Economic Calendar

Saturday, April 28, 2012

Economy in U.S. Grew Less Than Forecast in First Quarter

By Shobhana Chandra - Apr 28, 2012 11:00 AM GMT+0700

The U.S. economy expanded less than forecast in the first quarter as a smaller contribution from inventories overshadowed the biggest gain in consumer spending in more than a year.

Gross domestic product, the value of all goods and services produced in the U.S., rose at a 2.2 percent annual rate after a 3 percent pace, Commerce Department figures showed yesterday in Washington. The median projection of economists surveyed by Bloomberg News called for a 2.5 percent gain. Government spending fell for a sixth straight quarter.

Annie Ellicott, left, with a new Toyota at Toyota of Marin in San Rafael, California. Photographer: Justin Sullivan/Getty Images

April 27 (Bloomberg) -- David Semmens, a U.S. economist at Standard Chartered Bank, talks about the outlook for the U.S. economy. He speaks with Caroline Hyde on Bloomberg Television's "On the Move." (Source: Bloomberg)

April 27 (Bloomberg) -- Phillip Swagel, a professor at the University of Maryland School of Public Policy, talks about the first-quarter U.S. gross domestic product and economic outlook. GDP rose at a 2.2 percent annual rate, less than forecast, after a 3 percent pace, Commerce Department figures showed. Swagel speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

April 25 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke offers his views on the outlook for central bank monetary policy and the U.S. economy. Fed policy makers say they expect growth to accelerate, while refraining from new actions to lower borrowing costs. Bernanke says the central bank stands ready to add to its stimulus if necessary. (Excerpts. Source: Bloomberg)

April 27 (Bloomberg) -- Joshua Shapiro, chief U.S. economist at MFR Inc., talks about U.S. consumer sentiment, the economy and Federal Reserve monetary policy. He speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)

April 27 (Bloomberg) -- U.S. Housing and Urban Development Secretary Shaun Donovan talks about the outlook for the U.S. housing market and housing finance reform. He speaks on Bloomberg Television's "InBusiness With Margaret Brennan. (Source: Bloomberg)

Goods are stacked in the tray warehouse at a Supervalu Inc. distribution center in Hopkins, Minnesota. Photographer: Ariana Lindquist/Bloomberg

Job creation and income gains propelled sales at car dealerships and retailers like Target Corp. (TGT), helping cushion the U.S. economy from weakness overseas. Further gains in consumer spending will depend on progress in reducing a jobless rate that has hovered above 8 percent since early 2009.

“This report came in less than expected but it was hardly a disaster,” said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania. “Consumers hit the vehicle showrooms hard and consumption was strong.”

In addition to the 2.9 percent pickup in the rate of consumer purchases, the economy benefited from the biggest gain in homebuilding in two years and a jump in auto production. GDP was restrained by slower growth in business investment in equipment.

Stocks, Treasuries

Stocks rose for a fourth straight day on stronger corporate earnings. The Standard & Poor’s 500 Index climbed 0.2 percent to 1,403.36 at the close of trading in New York. Treasuries were little changed, with the 10-year note yield at 1.93 percent at 4:34 p.m. in New York.

Another report yesterday showed consumer confidence rose to the highest in a year in April. The Thomson Reuters/University of Michigan’s final index of sentiment increased to 76.4 from 76.2 last month. The gauge was projected to hold at the 75.7 level initially reported earlier this month, according to the median forecast in a Bloomberg News survey of economists.

Consumer spending, which accounts for about 70 percent of the economy, contributed 2 percentage points to first-quarter growth, the most since the final three months of 2010. Cars sold last quarter at the fastest pace in four years, according to industry data.

“Auto sales softened at the end of the first quarter, and this rapid growth rate is unlikely to be repeated in the second quarter,” Ryan Wang, an economist at HSBC Securities USA Inc. in New York, said in a research note.

Doing Better

The U.S. is doing better than some other major economies. The U.K. slipped into its first double-dip recession since the 1970s, figures showed this week. In Japan and Germany, gross domestic product dropped in the final three months of 2011, while China, the world’s second-largest economy, is also cooling.

“The U.S. is where the strength is,” Sandy Cutler, chairman and chief executive officer at Eaton Corp. (ETN), said on an April 23 conference call with analysts.

The Cleveland-based company predicted its U.S. markets, including electrical, hydraulics, aerospace, truck and automotive, will rise 9 percent this year, up from an earlier estimate of 6 percent. For its markets abroad, Eaton reduced its growth forecast to 2 percent from 4 percent, Cutler said.

The GDP data underscore the view of Federal Reserve officials who this week said they expect “moderate” growth as they repeated borrowing costs are likely to stay low at least through late 2014.

Central Theme

Jobs and the economy are a central theme in political sparring between President Barack Obama and Republican challenger Mitt Romney.

Obama’s job approval rating reached 50 percent in a Gallup Daily tracking poll for April 21-23. The telephone survey of 1,534 adults has a margin of error of plus or minus 3 percentage points. The 50 percent approval mark is notable because all incumbent presidents since Dwight Eisenhower at or above the level at the time of the election were re-elected, according to Gallup.

A stabilization in housing also aided first-quarter GDP growth. Residential construction increased at a 19.1 percent rate, the fastest in almost two years.

A job market that’s improved since the end of 2011 is underpinning demand. Employers increased payrolls by 635,000 from January through March, the biggest quarterly gain since the first three months of 2006, data from the Labor Department show. At the same time, the jobless rate has been above 8 percent for the past three years.

Labor Market

“People have been spending -- whether they continue to spend is a function of what happens with the labor market,” said Joseph Lavorgna, chief economist at Deutsche Bank Securities Inc. in New York.

Americans dipped into savings as they increased their purchases, yesterday’s data showed. Disposable income after inflation rose 0.4 percent in the first quarter following a 1.7 percent gain. The saving rate from January through March eased to 3.9 percent from 4.5 percent.

The drop “raises the question, ‘How long can we continue to consume by saving less?’” said Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., the world’s biggest manager of bond funds.

Yesterday’s University of Michigan report also showed that Americans were more pessimistic about their finances than in March. Views on finances weakened across all income groups, with 28 percent saying they were improved, down from 34 percent who said so last month.

Retail Sales

Retail purchases advanced at an average rate of 0.8 percent in the first quarter, the fastest in a year, as stores offered discounts and shoppers stocked up early on spring gear. Same- store sales at Target, the second-largest U.S. discount chain, and Gap Inc. (GPS), the biggest U.S. apparel chain, beat the average estimate of analysts.

Connie Zheng, 26, was promoted in January at North of Nine, a technology public relations agency based in San Francisco. The promotion came with a raise, allowing her to celebrate with the purchase of $150 purse and a new Apple Inc. iPad.

The economy “feels much better than a year ago,” Zheng said. “I was looking for a job in 2009. That was really hard, looking for a job back then. Since, there’s been a lot more hiring going on and things generally feel better.”

Mild Weather

Unseasonably mild temperatures may have also spurred spending on everything from homes to restaurant meals. The January-to-March period was the warmest first quarter on records going back to 1895, according to the National Oceanic and Atmospheric Administration.

Small businesses such as Spreadshirt Inc. are also benefiting from the pickup in consumption. The print-on-demand t-shirt company had a 108 percent increase in sales in the first quarter from a year ago. The company, which is based in Leipzig, Germany, is opening a factory in Las Vegas and will add 90 employees to its current U.S. staff of 150, according to Vice President Mark Venezia.

Sales have been “remarkable,” Venezia said. “With this growth we’re looking at expansion into other countries. We’re investing in more equipment.”

Business investment cooled. Corporate spending on equipment and software climbed at a 1.7 percent pace, the weakest in almost three years, after advancing at a 7.5 percent rate in the previous quarter. It contributed 0.1 percentage point to growth.

Rising auto and industrial demand will keep factories busy even as manufacturing, a driver of the economic rebound, cools to a more sustainable pace, economists said. 3M Co., the maker of fuel system tune-up kits and Post-it Notes, reported a first- quarter profit that beat analysts’ estimates.

Topping Estimates

Texas Instruments (TXN) Inc. this week forecast second-quarter earnings that may top some analysts’ estimates, and Chief Executive Officer Rich Templeton in a statement referred to the “breadth of increased orders across geographical regions and markets.”

A smaller boost came from inventories, which contributed 0.6 percentage point to GDP growth after 1.8 percentage points at the end of 2011. Stockpiles were rebuilt at a $69.5 billion annual pace, after a fourth-quarter rate of $52.2 billion.

Other areas of the economy that struggled include spending by state and local governments, which decreased at a 1.2 percent annual rate, after a 2.2 percent drop. Outlays by federal agencies declined 5.6 percent. National defense spending slumped 8.1 percent, following a 12.1 percent decrease the prior quarter.

A measure of inflation that is tied to consumer spending and strips out food and energy costs, climbed at a 2.1 percent annual pace compared with 1.3 percent in the prior quarter. Fed officials have defined their inflation target as 2 percent a year.

To contact the reporter on this story: Shobhana Chandra in Washington at

To contact the editor responsible for this story: Christopher Wellisz in Washington at


S&P 500 Gains as Retailers Surge to Record on Earnings

By Rita Nazareth - Apr 28, 2012 3:42 AM GMT+0700

The Standard & Poor’s 500 Index (SPX) capped the best week in a month, as retailers (S5RETL) surged to a record, after improving corporate earnings and consumer confidence tempered lower-than-forecast economic growth.

Retailers in the S&P 500 climbed 3.5 percent for the biggest gain among 24 groups. Inc. (AMZN), the largest Internet retailer, and Expedia Inc., an online-travel company, surged at least 15 percent as earnings beat estimates. A gauge of homebuilders in S&P indexes rallied 3 percent to the highest level since October 2008. Starbucks Corp. (SBUX) tumbled 5.3 percent as same-store sales trailed analysts’ projections.

Traders on the floor of the New York Stock Exchange on April 25, 2012. Photographer: Scott Eells/Bloomberg

April 27 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. The Standard & Poor’s 500 Index capped the best week in a month, as retailers surged to a record, after improving corporate earnings and consumer confidence tempered lower-than-forecast economic growth. (Source: Bloomberg)

April 27 (Bloomberg) -- Bloomberg’s Trish Regan, Adam Johnson and Matt Miller report on today’s ten most important stocks including Ford, Amazon and Starbucks. (Source: Bloomberg)

April 27 (Bloomberg) -- Michael Gayed, chief investment strategist at Pension Partners LLC, talks about the outlook for the U.S. stock market. He speaks with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

April 27 (Bloomberg) -- Michael Crofton, chief executive officer of Philadelphia Trust Co., talks about the U.S. economy, stock market and investment strategy. He speaks with Trish Regan and Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)

The S&P 500 added 0.2 percent to 1,403.36 at 4 p.m. New York time. The benchmark gauge for U.S. equities rallied 1.8 percent since April 20 for a back-to-back weekly gain. The Dow Jones Industrial Average gained 23.69 points, or 0.2 percent, to 13,228.31. About 6.2 billion shares changed hands on U.S. exchanges, or 7 percent below the three-month average.

“It all tells me that the economy continues to grow at a slow, steady pace,” said Jeffrey Layman, chief investment officer of BKD Wealth Advisors in Springfield, Missouri. His firm has $1.9 billion under management. “Consumers are feeling more confident and it’s a good thing. We’re pleased with the overall improvement in earnings.”

About 75 percent of the companies in the S&P 500 that reported results since April 10 have topped analysts’ estimates, according to data compiled by Bloomberg. Per-share profits are forecast to have grown 5.3 percent in the first-quarter, Bloomberg data show. That’s up from the 0.8 percent growth projection before the earnings season started.

Economic Data

Equities rose even after data showed the U.S. economy expanded at a 2.2 percent annual rate in the first quarter, less than the 2.5 percent increase forecast by economists. Confidence among U.S. consumers climbed in April to the highest level in a year, according to a separate report.

Pacific Investment Management Co.’s Mohamed El-Erian said lower-than-forecast U.S. growth suggests additional monetary stimulus remains on option for the Federal Reserve even though there is no immediate need for action.

“If we continue this weakening trend, the Fed will come back in and try to sustain this market and this economy,” El- Erian, the chief executive officer of the world’s largest manager of bond funds, said during an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “I don’t think there is an immediate need now.”

Today’s rally trimmed this month’s decline in the S&P 500 to 0.4 percent. If the index erases its April drop, it will cap the fifth straight month of gains, the longest winning streak since 2009. The gauge has gained 12 percent so far this year.

Biggest Gains

Six out of 10 groups in the S&P 500 rose today as companies that rely on consumer discretionary spending and industrial shares had the biggest gains. Ten of 11 stocks in a measure of homebuilders in S&P indexes advanced.

Amazon surged 16 percent, the biggest advance since October 2009, to $226.85. The company posted earnings-per-share that quadrupled the average analyst estimate. Chief Executive Officer Jeff Bezos is looking to add customers by pouring money into new versions of the Kindle and warehouses that are equipped to send out products faster.

Expedia (EXPE) soared 24 percent, the most in the S&P 500, to $40.31. “Gross bookings and revenue growth were again driven by strength in our hotel business with global room-nights growing 24 percent, a nice acceleration from the 19 percent we saw for the fourth quarter,” Dara Khosrowshahi, the company’s chief executive officer, said on a conference call yesterday.

Highest Since 1997

Vivus Inc. (VVUS) jumped 3 percent to $25.15, the highest since 1997. A Vivus pill that is supposed to provide erections within 15 minutes, about half the time or less than Pfizer Inc.’s Viagra, won U.S. regulatory approval.

Starbucks retreated 5.3 percent, the most since Aug. 18, to $57.43. Sales at stores open at least 13 months rose 7 percent globally in the quarter. Analysts projected a gain of 8.2 percent, the average of 17 estimates compiled by Consensus Metrix. Such sales fell 1 percent in Europe, the Middle East and Africa amid “slight decreases” in transactions and average check, Starbucks said.

Customers in Europe “are just cautious, as you would expect, not unlike what they were like in the U.S. three and four years ago,” Chief Financial Officer Troy Alstead said in an interview. Starbucks “is not immune from that,” he said.

Procter & Gamble Co. (PG) slumped 3.6 percent to $64.44 for the biggest loss in the Dow. The world’s largest consumer-products company reduced its full-year earnings forecast amid higher costs for raw materials.

Overseas Losses

Ford Motor Co. (F) dropped 2.3 percent to $11.60. The company seeking a second investment-grade credit rating said first- quarter profit fell 45 percent on a higher tax rate and as overseas losses ate into growing income from North America.

Allscripts Healthcare Solutions Inc. (MDRX) plunged 36 percent, the most in the Russell 1000 Index (RIY), to $10.30. The maker of clinical software slashed its earnings forecast for 2012. Chief Financial Officer Bill Davis will leave the company effective May 18, and three board directors resigned after disagreeing with a decision to terminate Chairman Phil Pead.

Utilities are poised to become the only one of the S&P 500’s 10 main industry groups whose investors receive dividends on every stock. AES (AES) Corp. and NRG Energy Inc. (NRG), two independent power producers, plan to introduce payouts during the second half. They are the only utilities in the S&P 500 that don’t already provide dividend income.

Dividend Ranking

The industry currently has the fourth-highest percentage of dividend-paying shares. Raw-material (S5MATR) producers, makers of food, beverages and other consumer staples, and industrial companies are the top three, in that order.

More than 80 percent of S&P 500 companies pay dividends, said Howard Silverblatt, a New York-based senior index analyst at S&P. The figure is the highest since January 2000. Nasdaq OMX Group Inc. sent the percentage above that threshold two days ago by declaring a quarterly payout of 13 cents a share.

AES plans to distribute $120 million a year, starting in the fourth quarter. That’s equivalent to an annual dividend of about 16 cents a share. The Arlington, Virginia-based company’s most recent payout was in 1994, four years before joining the S&P 500, according to data compiled by Bloomberg.

NRG, a component of the index since 2010, plans to begin paying dividends in the third quarter. Investors would receive 36 cents a share annually. The company, based in Princeton, New Jersey, made a similar proposal in 2007 that was scrapped after a bid to refinance debt failed.

To contact the reporter on this story: Rita Nazareth in New York at

To contact the editor responsible for this story: Michael P. Regan at