surged 26.5 percent in the first two months of the year, and German investor confidence in March reached its highest level since July 2007. The Standard & Poor’s 500 Index last month rallied the most in seven years.
Policy makers must still contend with plenty of bad news: The World Bank is warning of an “unemployment crisis,” and the U.S. Labor Department is forecast to report tomorrow that the jobless rate is now the highest in a quarter-century. The challenge for the G-20 is to turn the early indications that the worst is over into a fully fledged recovery.
“If you look at history, equity markets rally before the economy does,” said Alastair Newton, a political analyst at Nomura International and a former U.K. government official. “With the worst in unemployment to come, there’s still pressure on the leaders to act.”
U.S. President Barack Obama, U.K. Prime Minister Gordon Brown and their G-20 counterparts — responsible for 85 percent of the world economy — are gathering to push along an agenda aimed at ending the slump and avoiding a repeat of the financial crisis that caused it. They are scheduled to release a statement and hold press conferences about 3 p.m.
More Cash
As the leaders meet to hasten the recovery, they are signaling they will endorse more cash for the International Monetary Fund, seek to revive trade finance and reject protectionism. Initiatives to rein in toxic assets, hedge funds, derivatives trading, executive pay, tax havens and excessive risk-taking by financial firms are also in the works.
“This meeting will reflect enormous consensus about the need to work in concert to deal with these problems,” Obama said yesterday.
With police braced for more protests on the streets of the U.K. capital today, there are signs of discord among the policy makers, too. French President Nicolas Sarkozy and German Chancellor Angela Merkel said an agreement to tighten regulation is still some way off, while Japanese Prime Minister Taro Aso criticized Germany’s unwillingness to boost spending.
‘Must Stand United’
“We must stand united in our determination to do whatever is necessary,” Brown said yesterday. Merkel said she and Sarkozy “want results, but we don’t want results that have no effect in practice.”
Evidence is building that the deepest global recession since World War II may be easing — giving comfort to those who say the G-20’s $2 trillion of fiscal stimulus is working, as well as those who argue that enough has been provided. An index compiled by UBS AG economists to show when economic data is stronger than markets expect logged its biggest jump last month since August.
Among what economists call the possible “green shoots” of recovery: In the U.S., sales of new homes rose unexpectedly in February by 4.7 percent, and factory inventories are falling business card templates free. The rate of contraction in European manufacturing and services industries is slowing. New bank lending quadrupled in China in February and vehicle sales rose 25 percent, while Japanese companies including automaker Nissan Motor Co. say they will increase production in coming months. A new report today showed U.K. house prices surprisingly rose for the first time since October 2007.
‘Significant Improvement’
“Our bet is that the global economy is poised for significant improvement,” said David Hensley, JPMorgan Chase & Co.’s New York-based director of global economic coordination.
Investors may already be tuning in. The S&P 500 climbed 8.5 percent last month; according to data compiled by the National Bureau of Economic Research and Bloomberg, the index began rising on average five months before recessions ended in 1975, 1982 and 1991.
“You’re seeing encouraging signs of improvement in our markets; we want to reinforce that,” U.S. Treasury Secretary Timothy Geithner said yesterday in an interview.
Even so, bad news still pervades. Data released yesterday showed that Japanese business confidence plunged to a record low, Chinese manufacturing is shrinking and German retail sales unexpectedly fell. Companies in the U.S. cut an estimated 742,000 workers in March, the most since records began in 2001, according to ADP Employer Services.
‘In Danger’
“The global economy is still in danger,” said Stephen King, chief economist at HSBC Holdings Plc. He identifies deflation, falling corporate profits and financial protectionism as the biggest threats. As for financial institutions, Deutsche Bank AG Chief Risk Officer Hugo Banziger said March 30 that the credit crisis is “far from over” and IMF Managing Director Dominique Strauss-Kahn said yesterday that recovery depends on bank balance sheets being unclogged of tainted securities.
For the G-20 leaders, who already face declining popularity at home, the biggest concern may be slumping payrolls, as companies from French automaker Renault SA to computer-services provider International Business Machines Corp. ax jobs. Growing job losses could snuff-out any nascent recovery by decimating consumer spending.
In predicting the world economy will contract 2.7 percent this year, the Organization for Economic Cooperation and Development said two days ago that average unemployment in the 30 richest nations will top 10 percent next year.
Job Losses
A report this week already showed that job losses in Japan for February hit a three-year high of 4.4 percent. Unemployment in Europe jumped more than expected to 8.5 percent, the highest since May 2006, data showed yesterday. The U.S. rate for March probably leapt to 8.5 percent from 8.1 percent in February, according to the median estimate of analysts surveyed by Bloomberg News.
“There may eventually be light at the end of the tunnel,” said Nouriel Roubini, the New York University professor who predicted the crisis. Still “the economic recovery will be so weak that it will still feel like a recession.”
Powered by WordPress -- XHTML 1.0