a-clear-message

Toyota Idling Plants Marks Step to Win Back Buyers’ Trust as Shares Slump

by on January 27, 2010

By Alan Ohnsman and Mike Ramsey Jan. 27 (Bloomberg) — Toyota Motor Corp. ’s plan to suspend output at five North American plants marks an “unprecedented” step to win back U.S. buyers’ trust after recalling 2.3 million vehicles at risk for sudden acceleration, analysts said. U.S. law required Toyota to stop sales of eight models while a “dangerous” pedal flaw is fixed, the National Highway Traffic Safety Administration said today. Toyota made that move yesterday and also ordered the halt in production. “The only thing that it is close to in scale and size is the Ford and Firestone rollover issues,” said Bill Visnic, senior editor at auto researcher Edmunds.com, referring to the fatal accidents that spurred a recall of tires used on Ford Motor Co. Explorers in 2000. Toyota’s case “vastly transcends” Ford’s, Visnic said. Stopping work at the factories underscores the urgency for Toyota in reclaiming its standing as a maker of safe, reliable vehicles. Toyota promoted that image, as validated in surveys such as those conducted by Consumer Reports magazine, in rising to No. 2 in U.S. sales behind General Motors Co. “This is unprecedented, on this kind of scale,” said John Wolkonowicz , an analyst with IHS Global Insight in Lexington, Massachusetts. “This will have some impact on Toyota.” Toyota ’s American depositary receipts fell $7.56, or 8.7 percent, to $79.22 at 2:10 p.m. in New York Stock Exchange composite trading. The ADRs declined as much as 8.9 percent earlier for the worst intraday drop since Jan. 22, 2009. Sticky Pedals The Toyota City, Japan-based company said U.S. sales of the affected models were being stopped indefinitely while it figures out how to fix a problem with accelerator pedals that could cause them to stick. A spokesman, Mike Goss , said he didn’t know how much production would be lost at the five plants. Along with the top-selling Camry and Corolla, Toyota’s recall covers the Avalon sedan and Matrix hatchback; RAV4, Highlander and Sequoia SUVs; and Tundra pickups. Also included is the Pontiac Vibe, a version of the Matrix built at a joint Toyota-GM plant until last year. The eight Toyota models accounted for 56 percent of the automaker’s U.S. sales last year, said Koji Endo , managing director of Advanced Research Japan in Tokyo. Toyota has 1,234 U.S. franchises employing more than 100,000 people, according to the company. The Jan. 21 recall of 2.3 million cars and sport-utility vehicles was in response to a flawed pedal part. In November, Toyota recalled 4.3 million vehicles to reshape accelerator pedals to prevent them from getting stuck by floor mats. About 1.7 million vehicles are affected by both recalls. Safety First While Toyota is aware of the risks to its reputation for quality, “this is a customer safety issue,” said Irv Miller , U.S. group vice president for corporate communications. Miller said he wasn’t aware whether the decision to halt production was made by President Akio Toyoda . “He is certainly aware of the issue,” Miller said. The automaker retained the top spot in June in J.D. Power & Associates’ survey of initial quality and topped Consumer Reports’ magazine’s annual survey of automotive brand perceptions this month. Still, Toyoda already was under pressure to improve quality since he took the helm in June, and the latest setbacks probably will add to the strain as competitors including South Korea’s Hyundai Motor Co. narrow Toyota’s lead. Dramatic Move “Toyota had a bulletproof reputation for quality, and now it’s been tarnished,” said Jim Hossack , an industry analyst at AutoPacific Inc. in Fountain Valley, California. “It’s a dramatic move, and an expensive move.” NHTSA said it had been working with Toyota for “several months” and was “pleased” the automaker was taking steps to protect consumers. “Toyota dealers have a legal obligation not to sell a vehicle they know to be defective until the defect has been remedied,” said Karen Aldana, an agency spokeswoman. Toyota’s November recall, which also included Lexus models and the Prius hybrid, resulted from multiple investigations by NHTSA over complaints of vehicles accelerating out of control even as drivers applied the brakes. That recall prompted product-liability lawsuits against the company. “Toyota needed to send a clear message they care more about their customers than monthly profits,” said Jeremy Anwyl , chief executive officer of Santa Monica, California-based Edmunds.com, after the sales and production suspensions were announced yesterday. “The company has to get ahead of the problem.” Explorer Case Ford’s image was battered in 2000 by the recall of 6.5 million ATX and Wildnerness tires made by Bridgestone/Firestone Inc., the U.S. unit of Bridgestone Corp. Most of the tires were on Explorer SUVs. NHTSA said in December 2000 that as many as 148 traffic deaths may have been tied to the tires. Today’s fallout for Toyota included the decision by Avis Budget Group Inc. to remove recalled Toyotas from its rental-car fleet in the U.S., Canada and Puerto Rico. GM said it was starting incentives to help Toyota owners to switch to the U.S. automaker if they’re concerned about safety. Shares of CTS Corp. , the manufacturer of the pedal part cited in last week’s recall, plunged $1.27, or 15 percent, to $7.36 in NYSE trading for the largest decline since April. Toyota said last week that a potential flaw in CTS-made parts could, “in rare instances, mechanically stick in a depressed position or return slowly to the idle position.” “We at CTS have no knowledge of any incidents, accidents or injuries that have resulted from this,” Mitch Walorski , a spokesman for the Elkhart, Indiana-based company, said in an interview. Walorski said there were eight warranty claims related to sticky pedals among millions of vehicles equipped with the part since 2005. “We are working with their engineers and are actively working to support Toyota,” Walorski said. Toyota makes up about 3 percent of CTS’s annual sales, he said. To contact the reporters on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net ; Mike Ramsey in Southfield, Michigan, at mramsey6@bloomberg.net

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Toyota Halts U.S. Sale, Output of Eight Models as Reputation `Tarnished’

by on January 26, 2010

By Alan Ohnsman Jan. 27 (Bloomberg) — Toyota Motor Corp. , racing to stem widening quality concerns, is halting production and U.S. sales of eight models including its top-selling Camry and Corolla cars because of a component that led to a 2.3-million vehicle recall. Dealers will also temporarily stop selling RAV4, Highlander and Sequoia sport-utility vehicles, Avalon and Matrix cars and Tundra pickups, Toyota, the world’s largest carmaker, said in a statement yesterday. Assembly lines at five North American plants will be idled the week starting Feb. 1. Mike Goss , a company spokesman, said he couldn’t immediately say how many units of production would be lost. “Toyota had a bulletproof reputation for quality, and now it’s been tarnished,” said Jim Hossack , an industry analyst at AutoPacific Inc. in Fountain Valley, California. “It’s a dramatic move, and an expensive move.” President Akio Toyoda is under pressure to restore Toyota’s reputation as competitors including South Korea’s Hyundai Motor Co. narrow the gap with the Japanese carmaker in U.S. sales and vehicle-quality surveys. Toyota fell in Tokyo trading, bringing its decline to 9.4 percent since the company said on Jan. 21 that it found a pedal flaw linked to unintended acceleration. Last week’s announcement followed a record 4.3 million vehicle recall, triggered by a 2009 U.S. safety review, which has prompted product-liability lawsuits against the company. Shares Fall Toyota dropped 1.9 percent to 3,795 yen as of the 11 a.m. trading break on the Tokyo Stock Exchange. Honda Motor Co., Japan’s second-biggest carmaker, gained 0.8 percent while Hyundai fell 0.9 percent in Seoul. Japan’s Nikkei 225 Stock Average advanced 0.3 percent. Toyota said last week it would recall vehicles in the U.S. and Canada because of a potential flaw in parts made by CTS Corp. that could, “in rare instances, mechanically stick in a depressed position or return slowly to the idle position.” In November, Toyota recalled a record 4.3 million vehicles to reshape accelerator pedals to prevent them from getting stuck by floor mats. About 1.7 million vehicles are affected by both recalls. Halting sales and production of some of Toyota’s best- selling U.S. models may mean hundreds of millions of dollars in lost revenue, said AutoPacific’s Hossack, a former engineer for Ford Motor Co., Chrysler Corp. and Mazda Motor Corp. “Toyota needed to send a clear message they care more about their customers than monthly profits,” said Jeremy Anwyl , chief executive of Edmunds.com, a Web-based auto data service in Santa Monica, California. “The company has to get ahead of the problem.” Production Halt The eight models involved accounted for 56 percent of Toyota’s U.S. sales last year, said Koji Endo , managing director of Advanced Research Japan in Tokyo. “On top of losing sales, stopping production means Toyota still has to deal with costs such as worker wages and depreciation,” Endo said. “The full extent of the damage depends on how long it will take.” The announcements have fueled concern that rapid expansion by the Toyota City, Japan-based company in the past decade led to production and design glitches, risking its reputation for quality. “Helping ensure the safety of our customers and restoring confidence in Toyota are very important to our company,” Bob Carter , group vice president of Toyota’s U.S. sales unit, said in the statement. “This action is necessary until a remedy is finalized.” Still Investigating Toyota is still investigating the cause of the pedal flaw and hasn’t determined a precise fix, said Brian Lyons , a company spokesman. Lyons and Toyota’s Goss said they couldn’t provide details of discussions with CTS or other suppliers. “They’ll have a real challenge getting resupplied with the right parts from the supplier or new suppliers,” said manufacturing analyst Laurie Harbour Felax , president of Harbour Results Inc. in Berkley, Michigan. “You’re not talking about something that can be fixed in a few days,” Harbour Felax said. “It’s going to require a lot of resources, a lot of engineering resources. It’s definitely going to have a significant impact on their fiscal earnings.” Toyota said yesterday it may extend recalls to Europe where models using similar pedal components have been sold. Workers at the five plants, including Toyota’s lines in Kentucky, Indiana, Texas and Ontario, and a factory operated by affiliate Fuji Heavy Industries Ltd.’s Subaru in Indiana that makes Camrys for Toyota, won’t be laid off as a result of the production halt, Goss said. Toyota’s U.S. sales headquarters are based in Torrance, California. To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

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Toyota Halts U.S. Sale, Output of Eight Models as Reputation `Tarnished’

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U.S. Initial Jobless Claims Unchanged at 505,000 in Sign Firings Abating

November 19, 2009

By Shobhana Chandra Nov. 19 (Bloomberg) — The number of Americans filing claims for unemployment benefits held at a 10-month low last week, a sign firings are letting up as the economy recovers. Initial jobless claims were unchanged at 505,000 in the week ended Nov. 14, in line with the median forecast of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The number of people collecting unemployment insurance dropped in the prior week, while those getting extended payments jumped. The loss of 7.3 million jobs since the recession began in December 2007, the biggest drop of any postwar economic slump, makes an acceleration in firings less likely as consumers begin to spend. A rebound in hiring may take longer to develop as companies have ample room to boost hours for current employees before taking on additional staff. “Job losses are moderating,” Joel Naroff , chief economist at Naroff Economic Advisors Inc. in Holland, Pennsylvania, said before the report. Even so, “businesses have some room to expand without hiring lots of new employees.” Jobless claims were estimated to increase to 504,000 from 502,000 initially reported for the prior week, according to the median forecast of 42 economists in a Bloomberg News survey. Estimates ranged from 485,000 to 550,000. Futures on the Standard & Poor’s 500 Index declined 0.8 percent at 8:33 a.m. in New York. The yield on the 10-year Treasury note fell 1 basis point to 3.35 percent. Due to the U.S. Thanksgiving holiday on Nov. 26, the Labor Department said it will issue the next claims report on Nov. 25. Survey Week Today’s numbers represent claims from the survey week for nonfarm payrolls, and will be closely watched for signals on job losses in November, economists said. There were 531,000 claims filed in last month’s survey week. The Labor Department will release the November jobs report on Dec. 4. The economy lost 190,000 jobs in October and the unemployment rate rose to 10.2 percent , the highest level since 1983. The report showed the four-week moving average of initial claims, a less volatile measure, fell to 514,000 last week, the lowest level in a year, from 520,500. Continuing claims fell by 39,000 in the week ended Nov. 7 to 5.61 million. They were forecast to drop to 5.59 million. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs. Today’s report showed the number of people who’ve used up their traditional benefits and are now collecting extended payments jumped by about 119,000 to 4.16 million in the week ended Oct. 31. Benefits Extended President Barack Obama on Nov. 6 signed into law a plan to extend jobless benefits, expand a tax credit for first-time homebuyers, and provide tax refunds to money-losing companies. The measure also gives jobless people as many as 20 additional weeks of unemployment assistance. A Labor Department official said today’s figures don’t reflect the new extension and it may take until mid December for the complete readings to become available. The President has also announced plans to convene a jobs summit at the White House next month. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 4.3 percent in the week ended Nov. 7. Forty-eight states and territories reported an increase in claims, while five reported a decrease. These data are reported with a one-week lag. Initial jobless claims reflect weekly firings and tend to rise as job growth — measured by the monthly non-farm payrolls report — slows. Additional Firings Electronic Arts Inc. , the second-largest video-game publisher, is among companies still cutting staff. The Redwood City, California-based company this month said it’ll eliminate 1,500 jobs and close several facilities after reporting its 11th straight quarterly loss. Some companies are using other means to reduce labor costs. Reed Smith LLP, the 16th highest grossing U.S. law firm, said it will cut salaries for incoming associates by 20 percent. “In response to our clients’ feedback and concerns about driving down the cost of legal services, we wanted to send a clear message that we are listening,” firm managing partner Gregory Jordan said in a statement on Nov. 10. Reed Smith has offices in cities including Pittsburgh, London and New York. To contact the reporters on this story: Shobhana Chandra in Washington schandra1@bloomberg.net

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Dubai Ruler Says Bond Will Be `Well Received,’ Tells Critics to `Shut Up’

November 9, 2009

By Arif Sharif and Maher Chmaytelli Nov. 9 (Bloomberg) — Dubai’s second half of a $20 billion bond program will be “well received,” and those who doubt the unity of Dubai and Abu Dhabi should “shut up,” the emirate’s ruler Sheikh Mohammed Bin Rashid Al-Maktoum said. “The second tranche of the bond program will be well received, it will be widely subscribed and will be used directly to meet Dubai’s obligations in the next few years,” Sheikh Mohammed told an investors conference organized by Bank of America Merrill Lynch in Dubai today. Dubai, the second-biggest of seven states that make up the United Arab Emirates, raised $1.93 billion last month from the biggest sale of Islamic bonds in the Gulf Arab region this year. The $1.25 billion dollar-denominated portion of the bond traded at a yield of 6.42 percent today, compared with a 3.85 percent yield investors are seeking for a five-year Abu Dhabi bond. The sheikhdom set up the $20 billion support fund after the global credit crunch hurt its property, finance and tourism industries, leaving companies unable to raise debt as credit markets froze. The first $10 billion was raised by selling five- year bonds to the U.A.E. central bank in February, and some of the money went to property developers like Nakheel PJSC, which is building palm tree-shaped islands off Dubai’s coast. Dubai, Abu Dhabi The second half of Dubai’s bond program would attract “majority government and minority private sector in my opinion,” said Mohammed Alabbar , chairman of Emaar Properties PJSC, and a member of the Dubai Executive Council in an interview with CNN on Oct. 9. The bond may be issued in November, he said. Central Bank Governor Sultan bin Nasser al-Suwaidi said on July 15 that the U.A.E. may buy part of Dubai’s second bond offering. “Meaningful participation by the private sector would be a strong signal for Dubai that investor sentiment has improved,” said Tristan Cooper , a Dubai-based Middle East sovereign analyst at Moody’s Investors Service. “This provides a motivation for the Dubai government to get private investors involved even if it costs more than selling it all to the federal government.” Dubai allowed foreigners to buy property in some parts of the emirate in 2002, sparking a five-year building frenzy. The boom ended after the credit crisis crimped mortgage lending, forcing the emirate to look to Abu Dhabi, the U.A.E.’s capital and holder of 8 percent of global oil reserves, for support. “I assure you that we will be there for each other when we need it,” Sheikh Mohammed said, referring to the relationship between Dubai and Abu Dhabi. “I want to tell these people who nag about Dubai and Abu Dhabi to shut up.” Stocks Gain Dubai stocks extended gains after the ruler’s comments, climbing to the highest in a week. The DFM General Index added 1.4 percent, while Abu Dhabi’s measure rose 0.2 percent. Sheikh Mohammed’s statement “reiterates the strong link between Dubai, a non-oil state, and the important oil state of Abu Dhabi,” said Luis Costa , an emerging market debt strategist at Commerzbank AG in London. “Most investors are raising their expectations of net issuance out of the Middle East in 2010.” Dubai’s government borrowed $10 billion until last year and its state-related companies $70 billion to help diversify its economy. The emirate built a business park for financial service companies – which is home to the regional offices of Goldman Sachs Group Inc., Standard Chartered Plc, and HSBC Holdings Plc – as well as started a stocks, derivatives and energy exchange. The sheikhdom and its state-owned companies have to repay $15.8 billion of bonds and loans maturing this year, $9.2 billion in 2010, $19.8 billion in 2011 and $17.3 billion in the following year, according to a Deutsche Bank AG report in August. The government said yesterday it repaid a $1 billion civil aviation sukuk due Nov. 4. The seizure of credit markets sparked fears Dubai may not be able to refinance debt. Helps Sentiment The ruler’s comments “will help sentiment,” said Fadi Al Said , head of equities at ING Investment Management (Dubai) Ltd. “These strong statements coming from him directly are a clear message based on the success of the last sukuk issue. I think there will be a substantial portion that might get picked up by investors.” Dubai World, the state-owned holding company, is in talks with banks to reschedule at least $12 billion of debt, a person close to the talks said Sept. 14, speaking anonymously because the negotiations are private. Dubai World unit Nakheel must repay a $3.5 billion Islamic bond due at year-end. “Some may believe that Dubai could have acted faster in combating the impact” of the credit crisis, Sheikh Mohammed said. “We preferred to wait rather than rushing because we are keen to ensure strengthening our major enterprises and restructure them in a way that will have the momentum and the strength to cope with the realties of the new economy.” To contact the reporters on this story: Arif Sharif in Dubai at asharif2@bloomberg.net Maher Chmaytelli in Dubai at mchmaytelli@bloomberg.net or

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Fed Signals Return of U.S. Growth Insufficient to Withdraw Record Stimulus

September 23, 2009

By Scott Lanman Sept. 24 (Bloomberg) — The Federal Reserve signaled that the U.S. economy’s return to growth is insufficient to withdraw stimulus as officials seek to reduce the highest unemployment rate in a quarter century. While the economy has “picked up,” the central bank’s planned asset purchases will help ensure a “gradual return to higher levels of resource utilization,” the Fed’s Open Market Committee said yesterday. Policy makers committed to complete their $1.25 trillion in purchases of mortgage securities and extended the end-date of the program to March from December. “They’re going to be in that accommodative phase for a while,” said Vincent Reinhart , a former Fed monetary-affairs director who’s now a resident scholar at the American Enterprise Institute in Washington. The Fed’s “tactical goal isn’t just to get to the rate of growth of potential,” he said. “It’s to work down the level of slack.” The FOMC statement, while offering the most favorable economic outlook since Lehman Brothers Holdings Inc. failed a year ago, means Chairman Ben S. Bernanke may delay raising interest rates and shrinking the Fed’s $2.1 trillion balance sheet until he secures a recovery. Policy makers, as part of a unanimous decision, kept the main interest rate in a range of zero to 0.25 percent and reiterated that rates will stay low for an “extended period.” The central bank pledged to purchase “a total of” $1.25 trillion of mortgage debt, changing prior language saying it will buy “up to” that amount. Traders yesterday marked down expectations for Fed interest-rate increases next year, based on futures contracts on the Chicago Board of Trade. Stocks, Treasuries Treasuries rose yesterday, pushing the yield on the benchmark 10-year note down three basis points to 3.42 percent in New York, according to BGCantor Market Data. The Standard & Poor’s 500 Index lost 10.79, or 1 percent, to 1060.87, paring its gain this year to 17 percent. The FOMC said the economy showed signs of “substantial resource slack.” The unemployment rate rose to 9.7 percent last month, the highest since June 1983, when it reached 10.1 percent. Employers eliminated 216,000 jobs in August, the 20th straight month of losses, and the Fed acknowledged yesterday that businesses are “still cutting back on fixed investment and staffing, though at a slower pace.” Capacity utilization, the proportion of industrial volume in use, rose in August to 69.6 percent from 68.3 percent in June, its lowest level since record-keeping began in 1967. The figure averaged about 81 percent from 2005 to 2007. ‘Cost Pressures’ “Slack is important to their thinking about inflation and inflation expectations,” said Mark Spindel , chief investment officer at Potomac River Capital LLC in Washington, a hedge fund with about $100 million under management. “They are sending a clear message that rates will stay low for longer,” said Spindel, a former deputy treasurer at the World Bank’s International Finance Corp. The weakness in the economy is “likely to continue to dampen cost pressures” and keep inflation “subdued for some time,” policy makers said yesterday. Public expectations for price trends are “stable,” they said. At the same time, housing market has started to stabilize. Home prices rose 0.3 percent in July from the previous month, the Federal Housing Finance Agency said this week. Housing starts rose in August to the highest level in nine months. “Activity in the housing sector has increased,” the central bank said. ‘More Optimistic’ “They have gotten progressively more optimistic over the last several statements, and this is the most optimistic since the financial crisis intensified last September,” said Dean Maki , chief U.S. economist at Barclays Capital Inc. in New York. “The economic data will be improving quite sharply over the next few quarters,” said Maki, a former Fed researcher. Yesterday’s affirmation that the Fed would buy the full amount of mortgage backed securities eased concerns that any reduction of the program might undermine a recovery in the housing market. The Fed’s purchases of the securities have pushed down mortgage rates, helping spur demand for homes. “They probably recognize exiting is much more difficult than entering into the program,” said Torsten Slok , senior economist at Deutsche Bank AG in New York. “They’re very worried about what the reaction will be when it fades, so they’re pushing it into 2010,” he said. “For now, that’s pushed the problem ahead of them.” The average rate on a 30-year mortgage dropped to 5.04 percent in the week ending Sept. 17 from 5.07 percent the week before, according to mortgage buyer Freddie Mac. The Fed has announced $861.9 billion of mortgage-backed securities purchases and completed $685.1 billion. It’s bought $125.2 billion of agency debt and $289.2 billion of the planned purchases of $300 billion in Treasuries, which will end next month. The tapering in housing debt purchases will begin today, the New York Fed said in a separate statement after the meeting. To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net .

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King Sought $329 Billion of Asset Purchases in Bank of England Vote Defeat

August 19, 2009

By Brian Swint Aug. 19 (Bloomberg) — Bank of England Governor Mervyn King and two other policy makers were overruled in a push to expand the bank’s bond-purchase program to 200 billion pounds ($329 billion) as the majority favored a smaller amount. The pound fell after the nine-member Monetary Policy Committee said it voted 6-3 to raise the total they will spend by 50 billion pounds, according to minutes of the Aug. 6 decision released today in London. King, Timothy Besley and David Miles dissented in favor of a 75 billion-pound expansion. “All members agreed that substantial further asset purchases were needed over the next three months,” the minutes said. “The projections indicated that an increase in asset purchases of 50 billion pounds would probably need to be combined with a lower path of bank rate than implied by market yields to balance the risk of inflation around the 2 percent target in the medium term.” King, who has now been defeated three times as governor, said last week it’s “likely” that inflation will slow below 1 percent this year and won’t return to the goal until at least the end of 2012. Investors scaled back expectations for interest-rate increases next year after the comments. “I’m stunned,” said Colin Ellis , an economist at Daiwa Securities SMBC and a former Bank of England official. “This sends a clear message that the bank is willing to do whatever it takes, and that’s encouraging. It’s more likely they’ll make extra purchases than start tightening over the next year.” Pound Decline The pound dropped 0.4 percent to $1.64 after the Bank of England minutes. The yield on the 10-year benchmark U.K. government bond slid 6 basis point to 3.591 percent. An argument for a larger expansion of the bond purchases was that “insufficient stimulatory monetary policy” would harm confidence in the recovery. The risks of “another large stimulus might be less than the possible costs of acting too cautiously,” and the policy could be reversed if found to be “overly expansive,” the minutes said. The argument for a smaller extension included that “the most immediate downside risks to the economy seemed to have receded.” The effects of the purchases were “uncertain,” risked “unwarranted increases in some asset prices,” and an early unwinding of the program might “prompt a sharp rise in market interest rates that was unwarranted by the economic outlook,” the minutes said. Growth Return Policy maker Andrew Sentance wrote in an article for the Sunday Times on Aug. 16 that he expects a return to economic growth in the second half. U.K. services expanded the most in 1 1/2 years and manufacturing grew for the first time in more than a year in July, surveys show. “The more timely indicators of economic activity, including business surveys, indicated that output in the United Kingdom had probably stabilized in the middle of the year,” the minutes said. While that “indicated that the likelihood of the very worst near-term downside risks to activity had lessened, they shed little light on the key question of how durable the recovery would prove to be in the medium term.” Inflation unexpectedly held at 1.8 percent in July, instead of slowing as all economists in a Bloomberg News survey had predicted. Policy makers said that without more purchases, “nominal demand would likely be insufficient to prevent inflation remaining below the 2 percent target, perhaps substantially, throughout the forecast period.” To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net .

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