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Consumer Credit in U.S. Unexpectedly Increases for First Time in a Year

by on March 5, 2010

By Vincent Del Giudice March 5 (Bloomberg) — Borrowing by U.S. consumers unexpectedly rose in January for the first time in a year, led by auto and student loans, a sign Americans are gaining confidence in the economy. Consumer credit increased $5 billion, or 2.4 percent at an annual rate, the Federal Reserve said today in Washington. Borrowing dropped $4.6 billion in December, more than first estimated. The figures track credit card debt and non-revolving loans, including those for automobile purchases. Stocks rose after the report indicated that some banks may be more willing to lend as the economy recovers from the worst recession since World War II. Growth may get a bigger lift from consumer purchases that account for about 70 percent of the economy when companies start to hire. “Spending is holding up,” said David Wyss , chief economist at Standard & Poor’s in New York. “People are feeling a little bit more comfortable. They’re sticking their heads out of the shell a little more.” The economy lost 36,000 jobs in February, less than anticipated, after a decline of 26,000 a month earlier even as snowstorms in parts of the nation forced some employers to temporarily close, Labor Department figures showed earlier today. The unemployment rate held at 9.7 percent. Stocks gained for a sixth day and Treasury securities fell after a smaller-than-estimated loss of jobs in February. The Standard & Poor’s 500 Index rose 1.4 percent to 1,138.70 at 4:46 p.m. in New York. The 10-year Treasury note declined, pushing up the yield eight basis points to 3.68 percent. Decline Was Forecast Economists had forecast consumer credit would drop by $4.5 billion in January after a previously reported $1.7 billion decrease in December, according to the median of 33 estimates in a Bloomberg News survey. Projections ranged from a decrease of $12.3 billion to an increase of $2.4 billion. The January gain in credit was the biggest since July 2008, according to the Fed’s data. Non-revolving debt , including automobile and mobile-home loans, rose by $6.6 billion after a $4.9 billion gain. The Fed’s report doesn’t cover borrowing secured by real estate. Auto sales in the U.S. cooled in January to a seasonally adjusted annual rate of 10.8 million, according to industry statistics. The pace slowed in February to 10.36 million. Non-Revolving Loans Non-revolving credit, on an unadjusted basis, rose $10.3 billion at commercial banks. Federal government non-revolving loans, such as those for student loans, also increased an unadjusted $10.3 billion. The increase in student loans suggests people “are going back to school to ride it out because of the difficult labor market,” said Michael Feroli , chief U.S. economist at JPMorgan Chase & Co. in New York. Revolving debt , such as credit cards, fell by $1.7 billion in January, according to the Fed’s statistics. Revolving credit has fallen 16 straight months, the longest series of declines since the Fed began keeping those records in 1968. The January drop was the smallest since July. Consumer spending during the final three months of last year rose at a 1.7 percent annual rate following an increase of 2.8 percent in the third quarter, Commerce Department figures showed on Feb. 26. Spending contributed to economic growth of 5.9 percent at annual rate, the best performance in more than six years. A gain in February sales at retailers open at least a year indicates sustained spending by consumers. Comparable-store sales climbed 4.1 percent, according to Retail Metrics Inc. It was the sixth straight gain and the biggest in 27 months. Abercrombie & Fitch Co. said yesterday that sales rose 5 percent, while Macy’s Inc., the second-biggest U.S. department- store company, reported a 3.7 percent gain. “The consumer is starting to come out of hibernation and feel better about their situation,” Ken Perkins, president of Swampscott, Massachusetts-based Retail Metrics, said yesterday in an interview. More than three-fourths of retailers in the Retail Metrics survey beat estimates, he said. To contact the reporter on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net

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U.S. Consumer Credit Increases for First Time in a Year in Confidence Sign

by on March 5, 2010

By Vincent Del Giudice March 5 (Bloomberg) — Borrowing by U.S. consumers unexpectedly rose in January for the first time in a year, led by auto and student loans, a sign Americans are gaining confidence in the economy. Consumer credit increased $5 billion, or 2.4 percent at an annual rate, the Federal Reserve said today in Washington. Borrowing dropped $4.6 billion in December, more than first estimated. The figures track credit card debt and non-revolving loans, including those for automobile purchases. Stocks rose after the report indicated that some banks may be more willing to lend as the economy recovers from the worst recession since World War II. Growth may get a bigger lift from consumer purchases that account for about 70 percent of the economy when companies start to hire. “Spending is holding up,” said David Wyss , chief economist at Standard & Poor’s in New York. “People are feeling a little bit more comfortable. They’re sticking their heads out of the shell a little more.” The economy lost 36,000 jobs in February, less than anticipated, after a decline of 26,000 a month earlier even as snowstorms in parts of the nation forced some employers to temporarily close, Labor Department figures showed earlier today. The unemployment rate held at 9.7 percent. Stocks gained for a sixth day and Treasury securities fell after a smaller-than-estimated loss of jobs in February. The Standard & Poor’s 500 Index rose 1.4 percent to 1,138.70 at 4:46 p.m. in New York. The 10-year Treasury note declined, pushing up the yield eight basis points to 3.68 percent. Decline Was Forecast Economists had forecast consumer credit would drop by $4.5 billion in January after a previously reported $1.7 billion decrease in December, according to the median of 33 estimates in a Bloomberg News survey. Projections ranged from a decrease of $12.3 billion to an increase of $2.4 billion. The January gain in credit was the biggest since July 2008, according to the Fed’s data. Non-revolving debt , including automobile and mobile-home loans, rose by $6.6 billion after a $4.9 billion gain. The Fed’s report doesn’t cover borrowing secured by real estate. Auto sales in the U.S. cooled in January to a seasonally adjusted annual rate of 10.8 million, according to industry statistics. The pace slowed in February to 10.36 million. Non-Revolving Loans Non-revolving credit, on an unadjusted basis, rose $10.3 billion at commercial banks. Federal government non-revolving loans, such as those for student loans, also increased an unadjusted $10.3 billion. The increase in student loans suggests people “are going back to school to ride it out because of the difficult labor market,” said Michael Feroli , chief U.S. economist at JPMorgan Chase & Co. in New York. Revolving debt , such as credit cards, fell by $1.7 billion in January, according to the Fed’s statistics. Revolving credit has fallen 16 straight months, the longest series of declines since the Fed began keeping those records in 1968. The January drop was the smallest since July. Consumer spending during the final three months of last year rose at a 1.7 percent annual rate following an increase of 2.8 percent in the third quarter, Commerce Department figures showed on Feb. 26. Spending contributed to economic growth of 5.9 percent at annual rate, the best performance in more than six years. A gain in February sales at retailers open at least a year indicates sustained spending by consumers. Comparable-store sales climbed 4.1 percent, according to Retail Metrics Inc. It was the sixth straight gain and the biggest in 27 months. Abercrombie & Fitch Co. said yesterday that sales rose 5 percent, while Macy’s Inc., the second-biggest U.S. department- store company, reported a 3.7 percent gain. “The consumer is starting to come out of hibernation and feel better about their situation,” Ken Perkins, president of Swampscott, Massachusetts-based Retail Metrics, said yesterday in an interview. More than three-fourths of retailers in the Retail Metrics survey beat estimates, he said. To contact the reporter on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net

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U.K. Conservatives’ Lead Narrows in Poll, Pointing to Political Deadlock

March 1, 2010

By Thomas Penny March 2 (Bloomberg) — The Conservatives’ lead over Prime Minister Gordon Brown’s Labour Party narrowed to five percentage points in a poll published late yesterday, adding to signs Britain may have its first minority government since 1974. The ComRes Ltd. survey for the Independent newspaper showed David Cameron ’s Conservatives fell one point from a month earlier to 37 percent and Labour gained one point to 32 percent. The Liberal Democrats were unchanged with 19 percent. The pound yesterday slid below $1.50 for the first time in almost 10 months amid speculation that neither Labour nor the Conservatives will get an outright majority of the seats in Parliament at the general election due by June, hampering efforts to cut the country’s record budget deficit . The uneven distribution of votes across districts means if people voted in line with the ComRes poll Labour would get 294 seats to the Conservatives’ 277, with no one party in overall control, John Curtice , professor of politics at Strathclyde University in Scotland, said in an e-mailed statement. The election race has tightened over the past month after the economy emerged from recession and Conservative warnings of years of “austerity” to tackle the deficit frightened some voters. Brown says Cameron’s plans to begin spending cuts this year would plunge the economy into a “double-dip recession.” The poll, which follows a YouGov survey published in the Sunday Times on Feb. 28 that gave the Conservatives 37 percent and Labour 35 percent, puts Brown and Cameron neck and neck on the economy. When asked who had “the right skills to lead Britain back to economic health,” 43 percent said Cameron and 42 percent said Brown. ComRes interviewed 1,005 adults by telephone between Feb. 26 and Feb. 28. No margin of error was given. To contact the reporter on this story: Thomas Penny in London at tpenny@bloomberg.net

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Japan Consumer Prices Fall 1.3%, Adding to Pressure to Tackle Deflation

February 25, 2010

By Mayumi Otsuma (Corrects number of months prices fell in first paragraph.) Feb. 26 (Bloomberg) — Japan’s consumer prices fell for an 11th month in January, putting renewed pressure on policy makers to eradicate deflation that hampers the recovery. Prices excluding fresh food slid 1.3 percent from a year earlier, the same pace as December, the statistics bureau said today in Tokyo. The figure matched the median estimate of 29 economists surveyed by Bloomberg News. Bank of Japan Deputy Governor Hirohide Yamaguchi said this week that prices may not be improving as quickly as he had expected. Finance Minister Naoto Kan has urged the central bank to do more to beat deflation as the government’s ability to spur the economy is constrained by the world’s largest debt . “Prices won’t stop falling until the recovery spreads to households,” Hiroshi Watanabe , a senior economist at Daiwa Institute of Research, said before the report was published. “Japan’s deflation will continue through fiscal 2012,” beyond the BOJ’s projections, he said. The yen traded at 89.27 per dollar at 8:36 a.m. in Tokyo from 89.22 before the report. 　 Unemployment and falling wages are discouraging spending by households and prompting companies to make discounts. Daiei Inc. this month cut prices of clothing and household goods as much as 30 percent, including women’s suits and desks for children, to spur sales before Japan’s school year starts in April. Costlier Oil Price declines have eased since peaking at 2.4 percent last August, largely because of costlier crude oil. Excluding energy and food, prices slumped 1.2 percent in January from a year earlier, matching the previous month’s decline as the sharpest since records began in 1971. Yamaguchi said this week that the moderation of price declines “seems to have been somewhat slower” given improvements in the economy. He said the central bank is “always prepared to implement appropriate measures at an appropriate timing.” Kan repeated this week that he wants the central bank to work with the government to beat deflation and “do what it can.” The bank unveiled a 10 trillion yen ($112 billion) lending program for commercial banks in December after the yen surged to a 14-year high against the dollar and politicians including Kan urged action. BOJ Action “It’s highly probable that the BOJ will act to ease monetary policy further should financial markets turn volatile suddenly,” said Kenro Kawano , a debt strategist at Credit Suisse Group AG in Tokyo. Bank of Japan policy makers forecast last month that core prices will decline 0.5 percent in the year ending March 2011 and 0.2 percent in the following 12 months. They haven’t made forecasts beyond then. Exports and production, which have fueled Japan’s rebound, are “bound to slow down” and the economy’s momentum will temporarily decrease, Yamaguchi said on Feb. 24. Tokyo core consumer prices dropped 1.8 percent in February from a year earlier, today’s report showed. Figures for the capital city are released a month earlier than nationwide data, making them a harbinger of price trends. “Downward pressure on prices will persist” as supply continues to outstrip demand, said Yoshiki Shinke , a senior economist at Daiichi Life Research Institute in Tokyo. To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net

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Japan Consumer Prices Fall 1.3%, Adding to Pressure to Tackle Deflation

February 25, 2010

By Mayumi Otsuma (Corrects number of months prices fell in first paragraph.) Feb. 26 (Bloomberg) — Japan’s consumer prices fell for an 11th month in January, putting renewed pressure on policy makers to eradicate deflation that hampers the recovery. Prices excluding fresh food slid 1.3 percent from a year earlier, the same pace as December, the statistics bureau said today in Tokyo. The figure matched the median estimate of 29 economists surveyed by Bloomberg News. Bank of Japan Deputy Governor Hirohide Yamaguchi said this week that prices may not be improving as quickly as he had expected. Finance Minister Naoto Kan has urged the central bank to do more to beat deflation as the government’s ability to spur the economy is constrained by the world’s largest debt . “Prices won’t stop falling until the recovery spreads to households,” Hiroshi Watanabe , a senior economist at Daiwa Institute of Research, said before the report was published. “Japan’s deflation will continue through fiscal 2012,” beyond the BOJ’s projections, he said. The yen traded at 89.27 per dollar at 8:36 a.m. in Tokyo from 89.22 before the report. 　 Unemployment and falling wages are discouraging spending by households and prompting companies to make discounts. Daiei Inc. this month cut prices of clothing and household goods as much as 30 percent, including women’s suits and desks for children, to spur sales before Japan’s school year starts in April. Costlier Oil Price declines have eased since peaking at 2.4 percent last August, largely because of costlier crude oil. Excluding energy and food, prices slumped 1.2 percent in January from a year earlier, matching the previous month’s decline as the sharpest since records began in 1971. Yamaguchi said this week that the moderation of price declines “seems to have been somewhat slower” given improvements in the economy. He said the central bank is “always prepared to implement appropriate measures at an appropriate timing.” Kan repeated this week that he wants the central bank to work with the government to beat deflation and “do what it can.” The bank unveiled a 10 trillion yen ($112 billion) lending program for commercial banks in December after the yen surged to a 14-year high against the dollar and politicians including Kan urged action. BOJ Action “It’s highly probable that the BOJ will act to ease monetary policy further should financial markets turn volatile suddenly,” said Kenro Kawano , a debt strategist at Credit Suisse Group AG in Tokyo. Bank of Japan policy makers forecast last month that core prices will decline 0.5 percent in the year ending March 2011 and 0.2 percent in the following 12 months. They haven’t made forecasts beyond then. Exports and production, which have fueled Japan’s rebound, are “bound to slow down” and the economy’s momentum will temporarily decrease, Yamaguchi said on Feb. 24. Tokyo core consumer prices dropped 1.8 percent in February from a year earlier, today’s report showed. Figures for the capital city are released a month earlier than nationwide data, making them a harbinger of price trends. “Downward pressure on prices will persist” as supply continues to outstrip demand, said Yoshiki Shinke , a senior economist at Daiichi Life Research Institute in Tokyo. To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net

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Japan Consumer Prices Fall 1.3%, Adding to Pressure to Tackle Deflation

February 25, 2010

By Mayumi Otsuma (Corrects number of months prices fell in first paragraph.) Feb. 26 (Bloomberg) — Japan’s consumer prices fell for an 11th month in January, putting renewed pressure on policy makers to eradicate deflation that hampers the recovery. Prices excluding fresh food slid 1.3 percent from a year earlier, the same pace as December, the statistics bureau said today in Tokyo. The figure matched the median estimate of 29 economists surveyed by Bloomberg News. Bank of Japan Deputy Governor Hirohide Yamaguchi said this week that prices may not be improving as quickly as he had expected. Finance Minister Naoto Kan has urged the central bank to do more to beat deflation as the government’s ability to spur the economy is constrained by the world’s largest debt . “Prices won’t stop falling until the recovery spreads to households,” Hiroshi Watanabe , a senior economist at Daiwa Institute of Research, said before the report was published. “Japan’s deflation will continue through fiscal 2012,” beyond the BOJ’s projections, he said. The yen traded at 89.27 per dollar at 8:36 a.m. in Tokyo from 89.22 before the report. 　 Unemployment and falling wages are discouraging spending by households and prompting companies to make discounts. Daiei Inc. this month cut prices of clothing and household goods as much as 30 percent, including women’s suits and desks for children, to spur sales before Japan’s school year starts in April. Costlier Oil Price declines have eased since peaking at 2.4 percent last August, largely because of costlier crude oil. Excluding energy and food, prices slumped 1.2 percent in January from a year earlier, matching the previous month’s decline as the sharpest since records began in 1971. Yamaguchi said this week that the moderation of price declines “seems to have been somewhat slower” given improvements in the economy. He said the central bank is “always prepared to implement appropriate measures at an appropriate timing.” Kan repeated this week that he wants the central bank to work with the government to beat deflation and “do what it can.” The bank unveiled a 10 trillion yen ($112 billion) lending program for commercial banks in December after the yen surged to a 14-year high against the dollar and politicians including Kan urged action. BOJ Action “It’s highly probable that the BOJ will act to ease monetary policy further should financial markets turn volatile suddenly,” said Kenro Kawano , a debt strategist at Credit Suisse Group AG in Tokyo. Bank of Japan policy makers forecast last month that core prices will decline 0.5 percent in the year ending March 2011 and 0.2 percent in the following 12 months. They haven’t made forecasts beyond then. Exports and production, which have fueled Japan’s rebound, are “bound to slow down” and the economy’s momentum will temporarily decrease, Yamaguchi said on Feb. 24. Tokyo core consumer prices dropped 1.8 percent in February from a year earlier, today’s report showed. Figures for the capital city are released a month earlier than nationwide data, making them a harbinger of price trends. “Downward pressure on prices will persist” as supply continues to outstrip demand, said Yoshiki Shinke , a senior economist at Daiichi Life Research Institute in Tokyo. To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net

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U.S. Consumer Prices Increase Less Than Forecast in Sign Inflation Subdued

February 19, 2010

By Timothy R. Homan Feb. 19 (Bloomberg) — The cost of living in the U.S. rose in January less than anticipated and a measure of prices excluding food and fuel fell for the first time since 1982, indicating the recovery is showing few signs of inflation. The consumer-price index increased 0.2 percent for a fifth straight month, led by higher fuel costs, Labor Department figures showed today in Washington. Excluding energy and food, the so-called core index unexpectedly fell 0.1 percent, reflecting a drop in new-car prices, clothing and shelter. Companies may have little success raising prices with unemployment projected to end the year at 9.5 percent. The yield on the 10-year Treasury note fell after the report showed restrained inflation will allow Federal Reserve policy makers to keep interest rates close to zero to help support the recovery. “The broader picture remains one of subdued inflation, and this gives the Fed ample reason to stay on the sidelines until at least very late in the year,” said Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, who forecast no change in the core index. Economists forecast the consumer-price index would rise 0.3 percent in January from a month earlier, according to the median of 78 projections in a Bloomberg News survey. Estimates ranged from no change to a gain of 0.6 percent. The core index was forecast to rise 0.1 percent, according to the Bloomberg survey. The decline in the core was the first since December 1982. Treasuries, Stocks Treasury prices rose, pushing down the yield on the 10-year note one basis point to 3.79 percent at 8:42 a.m. in New York. Stock-index futures maintained losses, with futures on the Standard & Poor’s 500 Index expiring in March declining 0.4 percent to 1,100.7. Energy costs jumped 2.8 percent in January, led by higher prices for fuel oil and gasoline. The cost of crude oil on the New York Mercantile Exchange averaged $78.40 last month, up from $74.60 in December. Gasoline prices increased 4.4 percent, the most since August. The cost at the pump rose 10 cents to $2.71 a gallon on average in January, from $2.61 the previous month, according to AAA. The price has since retreated. Compared with January 2009, the CPI rose 2.6 percent after climbing 2.7 percent the previous month. The year-over-year gains in the consumer price index have been getting bigger as crude oil prices increase from an almost five-year low in December 2008. Food, Shelter Food costs, which account for about 15 percent of the CPI, increased 0.2 percent in January, reflecting higher prices for dairy products, meat and fruits and vegetables. Shelter costs that include lodging away from home and rental properties fell 0.5 percent. Owners-equivalent rent, one of the categories used to track rental prices, fell 0.1 percent last month after no change. New-car prices fell 0.5 percent in January, the most since August, and apparel costs dropped 0.1 percent. Medical-care costs rose 0.5 percent in January, the most in two years. The Fed’s long-term forecast for its preferred measure of inflation, the Commerce Department’s index tied to consumer spending and excluding food and fuel, calls for gains in a range of 1.5 percent to 2 percent. That gauge, which is typically lower than the CPI, was up 1.5 percent in the 12 months ended in December. ‘Subdued Inflation’ Fed Chairman Ben S. Bernanke said last week that the central bank expects economic conditions, including “subdued inflation trends,” that may warrant an “exceptionally low” benchmark interest rate “for an extended period.” Central bank policy makers last month “agreed that underlying inflation currently was subdued and was likely to remain so for some time,” according to minutes of the Jan. 26- 27 meeting released this week. Consumers in the Reuters/University of Michigan preliminary survey, released Feb. 12, said they expect an inflation rate of 2.8 percent over the next five years. Those figures are tracked by Fed policy makers. The CPI is the broadest of the three monthly price gauges from the Labor Department because it includes goods and services. Reports this week showed 1.4 percent gains in both the cost of imported goods and wholesale prices in January. Both increases were more than anticipated. Almost 60 percent of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets. Airline fares fell 2.5 percent in January, the most since February 2009. Companies Reluctant Even with higher production and material costs, U.S. companies are reluctant to pass on the expenses to consumers. Wal-Mart, the world’s largest retailer, reported fourth-quarter sales yesterday that trailed its projection after cutting grocery and electronic prices. The Bentonville, Arkansas-based company reduced the cost of laptop computers, along with turkeys and cranberry sauce for holiday meals, to attract shoppers living paycheck to paycheck. “We see the influence of the paycheck cycle as pronounced now as it’s been in the past,” Chief Financial Officer Tom Schoewe said on a call with reporters. To contact the reporters on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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U.S. Consumer Prices Rose 0.2% in January, Less Than Economists Forecast

February 19, 2010

By Timothy R. Homan Feb. 19 (Bloomberg) — The cost of living in the U.S. rose in January less than anticipated and a measure of prices excluding food and fuel fell for the first time since 1982, indicating the recovery is showing few signs of inflation. The consumer-price index increased 0.2 percent for a fifth straight month, led by higher fuel costs, Labor Department figures showed today in Washington. Excluding energy and food, the so-called core index unexpectedly fell 0.1 percent, reflecting a drop in new-car prices, clothing and shelter. Companies may have little success raising prices with unemployment projected to end the year at 9.5 percent. Subdued inflation will allow Federal Reserve policy makers to keep interest rates close to zero to help support the recovery. “Even though the economy appears to be entering a sustained recovery, it will take several quarters for inflation to accelerate in response,” Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, said before the report. “We expect core inflation to begin to firm in 2011.” Economists forecast the consumer-price index would rise 0.3 percent in January from a month earlier, according to the median of 78 projections in a Bloomberg News survey. Estimates ranged from no change to a gain of 0.6 percent. The core index was forecast to rise 0.1 percent, according to the Bloomberg survey. The decline in the core was the first since December 1982. Energy costs jumped 2.8 percent in January, led by higher prices for fuel oil and gasoline. The cost of crude oil on the New York Mercantile Exchange averaged $78.40 last month, up from $74.60 in December. Gasoline Prices Gasoline prices increased 4.4 percent, the most since August. The cost at the pump rose 10 cents to $2.71 a gallon on average in January, from $2.61 the previous month, according to AAA. The price has since retreated. Compared with January 2009, the CPI rose 2.6 percent after climbing 2.7 percent the previous month. The year-over-year gains in the consumer price index have been getting bigger as crude oil prices increase from an almost five-year low in December 2008. Food costs, which account for about 15 percent of the CPI, increased 0.2 percent in January, reflecting higher prices for dairy products, meat and fruits and vegetables. Rents of primary residences was unchanged. Owners- equivalent rent, one of the categories used to track rental prices, fell 0.1 percent last month after no change. Cars and Clothes New-car prices fell 0.5 percent in January, the most since August, and apparel costs dropped 0.1 percent. Medical-care costs rose 0.5 percent in January, the most in two years. The Fed’s long-term forecast for its preferred measure of inflation, the Commerce Department’s index tied to consumer spending and excluding food and fuel, calls for gains in a range of 1.5 percent to 2 percent. That gauge, which is typically lower than the CPI, was up 1.5 percent in the 12 months ended in December. Fed Chairman Ben S. Bernanke said last week that the central bank expects economic conditions, including “subdued inflation trends,” that may warrant an “exceptionally low” benchmark interest rate “for an extended period.” Central bank policy makers last month “agreed that underlying inflation currently was subdued and was likely to remain so for some time,” according to minutes of the Jan. 26- 27 meeting released this week. Consumers in the Reuters/University of Michigan preliminary survey, released Feb. 12, said they expect an inflation rate of 2.8 percent over the next five years. Those figures are tracked by Fed policy makers. Broadest Measure The CPI is the broadest of the three monthly price gauges from the Labor Department because it includes goods and services. Reports this week showed 1.4 percent gains in both the cost of imported goods and wholesale prices in January. Both increases were more than anticipated. Almost 60 percent of the CPI covers prices consumers pay for services ranging from medical visits to airline fares and movie tickets. Airline fares fell 2.5 percent in January, the most since February 2009. Even with higher production and material costs, U.S. companies are reluctant to pass on the expenses to consumers. Wal-Mart, the world’s largest retailer, reported fourth-quarter sales yesterday that trailed its projection after cutting grocery and electronic prices. The Bentonville, Arkansas-based company reduced the cost of laptop computers, along with turkeys and cranberry sauce for holiday meals, to attract shoppers living paycheck to paycheck. “We see the influence of the paycheck cycle as pronounced now as it’s been in the past,” Chief Financial Officer Tom Schoewe said on a call with reporters. To contact the reporters on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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Foreign Demand for U.S. Financial Assets Slowed in December on China Sales

February 16, 2010

By Vincent Del Giudice Feb. 16 (Bloomberg) — International demand for long-term U.S. stocks, bonds and financial assets grew at a slower pace in December than a month earlier, as China sold U.S. government securities, a U.S. Treasury Department report showed. Net buying of long-term equities, notes and bonds totaled $63.3 billion for the month, compared with net purchases of $126.4 billion in November, the Treasury said in Washington. Including short-term securities such as stock swaps, foreigners purchased a net $60.9 billion in December, compared with net buying of $30.7 the previous month. China has questioned the dollar’s dominance as the world’s reserve currency. In the U.S., spending to avert an economic collapse sent the federal budget deficit above $1 trillion for the first time ever in fiscal 2009, and economists said that may deter investment from abroad. “The U.S. may not be able to get its government spending under control,” said Chris Rupkey , chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, before today’s report. “But it is still seen as an island of relative safety.” China was a net seller of U.S. Treasuries for a second straight month, after sales of $34.2 billion, the report showed. Japan replaced China as the top foreign holder of U.S. government debt, after net purchases of $11.5 billion raised its total to $768.8 billion. Economists surveyed by Bloomberg News ahead of today’s survey projected long-term U.S. financial assets would show a net increase of $35.4 billion in December. Estimates ranged from $15 billion to $68.2 billion, according to the seven forecasts compiled in the survey. The Standard & Poor’s 500 Index rose 1.8 percent in December and the Dollar Index , a gauge of its strength against six other major currencies, jumped 4 percent. U.S. Treasuries lost 2.64 percent in the final month of 2009, according to an index compiled by Bank of America Corp.’s Merrill Lynch unit. The Treasury’s reporting on long-term securities captures international purchases of government notes and bonds, stocks, corporate debt and securities issued by U.S. agencies such as Fannie Mae and Freddie Mac , which buy home mortgages. Foreign purchases of Treasury notes and bonds rose to a net $69.9 billion in December compared with purchases of $117.9 billion in November. Foreign demand for U.S. agency debt from companies such as Fannie Mae and Freddie Mac registered net buying of $49 million in December after buying of $5.9 billion. Net foreign purchases of equities were $20.1 billion in December after net purchases of $9.7 billion in November. Investors sold a net $7.9 billion in U.S. corporate debt in December, the seventh straight month of net sales. To contact the reporters on this story: Vincent Del Giudice in Washington at Or vdelgiudice@bloomberg.net

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U.S. Consumer Credit Falls for 11th Straight Month Amid Lack of Job Growth

February 5, 2010

By Vincent Del Giudice Feb. 5 (Bloomberg) — Consumer credit in the U.S. declined in December for an 11th straight month, signaling a lack of job growth and limited bank lending are discouraging borrowing. The $1.7 billion drop in credit , less than economists anticipated, followed a record $21.8 billion slump in November that was larger than first estimated, according to a Federal Reserve report released today in Washington. The figures track credit card debt and non-revolving loans, such as those to buy autos. The series of declines is the longest on record and indicates consumer spending, which accounts for about 70 percent of the economy, will be restrained with Americans unwilling to take on more debt until hiring picks up. Fed policy makers, citing “tight credit” by banks, held the rate for overnight loans among banks near zero at their meeting last week. “The jobs situation is unknown and people are not going to go out and borrow when they are worried,” Win Thin , senior currency strategist at Brown Brothers Harriman & Co. in New York, said before the report. The drop in credit is “both a supply and demand problem,” he said. The economy unexpectedly lost 20,000 jobs in January after a 150,000 decline a month earlier, figures from the Labor Department in Washington showed earlier today. Revisions to previous data increased the number of jobs lost in the recession to 8.4 million. Economists had forecast consumer credit would drop by $10 billion in December, according to the median of 33 estimates in a Bloomberg News survey. Projections ranged from a decline of $13 billion to an increase of $5 billion. The Fed initially reported that consumer credit plunged $17.5 billion in November. Credit Cards Revolving debt , such as credit cards, fell by $8.5 billion in December, according to the Fed’s statistics. Revolving credit has decreased 15 straight months, the longest series of declines since the Fed began keeping those records in 1968. Non-revolving debt , including auto loans and mobile-home loans, rose by $6.8 billion as car sales increased during the month. The Fed’s report doesn’t cover borrowing secured by real estate. Auto sales in the U.S. increased in December to a seasonally adjusted annual rate of 11.23 million, the strongest since 14.09 million in August, when Americans took advantage of government incentives. The pace slowed last month, to 10.8 million. Consumer spending in the fourth quarter increased at a 2 percent annual rate after a 2.8 percent pace in the prior three months, Commerce Department figures showed on Jan. 29. The gain contributed to economic growth of 5.7 percent at an annual rate, the fastest in six years, from October through December. Lending Standards A Fed report on Feb. 1 showed fewer banks tightened standards for loans to consumers and companies last quarter as the economy improved. Banks continued to tighten the terms of loans they did make, and demand for both business and household loans weakened further over the past three months, the Fed said in its quarterly survey of senior loan officers. There is some indication Americans are getting their balance sheets in better order, and today’s jobs report produced some signs the labor market may be poised to climb out of its deepest slump since World War II. The unemployment rate fell 9.7 percent in January, the lowest since August, and manufacturers hired for the first time in three years, Labor Department figures showed. Credit-card delinquencies fell in December, Moody’s Investors Service reported Jan. 25. Card Issuers All of the “Big-6” U.S. card issuers, including Bank of America Corp., Citigroup Inc. and American Express Co., reported fewer early-stage delinquencies. JPMorgan Chase & Co., the nation’s biggest card lender, was the only one to report higher overall late loans due to a “payment holiday” the company offered customers. “We still face the challenge of high unemployment levels, depressed real estate values and shrunken household balance sheets, but the overall economy and our company are in stronger shape than they were a year ago,” Kenneth I. Chenault , chief executive officer of American Express , said Jan. 21 in a press release. New York-based AmEx is the biggest U.S. credit-card issuer by purchases. “While the economic recovery now under way is likely to be modest, we expect it to continue,” Chenault said. Consumer spending is also being threatened by rising home foreclosures that are projected to reach 3 million this year compared with a record 2.82 million last year, according to Irvine, California-based data provider RealtyTrac Inc. To contact the reporter on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net

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U.S. Consumer Credit Falls for 11th Straight Month Amid Lack of Job Growth

February 5, 2010

By Vincent Del Giudice Feb. 5 (Bloomberg) — Consumer credit in the U.S. declined in December for an 11th straight month, signaling a lack of job growth and limited bank lending are discouraging borrowing. The $1.7 billion drop in credit , less than economists anticipated, followed a record $21.8 billion slump in November that was larger than first estimated, according to a Federal Reserve report released today in Washington. The figures track credit card debt and non-revolving loans, such as those to buy autos. The series of declines is the longest on record and indicates consumer spending, which accounts for about 70 percent of the economy, will be restrained with Americans unwilling to take on more debt until hiring picks up. Fed policy makers, citing “tight credit” by banks, held the rate for overnight loans among banks near zero at their meeting last week. “The jobs situation is unknown and people are not going to go out and borrow when they are worried,” Win Thin , senior currency strategist at Brown Brothers Harriman & Co. in New York, said before the report. The drop in credit is “both a supply and demand problem,” he said. The economy unexpectedly lost 20,000 jobs in January after a 150,000 decline a month earlier, figures from the Labor Department in Washington showed earlier today. Revisions to previous data increased the number of jobs lost in the recession to 8.4 million. Economists had forecast consumer credit would drop by $10 billion in December, according to the median of 33 estimates in a Bloomberg News survey. Projections ranged from a decline of $13 billion to an increase of $5 billion. The Fed initially reported that consumer credit plunged $17.5 billion in November. Credit Cards Revolving debt , such as credit cards, fell by $8.5 billion in December, according to the Fed’s statistics. Revolving credit has decreased 15 straight months, the longest series of declines since the Fed began keeping those records in 1968. Non-revolving debt , including auto loans and mobile-home loans, rose by $6.8 billion as car sales increased during the month. The Fed’s report doesn’t cover borrowing secured by real estate. Auto sales in the U.S. increased in December to a seasonally adjusted annual rate of 11.23 million, the strongest since 14.09 million in August, when Americans took advantage of government incentives. The pace slowed last month, to 10.8 million. Consumer spending in the fourth quarter increased at a 2 percent annual rate after a 2.8 percent pace in the prior three months, Commerce Department figures showed on Jan. 29. The gain contributed to economic growth of 5.7 percent at an annual rate, the fastest in six years, from October through December. Lending Standards A Fed report on Feb. 1 showed fewer banks tightened standards for loans to consumers and companies last quarter as the economy improved. Banks continued to tighten the terms of loans they did make, and demand for both business and household loans weakened further over the past three months, the Fed said in its quarterly survey of senior loan officers. There is some indication Americans are getting their balance sheets in better order, and today’s jobs report produced some signs the labor market may be poised to climb out of its deepest slump since World War II. The unemployment rate fell 9.7 percent in January, the lowest since August, and manufacturers hired for the first time in three years, Labor Department figures showed. Credit-card delinquencies fell in December, Moody’s Investors Service reported Jan. 25. Card Issuers All of the “Big-6” U.S. card issuers, including Bank of America Corp., Citigroup Inc. and American Express Co., reported fewer early-stage delinquencies. JPMorgan Chase & Co., the nation’s biggest card lender, was the only one to report higher overall late loans due to a “payment holiday” the company offered customers. “We still face the challenge of high unemployment levels, depressed real estate values and shrunken household balance sheets, but the overall economy and our company are in stronger shape than they were a year ago,” Kenneth I. Chenault , chief executive officer of American Express , said Jan. 21 in a press release. New York-based AmEx is the biggest U.S. credit-card issuer by purchases. “While the economic recovery now under way is likely to be modest, we expect it to continue,” Chenault said. Consumer spending is also being threatened by rising home foreclosures that are projected to reach 3 million this year compared with a record 2.82 million last year, according to Irvine, California-based data provider RealtyTrac Inc. To contact the reporter on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net

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Stocks Rise as Commodities Rally; Australian Dollar Falls on Rate Surprise

February 2, 2010

By Justin Carrigan Feb. 2 (Bloomberg) — The Australian dollar dropped after the central bank unexpectedly left interest rates unchanged. European stocks and U.S. futures rose, while German bunds led government bonds lower. Australia’s currency weakened against all 16 of its most- traded peers tracked by Bloomberg as of 10:10 a.m. in London. Europe’s Dow Jones Stoxx 600 Index advanced 0.5 percent. Futures on the Standard & Poor’s 500 Index climbed 0.3 percent. The Reserve Bank of Australia left its key rate at 3.75 percent, defying the forecasts of all 20 analysts in a Bloomberg survey and signaling policy makers want to gauge the strength of the recovery before raising borrowing costs again. Economists anticipate that the European Central Bank and the Bank of England will keep borrowing costs unchanged when they meet later this week. “The fact that the Bank of Australia kept rates on hold against all expectations should be seen as a reality check that central banks are not in to strangle economies even if they are pushing banks to lend,” Simon Quijano-Evans , a strategist at Credit Agricole Cheuvreux in Vienna, wrote in a research note. The Aussie dropped 1.3 percent versus the U.S. dollar and the yen. The dollar was little changed near a seven-month high against the euro. Stimulus Withdrawal Central banks around the world are weighing how soon to withdraw economic-stimulus measures and raise interest rates from record lows. The Bank of England will decide Feb. 4 whether to increase a 200 billion-pound ($319 billion) program of asset purchases designed to revive the economy. The MSCI World Index of 23 developed nations’ stocks added 0.5 percent. The MSCI Asia Pacific Index gained the most in two weeks after U.S. manufacturing expanded more than estimated. Canon Inc., a camera maker that gets about 28 percent of revenue from the Americas, climbed 2.7 percent in Tokyo. Toyota Motor Corp. gained 4.5 percent after the automaker said it will resume some production operations that were halted after recalling 2.3 million cars to fix faulty accelerator pedals. European oil and gas shares fell after BP Plc plunged 4.2 percent. The region’s biggest oil company reported fourth- quarter earnings that missed analysts’ estimates and predicted the recovery from last year’s recession will be “slow and gradual.” Declines were limited as Rio Tinto led a rally in basic resources shares, climbing 2.3 percent. The world’s third- biggest mining company was raised to “buy” from “hold” at Citigroup Inc., which cited upgrades to iron-ore prices. Home Sales U.S. stock-index futures gained 0.2 percent, after the S&P 500 yesterday posted its biggest jump in a month. The number of contracts to buy previously owned U.S. homes was probably little changed in December after a record plunge a month earlier, indicating a renewed tax credit will take time to revive sales, economists said before a report due at 10 a.m. in Washington. A record nine-quarter earnings slump for S&P 500 companies is projected to have ended in the final three months of 2009 with a 76 percent increase in profits. Almost 80 percent of the results released since Jan. 11 topped the average forecasts of Wall Street estimates, data compiled by Bloomberg show. United Parcel Service Inc. and Dow Chemical Co. are among companies reporting earnings today. Paul Volcker, head of the U.S. Economic Recovery Advisory Board, is likely to repeat his call to prohibit commercial banks from owning hedge funds and limit their ability to trade for their own accounts when he testifies to the Senate Banking Committee. Romanian Rates The MSCI Emerging-Markets Index climbed 0.3 percent as Russia’s Micex Index gained 1 percent and Abu Dhabi’s ADX Index advanced 0.8 percent. Taiwan’s Taiex Index dropped 1.3 percent, leading Asian gauges lower. Romania’s BET index rose 0.4 percent as economists predict the central bank will lower its interest rate by half a percentage point tomorrow. Russia is likely to cut its rate by 1 percentage point in “coming months,” Barclays Capital said in a report today. Government bonds fell, with the yield on the U.S. 10-year Treasury rising 2 basis points to 3.67 percent. The yield on the German bund increased 3 basis points to 3.31 percent. Copper for delivery in three months fell 0.1 percent to $6,783.75 a metric ton on the London Metal Exchange. Gold for immediate delivery retreated 0.1 percent to $1,104.80 an ounce. Crude oil added 0.5 percent to $74.76 a barrel in New York. To contact the reporter on this story: Justin Carrigan in London at jcarrigan@bloomberg.net

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Japan’s Wages Slump at Near-Record Pace, Indicating Weak Consumer Spending

February 1, 2010

By Aki Ito Feb. 2 (Bloomberg) — Japan’s wages slumped at a near- record pace in December as employers pared workers’ bonuses, an indication that consumer spending is unlikely to drive the economic recovery. Monthly wages including overtime and bonuses slipped 6.1 percent from a year earlier to 549,259 yen ($5,056), the Labor Ministry said today in Tokyo. Paychecks slumped an unprecedented 7 percent in June. Even as Japan continues to climb out of its deepest postwar recession, companies from All Nippon Airways Co. to Noritsu Koki Co. have yet to return to profit. A declining jobless rate won’t be enough to spur household consumption as long as businesses keep cutting salaries, according to economist Azusa Kato . “You have to weigh the improvements in jobs against the plunge in wages,” Kato, an economist at BNP Paribas in Tokyo, said before the report was released. “As long as workers’ incomes keep plummeting like this, households won’t feel the benefits of this economic recovery firsthand.” The decline in paychecks was the 19th in a row, extending the longest losing streak since 2003. Today’s report also showed that average monthly wages slid a record 3.9 percent to 315,164 yen last year, the lowest level since the government started tracking the data 1990. Large businesses cut winter bonuses by 15 percent to 755,628 yen, the steepest drop since the survey began in 1959, a separate report by the Japan Business Federation showed last month. The money is typically paid in December and is often equivalent to several months of pay. Adding Jobs The economy added 130,000 jobs in December, the biggest jump in four months, pushing the unemployment rate down to 5.1 percent, the government said last week. A separate report showed there were 87 newly advertised jobs in December for every 100 people who started looking for work that month, the most since January. The export growth that pulled Japan out of its worst postwar recession has failed to boost spending at home, with retail sales slumping for 16 straight months to December. The Bank of Japan’s chief economist Kazuo Momma yesterday said Japan can’t enjoy a stable recovery until consumer and corporate spending gain momentum. “The risk that the Japanese economy will fall off from a cliff is small, but there is still a long way to go” before the expansion becomes sustainable, Momma said in Tokyo.“Even if the global economy continues to recover, the spread of that to capital spending and the labor market will be limited.” Damp ‘Significantly’ A fading of stimulus boosts amid falling salaries will damp household spending “significantly” in the months ahead, according to Hiromichi Shirakawa , chief economist at Credit Suisse in Tokyo. Consumer outlays last year were fueled by government cash handouts and incentives to purchase cars and electronics. “Considering how much incomes have fallen, the drop in consumer spending has been relatively small. That’s because government measures, so far, have been working,” he said. Noritsu Koki, a maker of photo processors, widened its full-year net loss forecast by 9 percent to 6.88 billion yen as companies pared spending on plant and equipment following the global recession, according to a statement on its Web site. All Nippon Airways, Japan’s second-largest carrier by sales, said it swung to a 35.2 billion yen net loss for the nine months ended Dec. 31, from a profit of 9.42 billion yen a year earlier. Pay cuts are also pushing down prices and Japan will probably stay in deflation until the middle of 2012, according to Kyohei Morita , chief economist at Barclays Capital in Tokyo. Consumer prices excluding fresh food and energy dropped an unprecedented 1.2 percent in December. A government survey last month showed the proportion of people who expect costs of household goods to decline exceeded those who see them becoming more expensive for the first time the survey began in 2004. Even so, today’s report showed manufacturers boosted workers’ overtime hours by 3.8 percent from a month earlier to keep up with a jump in orders, helping the component increase from a year earlier for the first time in 21 months. Industrial production climbed for a 10th month, the Trade Ministry said last week. To contact the reporter on this story: Aki Ito in Tokyo at aito16@bloomberg.net

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Japan’s Exports Rose 12.1% in December, First Advance Since September 2008

January 26, 2010

By Keiko Ujikane Jan. 27 (Bloomberg) — Japan’s exports rose for the first time since Lehman Brothers Holdings Inc. collapsed 15 months ago, adding to signs that the world’s second-largest economy is recovering from the global recession. Shipments abroad rose 12.1 percent in December from a year earlier, the Finance Ministry said today in Tokyo. The median estimate of 19 economists surveyed by Bloomberg was for a 7.6 percent gain. Exports fell 6.3 percent in November. Japanese manufacturers from Honda Motor Co. to Fuji Xerox Co. are benefiting from renewed demand in emerging nations including China, where gross domestic product expanded at the fastest pace since 2007 last quarter. The booming economy in Japan’s largest overseas market may help offset weak demand at home weighed down by falling wages and deflation. “Shipments to Asia, especially China, have been growing a lot and these are strong results,” said Yoshiki Shinke , senior economist at Dai-Ichi Life Research Institute in Tokyo. “It’s safe to say that exports were strong” in the fourth quarter. The improvement in exports last month was partly due to a favorable year-on-year comparison. In December 2008, shipments abroad tumbled 35 percent as global trade froze in the aftermath of Lehman Brothers’ collapse in September. From a month earlier, exports rose a seasonally adjusted 2.5 percent in December, today’s report showed. Imports slid 5.5 percent in December from a year earlier, the smallest drop in 14 months. Japan posted a trade surplus for an 11th straight month, totaling 545.3 billion yen ($6.1 billion). The yen traded at 89.46 per dollar at 10:24 a.m. in Tokyo from 89.64 before the report. Weaker Currency While the currency is weaker than the 14-year high of 84.83 reached in November, it has advanced more than 3 percent this year, and is still stronger than the 92.93 that manufacturers expect the currency to average in the year ending March 31. Demand from Asia led the resurgence in trade. Shipments to Asia advanced 31.2 percent from a year earlier, the fastest pace since February 2000. Exports to China climbed 42.8 percent, the largest increase in almost three years, led by record demand for automobiles. Exports to the U.S. fell 7.6 percent, while shipments to Europe rose 1.4 percent, the first increase in 17 months. Asian economies are benefiting from a global trade rebound that’s being driven by interest-rate cuts and more than $2 trillion in government spending worldwide. Fuji Xerox, Japan’s biggest maker of color copiers, expects sales to recover as early as September, helped by growth in China and increased demand for printers in the U.S., President Tadahito Yamamoto said on Jan. 15. China Plant Honda Motor’s venture with Dongfeng Motor Group Co. will invest 1.15 billion yuan to build a second plant in China as vehicle demand rises in the world’s largest car market. The plant, with an initial annual capacity of 60,000 vehicles, will start production in the second half of 2012, Honda said. “In coming months, the export recovery may lose some of its speed since the rally so far has been so fast, but on the whole, exports will keep growing,” Dai-Ichi’s Shinke said. “Asian economies, particularly China, will keep expanding, and Japan will benefit from that.” Still, the export-led recovery hasn’t been strong enough to spur spending by companies and consumers at home. Remain Reluctant Japanese machinery orders fell to a record low in November, signaling companies remain reluctant to increase capital spending, while household sentiment fell to a six-month low in December because of wage cuts and deflation, government reports showed this month. Bank of Japan Governor Masaaki Shirakawa said yesterday the economy is likely to lose momentum as global stimulus spending fades. His policy board left interest rates unchanged at 0.1 percent. Japan’s government may have limited scope to inject further stimulus spending after Standard and Poor’s cut its outlook for the nation’s sovereign debt rating yesterday. Prime Minister Yukio Hatoyama unveiled a 7.2 trillion yen economic package and a record budget last month. “We have maintained that the economy will slow in the first half of 2010 due to weak domestic demand,” said Kyohei Morita , chief economist at Barclays Capital in Tokyo. “Evidence of deteriorating consumer confidence is consistent with this view.” In 2009, exports fell 33 percent, the biggest drop since comparable figures were made available in 1979. China surpassed the U.S. as Japan’s largest export market for the first time on an annual basis, the report showed. To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net

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Japan Exports Rise for First Time in 15 Months, Beating Estimates on China

January 26, 2010

By Keiko Ujikane Jan. 27 (Bloomberg) — Japan’s exports rose for the first time since the collapse of Lehman Brothers Holdings Inc., adding to signs that the world’s second-largest economy is recovering from the global recession. Shipments abroad rose 12.1 percent in December from a year earlier, the Finance Ministry said today in Tokyo. The median estimate of 19 economists surveyed by Bloomberg was for a 7.6 percent gain. Exports fell 6.3 percent in November. Japanese manufacturers from Honda Motor Co. to Fuji Xerox Co. are benefiting from renewed demand in emerging nations including China, where gross domestic product expanded at the fastest pace since 2007 last quarter. The booming economy in Japan’s largest overseas market may help offset weak demand at home weighed down by falling wages and deflation. “Exports are on a solid recovery trend, although the December increase was largely due to the base effect from last year’s slump,” Junko Nishioka , chief economist at RBS Securities Japan Ltd. in Tokyo, said before the report was released. “The Chinese economy is more robust than expected, leading the global recovery.” The improvement in exports last month was partly due to a favorable year-on-year comparison. In December 2008, shipments abroad tumbled 35 percent as global trade froze in the aftermath of Lehman Brothers’ collapse three months earlier. From a month earlier, exports rose a seasonally adjusted 2.5 percent in December, today’s report showed. Trade Surplus Imports slid 5.5 percent in December from a year earlier, the smallest drop in 14 months. Japan posted a trade surplus for an 11th straight month, totaling 545.3 billion yen ($6.1 billion). The yen was little changed, trading at 89.63 per dollar at 9:13 a.m. in Tokyo from 89.64 before the report. While it’s weaker than the 14-year high of 84.83 reached in November, it has advanced more than 3 percent this year, threatening exporters. Demand from Asia led the resurgence in trade. Shipments to Asia advanced 31.2 percent from a year earlier. Exports to China climbed 42.8 percent, compared with a 7.8 percent gain the previous month. Exports to the U.S. fell 7.6 percent, while shipments to Europe rose 1.4 percent. There’s “a low chance that Japan will fall back into a double-dip recession” because the global economy is expanding and the yen has stabilized, said Mikihiro Matsuoka , chief economist at Deutsche Securities Inc. in Tokyo. Higher Forecasts Deutsche forecasts the economy grew an annualized 2.8 percent in the three months ended Dec. 31, which would be the third straight expansion. The World Bank last week raised its forecast for Japan to 1.3 percent for 2010, from 1 percent in June. Asian economies are benefiting from a global trade rebound that’s being driven by interest-rate cuts and more than $2 trillion in government spending worldwide. Fuji Xerox, Japan’s biggest maker of color copiers, expects sales to recover as early as September, helped by growth in China and increased demand for printers in the U.S., President Tadahito Yamamoto said on Jan. 15. Honda Motor’s venture with Dongfeng Motor Group Co. will invest 1.15 billion yuan to build a second plant in China as vehicle demand rises in the world’s largest car market. The plant, with an initial annual capacity of 60,000 vehicles, will start production in the second half of 2012, Honda said. Still, the export-led recovery hasn’t been strong enough to spur spending by companies and consumers at home. Reluctant to Spend Japanese machinery orders fell to a record low in November, signaling companies remain reluctant to increase capital spending, while household sentiment fell to a six-month low in December because of wage cuts and deflation, government reports showed this month. Bank of Japan Governor Masaaki Shirakawa said yesterday the economy is likely to lose momentum as global stimulus spending fades. His policy board left interest rates unchanged at 0.1 percent. Japan’s government may have limited to inject further stimulus spending after Standard and Poor’s cut its outlook for the nation’s sovereign debt rating yesterday. Prime Minister Yukio Hatoyama unveiled a 7.2 trillion yen economic package and a record budget last month. “We have maintained that the economy will slow in the first half of 2010 due to weak domestic demand,” said Kyohei Morita , chief economist at Barclays Capital in Tokyo. “Evidence of deteriorating consumer confidence is consistent with this view.” To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net

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Producer Prices in U.S. Climb 0.2% in Sign Inflation Threat Is Contained

January 20, 2010

By Courtney Schlisserman Jan. 20 (Bloomberg) — Wholesale prices in the U.S. rose at a slower pace in December, showing the economy is recovering without the immediate threat of inflation. The 0.2 percent increase in prices paid to factories, farmers and other producers followed a 1.8 percent jump in November, according to Labor Department data released today in Washington. The gain was more than anticipated and reflected higher food costs. Excluding food and fuel, so-called core prices were unchanged. An unemployment rate projected to average 10 percent this year and excess capacity are giving companies room to hold the line on prices. Few signs of inflation will allow the Federal Reserve to keep interest rates near zero in coming months to help fuel the economic recovery. “We’re not looking at any sort of major inflation pressures emanating from the manufacturing sector,” said Jonathan Basile, an economist at Credit Suisse in New York. The Fed’s view on inflation is that it’s “contained, subdued and that’s what the PPI is telling us,” he said. Stock-index futures held earlier losses after a separate report showed housing starts dropped more than expected in December. Futures on the Standard & Poor’s 500 Index expiring in March fell 0.5 percent to 1,139.8 at 8:41 a.m. in New York. Housing Starts The Commerce Department said beginning construction declined 4 percent to 557,000 homes at an annual rate last month, signaling bad weather kept builders away from worksites. Starts were projected to fall to a 572,000 pace, according to the median estimate in a Bloomberg News survey. Building permits, a sign of future construction, climbed to the highest level in a year. Economists forecast no change in December producer prices, according to the median of 73 projections in a Bloomberg survey. Estimates ranged from a decrease of 0.5 percent to an increase of 0.5 percent. Prices excluding food and energy were forecast to rise 0.1 percent after a 0.5 percent increase a month earlier, according to the survey median. Core prices have increased in one of the last four months. Wholesalers received 4.4 percent more for their goods last year, compared with a 0.9 percent decrease in 2008. Core producer prices rose 0.9 percent in 2009, the smallest annual gain since 2002. Year-over-year costs may keep rising the next few months as the plunge in fuel prices at the depths of the recession in late 2008 and early 2009 drops out of the calculations. Energy Costs Compared with a month earlier, energy costs fell 0.4 percent in December, led by cheaper gasoline and natural gas. The cost of crude oil on the New York Mercantile Exchange has since risen, reaching an intraday high of $83.95 a barrel on Jan. 11 after closing at $69.51 on Dec. 14. The cost of food increased 1.4 percent from November, led by higher pork, dairy and vegetable prices. The cost of pork showed the biggest gain since January 1999, while dairy products were up the most since July 2007. Core costs were restrained by cheaper business equipment, women’s apparel and trucks. Producer prices are one of three monthly inflation gauges reported by the Labor Department. Consumer prices rose 0.1 percent in December, while the cost of imported goods was unchanged, according to data released last week. Interest Rates Fed policy makers meet Jan. 26-27 to discuss the direction of the benchmark overnight lending rate between banks. At their last meeting in December, central bankers repeated their pledge to keep the rate near the historic low of zero to 0.25 percent for an “extended period.” They also said policy is contingent on “low rates of resource utilization, subdued inflation trends, and stable inflation expectations.” The Fed’s long-term forecast for its preferred measure of inflation, the Commerce Department’s index tied to consumer spending and excluding food and fuel, calls for gains in a range of 1.5 percent to 2 percent. That gauge, which is typically lower than the CPI, was up 1.4 percent in the 12 months ended in November. Consumers in the Reuters/University of Michigan preliminary survey, released Jan. 15, said they expect an inflation rate of 2.8 percent over the next five years. Those figures are tracked by Fed policy makers. Plant-Use Rate Helping limit inflation is data on capacity utilization. Economists track operating rates to gauge factories’ ability to produce goods with existing resources and lower rates reduce the risk of bottlenecks that can force prices higher. The proportion of plants in use rose to 72 percent in December, Fed figures showed Jan. 15. Capacity averaged 80 percent over the past two decades. Crude oil prices that rose 78 percent in 2009 limited Alcoa Inc.’s profit in the fourth quarter. The world’s largest U.S. aluminum producer said Jan. 12 that profit excluding certain items was 1 cent a share, trailing the 6-cent average estimate of analysts. New York-based Alcoa said it had to buy 207,000 tons of aluminum on the open market to satisfy customer purchase agreements while also coping with higher energy costs and currency exchange. Costs of some goods are reflecting higher prices at the earliest stage of production. Raw Materials Dan DiMicco, chief executive officer at Nucor Corp., said Jan. 14 that steel prices have been rising primarily because of higher raw material costs, rather than a pickup in U.S. demand. “If you tell me what will happen to raw materials, I will tell you what will happen to prices, because right now the economy is terrible,” DiMicco said in an interview with Bloomberg Television. Nucor is the second-largest U.S. steelmaker by 2008 sales behind U.S. Steel Corp. Steel prices surged in the second half of last year after the nation’s deepest recession in seven decades cut demand in the first six months. To contact the reporter on this story: Courtney Schlisserman at cschlisserma@bloomberg.net

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U.S. Homebuilder Confidence Unexpectedly Drops in Sign Recovery Stalling

January 19, 2010

By Bob Willis Jan. 19 (Bloomberg) — Confidence among U.S. homebuilders unexpectedly dropped in January to the lowest level since June, a sign the housing recovery may stall in coming months. The National Association of Home Builders/Wells Fargo index of builder confidence decreased to 15 from 16 the prior month, the Washington-based group said today. Readings below 50 mean most respondents view conditions as poor. The report showed traffic slowed to a 10-month low, indicating the government’s extension and expansion of its first-time buyer program has, so far, not drawn in new demand after propelling total sales to an almost three-year high in November. A projected record 3 million foreclosures this year may also pressure prices, making it more difficult for homebuilders to turn a profit. “The past strength in the housing market was inflated by the tax credit,” said David Sloan , chief U.S. economist at 4Cast Inc. in New York, who was the only economist surveyed to foresee a drop in the index. “We’re seeing a bit of payback from those over-inflated levels.” Stocks held earlier gains following the report, while builder shares retreated from prior highs. The Standard & Poor’s 500 Index was up 1 percent to 1,147.18 at 1:16 p.m. in New York. The S&P Supercomposite Homebuilder Index gained 0.8 percent after having been up as much as 1.1 percent before the report. Less Than Forecast The builder confidence index was forecast to increase to 17 this month, according to the median forecast of 45 economists surveyed by Bloomberg News. Projections ranged from 14 to 18. The index, first published in January 1985, averaged 15 last year. The builders group’s index of current single-family home sales fell to 15 in January from 16 in December. The gauge of buyer traffic dropped to 12, the lowest level since March, from 13. A measure of sales expectations for the next six months held at 26. “Factors beyond our control, including consumer concerns about job security and competition from foreclosed homes on the market, are still impeding demand for new homes at this time,” Joe Robson, the group’s chairman and a builder from Tulsa, Oklahoma, said in a statement. Broad Decrease All four regions showed a drop in sentiment, led by the West, which fell to 16 from 19. In the Northeast, confidence decreased to 22 from 23, in the Midwest it fell to 11 from 12 and dropped to 16 from 17 in the South. The confidence survey asks builders to characterize current sales as “good,” “fair” or “poor” and to gauge prospective buyers’ traffic. It also asks participants to gauge the outlook for the next six months. “Consumers are still waiting to see significant positive signs of improvement in employment and confidence, and this is slowing buyers’ return to the market,” David Crowe , the NAHB’s chief economist, said in a statement. Rising foreclosures are adding to inventory and may discourage builders. A record 3 million U.S. homes will be repossessed by lenders this year as high unemployment and depressed home values leave borrowers unable to make their house payment or sell, according to a RealtyTrac Inc. forecast on Jan 14. Last year there were 2.82 million foreclosures, the most since RealtyTrac began compiling data in 2005. ‘Borrowing Demand’ “A lot of inventory is still coming onto the market from distressed sales and that is borrowing demand from new homes,” Julia Coronado , a senior economist at BNP Paribas in New York, said before the report. “Improvement in construction will be gradual in the initial stages.” President Barack Obama on Nov. 6 extended an $8,000 first- time buyer credit that was due to expire at the end of the month and expanded it to include current homeowners. The extension covers closings through June as long as contracts are signed by the end of April. Still, the measure may have pulled sales forward, depressing demand in coming months. Sales of new houses dropped 11 percent in November, the month the government’s tax credit was due to expire. A jump in purchases of existing homes pushed total sales up to a 6.895 million annual pace, the most since March 2007. Starts Forecast Housing starts , which jumped 24 percent from April to July as builders rushed to satisfy buyers taking advantage of the credit, will probably cool in coming months as sales slow. A report from the Commerce Department tomorrow may show builders broke ground on 575,000 houses at an annual pace in December, little changed from 574,000 a month earlier, according to the median forecast of economists surveyed by Bloomberg. November starts were 75 percent below their peak of 2.27 million pace reached in January 2006. KB Home , the Los Angeles-based homebuilder that sells to first-time buyers, is among those struggling. The company last week reported a pretax loss of $91 million on declining revenue for the fiscal fourth quarter that ended Nov. 30. KB Home’s orders rose 12 percent to 1,446 from 1,296 in the year-earlier quarter, while completed sales dropped 22 percent to 3,042, according to the report. The average price declined 12 percent to $203,400. KB Home is “not going to make money in the first quarter” and plans to “restore profitability” in the second half of 2010, Chief Executive Officer Jeffrey Mezger said Jan. 12 in a conference call with analysts and investors. To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net

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Trade Deficit in U.S. Probably Widened as Imports Rose More Than Exports

January 11, 2010

By Courtney Schlisserman Jan. 12 (Bloomberg) — The trade deficit in the U.S. probably widened in November as imports climbed faster than exports, economists said before a report today. The gap grew to $34.6 billion during the month from $32.9 billion in October, according to the median estimate of 76 economists surveyed by Bloomberg News. Increases in spending by American businesses and consumers indicate demand for foreign goods will keep growing in coming months. At the same time, a 12 percent drop in the dollar and growing economies overseas mean U.S. sales abroad by companies such as United Parcel Service Inc. and United Technologies Corp. may also rise, giving factories and the economy a lift. “Both sides of the trade ledger are going to show strength,” said Jonathan Basile , an economist at Credit Suisse in New York, whose forecast matched the survey median. “It’s just that we think the import side will show more strength and that’s a good sign for the recovery.” The Commerce Department’s trade figures are due at 8:30 a.m. in Washington. Estimates in the Bloomberg News survey ranged from gaps of $38.2 billion to $31 billion. The global economic rebound is pushing up commodity costs, which is contributing to the increase in imports, economists said. The price of imported petroleum and petroleum products increased 6.2 percent in November after a 2 percent gain a month earlier, according to figures from the Labor Department. After dipping in December, the cost of crude on the New York Mercantile Exchange is up again this month, suggesting oil will continue to boost the value of imports. More Inventories The need to prevent inventories from falling even more as sales improve is also contributing to growing imports, economists said. “As confidence returns amongst all levels of the economy I would expect that manufacturers and wholesalers and retailers will have more confidence in holding slightly higher levels of inventories and that should be a boost to imports,” said Robert Dye , a senior economist at PNC Financial Services Group in Pittsburgh. Economists at JPMorgan Chase & Co. and Credit Suisse in New York are among those projecting the world’s largest economy grew by at least 4 percent at an annual rate in the last three months of 2009 after expanding at 2.2 percent pace in the third quarter. Stocks rose last week amid signs company profits and sales were improving. The Standard & Poor’s 500 Index climbed another 0.2 percent yesterday and was up 70 percent since reaching a 12-year low on March 9. Global Growth The U.S. isn’t the only economy gaining speed. The International Monetary Fund has said it will probably raise its estimate for 2010 world growth from 3.1 percent. A report Jan. 10 showed China’s exports surged in December and imports jumped by a record 56 percent from a year earlier. Rising exports may fuel calls from the country’s trading partners for gains by the yuan against the dollar after China’s policy makers halted appreciation for 17 months to help manufacturers weather slumping demand. Growing economies overseas and a 12 percent drop in the dollar from a five-year high reached on March 9 against a trade-weighted basket of currencies from the nation’s biggest trading partners are helping companies such as United Technologies , the maker of Pratt & Whitney jet engines and Otis elevators. Overseas Sales The Hartford, Connecticut-based manufacturer last month forecast 2010 per-share profit would increase at least 7.3 percent, in line with analyst estimates, because of cost cuts and growth in emerging markets. The company, which garners more than 60 percent of sales outside the U.S., sees improvement in emerging markets in regions including Asia, Chief Executive Officer Louis Chenevert told investors at a meeting on Dec. 10. The Otis unit announced two contracts Dec. 8 to supply, install and maintain 1,300 elevators in Singapore public housing. Manufacturing in the U.S. expanded in December at the fastest pace in more than three years, the Institute for Supply Management said Jan. 4. Other reports showed factories in Europe and in China also strengthened last month. To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

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Video: Solis Says U.S. Needs to `Work Harder’ to Create Jobs: Video

January 8, 2010

Jan. 8 (Bloomberg) — U.S. Labor Secretary Hilda Solis talks with Bloomberg’s Betty Liu about the Obama administration’s efforts to create conditions for job growth in a “very stubborn recession.” The Labor Department said U.S. nonfarm payrolls dropped by 85,000 in December, more than economists projected, after a revised gain a month earlier of 4,000 that was the first increase in almost two years. The unemployment rate held at 10 percent last month. (Source: Bloomberg)

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Japan’s Recovery Persists as Exports Expand to Asia, Economic Index Shows

January 7, 2010

By Aki Ito and Toru Fujioka Jan. 8 (Bloomberg) — Japan’s broadest indicator of economic health rose for an eighth month as growing demand from abroad boosted manufacturing. The coincident index , a composite of 11 indicators including factory production and retail sales, climbed to 95.9 in November from a revised 94.3 a month earlier, the Cabinet Office said today in Tokyo. The median estimate of 13 economists surveyed by Bloomberg was for an advance to 95.8. The report adds to evidence that Japan’s recovery persists as companies from Toyota Motor Corp. to Komatsu Ltd. benefit from more than $2 trillion in global stimulus spending. Analysts say accelerating growth in Asia will prompt manufacturers to continue increasing output, which climbed the most in six months in November. “From steel to metal parts, increasing exports to Asia is lifting activity at the country’s factories,” Kyohei Morita , chief economist at Barclays Capital in Tokyo, said before the report. “Production won’t keep rising at this pace forever. But exports will continue to recover, and that means Japan will be able to avert a double-dip recession.” The leading index , an indication of economic health in three to six months, rose to 91.2, a ninth monthly gain. Japanese shipments to Asia rose in November for the first time in 14 months. Industrial production climbed 2.6 percent, the most since May, and factories increased their workers’ overtime hours for an eighth month. Demand From China Toyota, the country’s largest carmaker, said this week its China sales rose 21 percent to 790,000 units in 2009. The automaker narrowed its full-year net loss forecast for a second time in November after government incentives boosted car demand in China and the U.S. Komatsu and Hitachi Construction Machinery Co., Asia’s two largest excavator makers, said this week that December sales in China more than doubled. Takahide Kiuchi , chief economist at Nomura Securities Co. in Tokyo, says exporters face a better outlook than sectors dependent on consumers at home, forming a “two-faced” recovery this year. Benefits from an export revival have been slow to spread to households because corporate profits are still too low for employers to afford higher personnel costs, according to Barclays’ Morita. That means workers won’t see paycheck increases anytime soon. Wages have dropped for 18 straight months, leaving less money for consumers to spend. Japan’s largest businesses slashed winter bonuses by 15 percent to 755,628 yen ($8,100), the steepest drop since the survey began in 1959, the Japan Business Federation said last month. Firms typically pay the bonus in December. To contact the reporters on this story: Aki Ito in Tokyo at aito16@bloomberg.net ; Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

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Russia Cuts Benchmark Rate to Record Low to Spur Lending, Stem Ruble Bets

December 25, 2009

By Alex Nicholson and Paul Abelsky Dec. 25 (Bloomberg) — Russia’s central bank cut its benchmark interest rate for the 10th time since April to discourage speculative ruble trades and ease credit flows. Bank Rossii cut the refinancing rate by a quarter point to a record low 8.75 percent effective Dec. 28, it said in a statement today. The bank last lowered the rates by half a percentage point on Nov. 24. The central bank has cut the refinancing rate from 13 percent in April after the world’s biggest energy exporter lurched into its deepest economic decline on record, contracting 10.9 percent in the second quarter and 8.9 percent in the third. The bank has eased policy to aid the recovery and stem speculative inflows that has fueled ruble volatility. There’s some evidence the Moscow-based bank’s currency policy is working. The ruble has lost 2.7 percent against the dollar since Nov. 11, when it reached the strongest level of the year, after gaining 13 percent in the previous three months. Bank Rossii’s efforts to deter speculation are “appropriate,” International Monetary Fund senior Russia representative Odd Per Brekk said last month. Russian authorities are trying to discourage the use of the ruble in so-called carry trades, in which investors borrow in low-yielding currencies to buy high-yielding currencies that can generate a quick profit. Capital Flows Russian equity funds drew $59.5 million in the seven days ended Dec. 16 after posting an inflow of $181.7 million a week earlier, according to EPFR Global. The country may post a net capital outflow in the fourth quarter after oil prices retreated in December and investors fled emerging-market assets on concerns about Dubai’s debt restructuring, central bank Chairman Sergey Ignatiev said on Dec. 22. Russia may see a net outflow of $40 billion for the year, according to the central bank. Policy makers are also trying to revive lending after previous rate cuts failed to ease credit flows. The financial industry will show “zero growth” next year as provisions for mounting bad loans tie up cash that might have gone to companies and households, Alexander Turbanov , head of the Deposit Insurance Agency, said last week. “We could not drastically change the situation with lending in industry,” Deputy Economy Minister Andrei Klepach said last month. “There is stagnation in lending and borrowing.” Lending Signs Policy makers will be looking for signs that today’s cut feeds through to bank loans. Lending to companies by Russian banks rose 0.8 percent last month, Bank Rossii First Deputy Chairman Gennady Melikyan said last week. Lending to households fell 0.2 percent in the month, while bank assets grew 2.8 percent, Melikyan said, adding that the data don’t include OAO Sberbank, the country’s biggest lender, or take exchange-rate shifts into account. “Banks are not lending at present, and have effectively frozen their corporate loan books,” said Clemens Grafe , chief economist at UBS AG in Moscow. “Instead, they are concentrating on building up buffers to absorb expected loan losses, and this is clearly restricting the economy.” Russian banks’ corporate loan books fell 0.5 percent in October, following a 0.7 percent decline the previous month, the central bank said on Dec. 3. Growth Outlook Corporate borrowing costs from domestic banks fell in November to the lowest level this year, sliding to an average of 13.6 percent compared with 13.9 percent a month earlier and 17.4 percent in January, the central bank said on Dec. 23. The country will post “steady economic growth” next year because the negative factors that led to the worst slump since the 1998 default, including lower prices for commodities and a lack of external financing, are “no longer in effect,” Ignatiev said this week. The economy may grow 5 percent or more in 2010, faster than the government is estimating, and output will return to its pre- crisis level in less than three years, Ignatiev said Dec. 22. The refinancing rate may be lowered as much as 1 percentage point in 2010, Arkady Dvorkovich , President Dmitry Medvedev’s chief economic adviser, said Dec. 8, adding that the inflation rate next year may slow to 8 percent or more. “Average lending rates may drop more,” Dvorkovich said. “Lending rates for large and medium companies are at 14 percent to 16 percent. I think they may drop by 3 percentage points.” Russia has continued easing its policy rates even as the IMF has urged Bank Rossii to halt the reductions, warning they may be inflationary. “Further cuts in policy interest rates should be put on hold until the monetary implications of the very large end-year liquidity injection associated with the fiscal deficit become clear,” the IMF said in a report this month. The IMF warned Bank Rossii to step up efforts to contain inflation and embrace a more “ambitious” policy to reduce consumer-price growth to below 5 percent in 2010. Consumer prices rose 9.1 percent on an annual basis in November, the slowest pace in more than two years, according to the Federal Statistics Service. To contact the reporters on this story: Alex Nicholson in Moscow at anicholson6@bloomberg.net . Paul Abelsky in Moscow at pabelsky@bloomberg.net ;

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Japan’s Jobless Rate Climbs for First Time Since July as Recover Sputters

December 24, 2009

By Aki Ito Dec. 25 (Bloomberg) — Japan’s unemployment rate rose to 5.2 percent in November from 5.1 percent a month earlier, the statistics bureau said today in Tokyo. The median forecast of 26 economists surveyed by Bloomberg News was 5.2 percent. To contact the reporter on this story: Aki Ito in Tokyo at aito16@bloomberg.net

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Japan’s Exports Fall at Slowest Pace in 14 Months as Asian Demand Recovers

December 20, 2009

By Keiko Ujikane Dec. 21 (Bloomberg) — Japan’s exports fell at the slowest pace in 14 months in November as demand from Asia supported the nation’s recovery from its worst postwar recession. Shipments abroad slid 6.2 percent from a year earlier, the smallest drop since September 2008, the Finance Ministry said today in Tokyo. From a month earlier, exports rose a seasonally adjusted 4.9 percent, the biggest advance since November 2002. Worldwide government spending has spurred demand for cars and electronics goods made by companies including Fuji Heavy Industries Ltd. and Elpida Memory Inc. The improvement in shipments may ease concern Japan’s economic recovery will stall after reports this month showed confidence among large manufacturers rose the least in three quarters and companies plan deeper spending cuts. “Economic growth may slow in the months ahead as domestic demand remains weak,” said Yoshiki Shinke , senior economist at Dai-Ichi Life Research Institute in Tokyo. “But exports are looking solid, so Japan should at least be able to avoid another recession.” The improvement in exports is partly due to a favorable year-on-year comparison, economists including Shinke said. In November 2008, shipments abroad tumbled 26.8 percent as global trade froze following the collapse of Lehman Brothers Holdings Inc. The median estimate of 17 economists surveyed by Bloomberg News was for exports to drop 6.8 percent from a year earlier. Imports Decline Imports slid 16.8 percent in November from a year earlier, the slowest decline in 12 months, the ministry said. Japan posted a trade surplus for a 10th straight month, totaling 373.9 billion yen ($4.1 billion). Exports are mending even as the strengthening yen erodes the value of profits companies earn abroad and makes their products less competitive. Japan’s currency traded at 90.41 per dollar at 9:57 a.m. in Tokyo from 90.46 before the report. It has weakened since hitting a 14-year high of 84.83 on Nov. 27. The Nikkei 225 Stock Average rose 0.6 percent. Fuji Heavy, the maker of Subaru cars, expects to boost sales in the U.S. and China next year by 15,000 vehicles in each market, Chief Executive Officer Ikuo Mori said in an interview on Dec. 16. Elpida Memory, Japan’s largest computer-memory chipmaker, may return to profit for the first time in three years, thanks to higher demand, Chief Executive Officer Yukio Sakamoto said this month. China Growth Exports to China and Asia both rose for the first time since September 2008. Shipments to Asia advanced 4.7 percent from a year earlier, compared with a 15 percent drop in October. Exports to China, Japan’s biggest overseas customer, climbed 7.8 percent, compared with a 14.4 percent decline the previous month. Asian economies are benefiting from a global trade rebound that’s being driven by interest-rate cuts and more than $2 trillion in government spending worldwide. Growth in China will accelerate to 9.4 percent next year, according to the median estimate of economists surveyed by Bloomberg News. “Exports to Asia are strong so Japan will be able to avoid a double-dip recession even though a slowdown in domestic demand is unavoidable,” said Azusa Kato , an economist at BNP Paribas in Tokyo. “Demand in Asia is strong enough to offset the adverse impact of the yen’s gain.” U.S. Sales Sales to the U.S. fell 7.9 percent, easing from October’s 27.6 percent decrease and automobile shipments to the nation rose for the first time since April 2008, the Finance Ministry said. Exports to Europe slid 15.9 percent after declining 29 percent. “Exports to the U.S. have hit bottom and are starting to gradually rise,” Dai-Ichi Life’s Shinke said. “Even though it’s not as strong as Asia, it’s positive for Japan’s economy.” Some companies are coping with the rising currency by trimming costs. Toyota Motor Corp. may avoid an annual loss if the yen trades around 90 per dollar because the automaker will postpone investments and cut costs, the Asahi newspaper reported on Dec. 16. Japanese policy makers are trying to sustain a recovery that’s under threat from the currency’s gains and deflation. Prime Minister Yukio Hatoyama unveiled a 7.2 trillion yen economic stimulus package on Dec. 8, a week after the Bank of Japan released a 10 trillion yen credit program. The central bank said last week that it “does not tolerate” falling prices. Export Revival The export revival has yet to spread to the domestic economy. Large companies plan to cut spending 13.8 percent in the year ending March 2010, the second-worst projection on record, the Bank of Japan’s Tankan survey showed last week. Economic growth slowed to an annualized 1.3 percent in the third quarter, about half the pace of the previous three months. Household confidence fell in November for the first time this year and wages have slumped for 17 months. “Even though exports are strong, domestic demand is weaker than people expected earlier this year as employment has worsened rapidly,” said Junko Nishioka , chief economist at RBS Securities Japan Ltd. in Tokyo. “That signals the recovery in external demand and the stimulus effects won’t be enough to sustain growth.” To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net

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Japan’s Exports Fall at Slowest Pace in 14 Months as Asian Demand Recovers

December 20, 2009

By Keiko Ujikane Dec. 21 (Bloomberg) — Japan’s exports fell at the slowest pace in 14 months in November as demand from Asia supported the nation’s recovery from its worst postwar recession. Shipments abroad slid 6.2 percent from a year earlier, the smallest drop since September 2008, the Finance Ministry said today in Tokyo. From a month earlier, exports rose a seasonally adjusted 4.9 percent, the biggest advance since November 2002. Worldwide government spending has spurred demand for cars and electronics goods made by companies including Fuji Heavy Industries Ltd. and Elpida Memory Inc. The improvement in shipments may ease concern Japan’s economic recovery will stall after reports this month showed confidence among large manufacturers rose the least in three quarters and companies plan deeper spending cuts. “Economic growth may slow in the months ahead as domestic demand remains weak,” said Yoshiki Shinke , senior economist at Dai-Ichi Life Research Institute in Tokyo. “But exports are looking solid, so Japan should at least be able to avoid another recession.” The improvement in exports is partly due to a favorable year-on-year comparison, economists including Shinke said. In November 2008, shipments abroad tumbled 26.8 percent as global trade froze following the collapse of Lehman Brothers Holdings Inc. The median estimate of 17 economists surveyed by Bloomberg News was for exports to drop 6.8 percent from a year earlier. Imports Decline Imports slid 16.8 percent in November from a year earlier, the slowest decline in 12 months, the ministry said. Japan posted a trade surplus for a 10th straight month, totaling 373.9 billion yen ($4.1 billion). Exports are mending even as the strengthening yen erodes the value of profits companies earn abroad and makes their products less competitive. Japan’s currency traded at 90.41 per dollar at 9:57 a.m. in Tokyo from 90.46 before the report. It has weakened since hitting a 14-year high of 84.83 on Nov. 27. The Nikkei 225 Stock Average rose 0.6 percent. Fuji Heavy, the maker of Subaru cars, expects to boost sales in the U.S. and China next year by 15,000 vehicles in each market, Chief Executive Officer Ikuo Mori said in an interview on Dec. 16. Elpida Memory, Japan’s largest computer-memory chipmaker, may return to profit for the first time in three years, thanks to higher demand, Chief Executive Officer Yukio Sakamoto said this month. China Growth Exports to China and Asia both rose for the first time since September 2008. Shipments to Asia advanced 4.7 percent from a year earlier, compared with a 15 percent drop in October. Exports to China, Japan’s biggest overseas customer, climbed 7.8 percent, compared with a 14.4 percent decline the previous month. Asian economies are benefiting from a global trade rebound that’s being driven by interest-rate cuts and more than $2 trillion in government spending worldwide. Growth in China will accelerate to 9.4 percent next year, according to the median estimate of economists surveyed by Bloomberg News. “Exports to Asia are strong so Japan will be able to avoid a double-dip recession even though a slowdown in domestic demand is unavoidable,” said Azusa Kato , an economist at BNP Paribas in Tokyo. “Demand in Asia is strong enough to offset the adverse impact of the yen’s gain.” U.S. Sales Sales to the U.S. fell 7.9 percent, easing from October’s 27.6 percent decrease and automobile shipments to the nation rose for the first time since April 2008, the Finance Ministry said. Exports to Europe slid 15.9 percent after declining 29 percent. “Exports to the U.S. have hit bottom and are starting to gradually rise,” Dai-Ichi Life’s Shinke said. “Even though it’s not as strong as Asia, it’s positive for Japan’s economy.” Some companies are coping with the rising currency by trimming costs. Toyota Motor Corp. may avoid an annual loss if the yen trades around 90 per dollar because the automaker will postpone investments and cut costs, the Asahi newspaper reported on Dec. 16. Japanese policy makers are trying to sustain a recovery that’s under threat from the currency’s gains and deflation. Prime Minister Yukio Hatoyama unveiled a 7.2 trillion yen economic stimulus package on Dec. 8, a week after the Bank of Japan released a 10 trillion yen credit program. The central bank said last week that it “does not tolerate” falling prices. Export Revival The export revival has yet to spread to the domestic economy. Large companies plan to cut spending 13.8 percent in the year ending March 2010, the second-worst projection on record, the Bank of Japan’s Tankan survey showed last week. Economic growth slowed to an annualized 1.3 percent in the third quarter, about half the pace of the previous three months. Household confidence fell in November for the first time this year and wages have slumped for 17 months. “Even though exports are strong, domestic demand is weaker than people expected earlier this year as employment has worsened rapidly,” said Junko Nishioka , chief economist at RBS Securities Japan Ltd. in Tokyo. “That signals the recovery in external demand and the stimulus effects won’t be enough to sustain growth.” To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net

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Retail Sales in U.S. Probably Increased for Third Time in Past Four Months

December 10, 2009

By Bob Willis Dec. 11 (Bloomberg) — Sales at U.S. retailers probably rose in November for the third time in the past four months, a sign consumers are joining the emerging recovery, economists said before a government report today. Purchases climbed 0.6 percent after a 1.4 percent October gain, according to the median estimate of 79 economists surveyed by Bloomberg News. Other reports may show sentiment climbed this month and import prices increased in November. Households have kept buying automobiles even after government incentives expired, showing the biggest part of the economy was weathering the worst employment slump in the postwar era. The Obama administration is proposing new initiatives in a bid to create jobs, while Best Buy Inc. is among retailers using discounts to lure budget-conscious holiday shoppers. “The stimulus has provided a prop to household income, and that’s enabled spending to be higher,” said David Resler , chief economist at Nomura Securities International Inc. in New York. “One would give the stimulus some credit for keeping the economy from getting worse.” The Commerce Department’s sales report is due at 8:30 a.m. in Washington. Forecasts ranged from a decline of 0.8 percent to a gain of 1.3 percent. General Motors Co ., Toyota Motor Corp., Ford Motor Co . and Chrysler Group LLC all posted November sales that beat analysts’ estimates. The seasonally adjusted sales rate was 10.9 million vehicles, up from 10.45 million in October, according to industry figures released last week. Auto Sales Auto sales climbed back during the past two months after plunging in September, the month after the government’s “cash- for-clunkers” plan expired. Excluding automobiles , sales probably rose 0.4 percent after a 0.2 percent increase the prior month, according to the Bloomberg survey. The data aren’t adjusted for inflation so an increase in gasoline prices probably helped push up service station receipts, contributing to the projected gain. The average cost of a gallon of the fuel at the pump was $2.65 last month, up 9 cents from October, according to figures from AAA, the nation’s biggest motoring organization. Signs the deterioration in the labor market is abating may help restore confidence and boost spending. A Labor Department report last week showed the economy lost 11,000 jobs in November, the smallest decline since the start of the recession in December 2007. Price Cuts Americans are responding to price cuts. Sales on Black Friday and the weekend after the Thanksgiving holiday advanced 0.5 percent as discounts on electronics and toys drew crowds, according to the National Retail Federation. Best Buy, the biggest electronics chain, used $547.99 42- inch Samsung flat-panel TVs to lure shoppers. The retailer had bigger early morning crowds than last year, said Brian Dunn , chief executive officer and president of the Eden Prairie, Minnesota-based company. He said shoppers would continue to see discounted pricing into the holidays. “You’re going to see great values throughout the holiday selling season,” he said in an interview with Bloomberg Television on Nov. 27. TJX Corporation Inc. reported sales up 15 percent in the four weeks ended Nov. 28 from a year earlier. The operator of T.J. Maxx and other low-priced apparel retailers forecasts strong sales through the end of the year. Gaining Confidence “We are confident in our momentum,” said Carol Meyrowitz , chief executive officer of TJX, said in a statement on Dec. 3. Consumers may be turning less pessimistic. The Reuters/University of Michigan preliminary index of consumer sentiment for December probably rose to 68.8 from a final reading of 67.4 a month earlier, according to the survey median. The data are due at about 10 a.m. Consumer spending will probably climb at a 1.7 percent annual rate this quarter, more than anticipated in November, according to the median estimate of economists surveyed this month. The world’s largest economy will expand at a 3 percent pace after growing 2.8 percent in the third quarter, the survey showed. The global recovery is boosting world trade, pushing up the costs of imports. Cost of imported goods increased by 1.2 percent, according to the median estimate of economists surveyed before a Labor Department report at 8:30 a.m. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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Japan Machine Orders Fall 4.5%, Signaling Recovery Too Weak for Investment

December 9, 2009

By Keiko Ujikane Dec. 10 (Bloomberg) — Orders for Japanese machinery fell 4.5 percent in October from a month earlier, the Cabinet Office said today in Tokyo. The median estimate of 27 economists surveyed by Bloomberg was for a 4.4 percent drop. To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net

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Japan Machine Orders Fall 4.5%, Signaling Recovery Too Weak for Investment

December 9, 2009

By Keiko Ujikane Dec. 10 (Bloomberg) — Orders for Japanese machinery fell 4.5 percent in October from a month earlier, the Cabinet Office said today in Tokyo. The median estimate of 27 economists surveyed by Bloomberg was for a 4.4 percent drop. To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net

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Companies in U.S. More Upbeat on Sales Pickup Than Job Growth, Surveys Say

December 8, 2009

By Courtney Schlisserman and Shobhana Chandra Dec. 8 (Bloomberg) — Chief executive officers, supply managers and small business leaders in the U.S. said a pickup in sales next year will not lead to a surge in hiring, surveys showed. Three times as many company chiefs anticipate sales will grow over the next six months than project payrolls will climb, according to a survey by the Washington-based Business Roundtable. A poll by the Institute for Supply Management found service companies, which account for almost 90 percent of the economy, forecast additional job cuts in 2010. “These results are in line with an anticipated slow and uneven recovery,” Ivan G. Seidenberg , chairman of the Business Roundtable and chief executive officer of New York-based Verizon Communications Inc. , said on a conference call with reporters. The reports indicate it will take time for the economy to recover the 7.2 million jobs lost since the recession began in December 2007, the worst employment slump in the post-World War II era. President Barack Obama today proposed new spending on the nation’s transportation system and tax credits to spur hiring by small businesses among a second round of initiatives aimed at cutting the jobless rate . Sixty-eight percent of chief executive officers this quarter said they expect sales to grow, compared with 51 percent in the previous three months, the report from the Business Roundtable showed. The group is an association of CEOs of corporations representing a combined workforce of 12 million employees and almost $6 trillion in annual revenue. Nineteen percent said they planned on increasing headcount. Purchasing Managers Factory purchasing managers anticipated sales will grow 5.7 percent next year, while their counterparts at service providers projected a 1.3 percent gain, according to a semiannual forecast from members of the Tempe, Arizona-based ISM. Manufacturers projected employment will rise 1.5 percent, while service companies predicted a 0.6 percent drop. “Services employment has been declining steadily and will continue to decline,” Anthony Nieves , chairman of the group’s services survey said in an interview. “There is going to be slow growth not substantial spikes.” Labor Department figures last week showed payrolls dropped by 11,000 in November, the smallest decline since the recession began in December 2007. The unemployment rate fell to 10 percent from a 26-year high of 10.2 percent. Fewer Openings A report from the Labor Department today showed job openings declined in October, a sign employers are reluctant to expand staff even as firings subside. Openings, or the number of jobs available as a percent of total employment, fell by 80,000 to 2.51 million. The number of unfilled positions was down by 2.3 million, or 48 percent, since peaking in June 2007. Confidence among small businesses declined in November to the lowest level in four months, the Washington-based National Federation of Independent Business reported today. Those expecting to take on more staff fell to a net minus 3 percent from minus 1 percent a month earlier, the figures showed. Negative readings signal more owners plan to cut staff than hire more workers. The group’s sales index improved to minus 2 from minus 4, showing pessimism over revenue was starting to abate. Obama called for “mobilizing” money from the financial- system bailout fund to open up more credit to small businesses, which accounted for six out of every 10 jobs created over the past 15 years. Obama Initiatives “Given the challenge of accelerating the pace of hiring in the private sector, these targeted initiatives are right and they are needed,” Obama said in a speech at the Brookings Institution , a research organization in Washington. “But with a fiscal crisis to match our economic crisis, we also must be prudent about how we fund it.” Growing sales were making company chiefs at the larger firms more optimistic. The Business Roundtable’s economic outlook index increased this quarter to 71.5, the highest since July-September 2008, from 44.9 in the previous three months. Readings higher than 50 are consistent with economic expansion. FedEx Corp. said yesterday its fiscal second-quarter profit will exceed its forecast as international and ground shipments increased, signaling a strengthening in the global economic recovery. The world’s largest cargo airline flies goods ranging from industrial parts to electronic equipment to financial documents, making its business a proxy for overseas commerce. Demand Overseas Overseas demand has “improved significantly,” Alan Graf , chief financial officer of FedEx, said in a statement. The company is No. 2 in the world in package deliveries behind United Parcel Service Inc. The Business Roundtable’s employment results were more pessimistic than those reported by Manpower Inc. today. The world’s second-largest provider of temporary workers said 12 percent of the more than 28,000 companies it polled planned to hire additional staff in the first quarter, matching the share that anticipated more cutbacks. A record 73 percent projected payrolls will be unchanged. After adjusting for seasonal differences, the Manpower index turned positive for the first time in a year. To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net ; Shobhana Chandra in Washington at schandra1@bloomberg.net

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Sales at U.S. Retailers Probably Rose as Consumer Spending Fueled Economy

December 6, 2009

By Bob Willis Dec. 6 (Bloomberg) — Sales at U.S. retailers probably rose in November for the third time in the past four months, a sign consumer spending will sustain growth into 2010, economists said before a government report this week. Purchases climbed 0.7 percent after a 1.4 percent gain the prior month, according to the median estimate of 62 economists surveyed by Bloomberg News before Commerce Department figures on Dec. 11. Other reports may show the trade gap widened in October and consumers grew more confident this month. Gains in sales show American households have survived the worst employment slump in the postwar era and are poised to join in the emerging expansion. Treasury Secretary Timothy Geithner said the labor market is moving closer to a period of job creation instead of losses, which may give the economy an additional lift early next year. “Job gains are in sight,” said Ken Mayland , president ClearView Economics LLC in Pepper Pike, Ohio. “With employment increases, we can expect people to begin buying some more homes, cars, appliances, etc.” A Labor Department report last week showed the economy lost 11,000 jobs in November, the smallest decline since the start of the recession in December 2007. The jobless rate unexpectedly fell to 10 percent from 10.2 percent. The report showed “progress, but not good enough,” Geithner said in a Dec. 4 interview for Bloomberg Television’s “Political Capital With Al Hunt.” Geithner on Economy “The key test is when you see companies across the country starting to create jobs and add to payrolls,” Geithner said. “We’re getting closer to that point — that’s the important thing. The economy is now growing and growth seems to be gradually strengthening.” Auto sales are improving even after the federal “cash- for-clunkers” incentives ended in late August. General Motors Co ., Toyota Motor Corp., Ford Motor Co . and Chrysler Group LLC all posted November sales that beat analysts’ estimates. The seasonally adjusted sales rate was 10.9 million vehicles, up from 10.45 million in October, according to industry figures released last week. Excluding automobiles , retail sales probably rose 0.4 percent after a 0.2 percent increase the prior month, according to the Bloomberg survey. A gain would be the fourth straight. Holiday shoppers are turning out. Sales on Black Friday and the weekend after Thanksgiving advanced 0.5 percent as discounts on electronics and toys drew budget-conscious crowds, according to the National Retail Federation. Electronics Sales Best Buy Co. , the biggest electronics chain, had bigger early-morning crowds than last year, said Brian Dunn , chief executive officer and president of the Eden Prairie, Minnesota- based company. He said shoppers would continue to see discounted pricing into the year-end holidays. “You’re going to see great values throughout the holiday selling season,” he said in an interview with Bloomberg Television on Nov. 27. TJX Corporation Inc. reported sales up 15 percent in the four weeks ended Nov. 28 from a year earlier. The operator of T.J. Maxx and other low-priced apparel retailers forecasts strong sales through the end of the year. “We are confident in our momentum,” said Carol Meyrowitz , chief executive officer of TJX, said in a statement on Dec. 3. Gaining Confidence The Reuters/University of Michigan preliminary index of consumer sentiment for December probably rose to 69 from 67.4 a month earlier, according to the Bloomberg survey before the Dec. 11 release. The economy grew at a 2.8 percent annual pace in the third quarter following four quarters of contraction that marked the deepest recession since the 1930s. Economists surveyed by Bloomberg early last month forecast growth will accelerate to 3 percent in the current quarter. The recovery is spurring demand for imports. That probably caused the trade deficit to widen to $37 billion in October from $36.5 billion in September, according to the median estimate of economists surveyed by Bloomberg before the Dec. 10 report from the Commerce Department. The collapse in trade earlier this year brought the deficit down to a near-decade low of $26.4 billion in May. With global economies and trade on the mend, oil prices are rising. That helped push up the costs of imported goods by 1.2 percent in November, according to the median estimate of economists surveyed by Bloomberg News. Compared with a year earlier, import prices probably rose 2.9 percent, economists forecast. The Labor Department is due to release the numbers on Dec. 11. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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Sales at U.S. Retailers Probably Rose as Consumer Spending Fueled Economy

December 6, 2009

By Bob Willis Dec. 6 (Bloomberg) — Sales at U.S. retailers probably rose in November for the third time in the past four months, a sign consumer spending will sustain growth into 2010, economists said before a government report this week. Purchases climbed 0.7 percent after a 1.4 percent gain the prior month, according to the median estimate of 62 economists surveyed by Bloomberg News before Commerce Department figures on Dec. 11. Other reports may show the trade gap widened in October and consumers grew more confident this month. Gains in sales show American households have survived the worst employment slump in the postwar era and are poised to join in the emerging expansion. Treasury Secretary Timothy Geithner said the labor market is moving closer to a period of job creation instead of losses, which may give the economy an additional lift early next year. “Job gains are in sight,” said Ken Mayland , president ClearView Economics LLC in Pepper Pike, Ohio. “With employment increases, we can expect people to begin buying some more homes, cars, appliances, etc.” A Labor Department report last week showed the economy lost 11,000 jobs in November, the smallest decline since the start of the recession in December 2007. The jobless rate unexpectedly fell to 10 percent from 10.2 percent. The report showed “progress, but not good enough,” Geithner said in a Dec. 4 interview for Bloomberg Television’s “Political Capital With Al Hunt.” Geithner on Economy “The key test is when you see companies across the country starting to create jobs and add to payrolls,” Geithner said. “We’re getting closer to that point — that’s the important thing. The economy is now growing and growth seems to be gradually strengthening.” Auto sales are improving even after the federal “cash- for-clunkers” incentives ended in late August. General Motors Co ., Toyota Motor Corp., Ford Motor Co . and Chrysler Group LLC all posted November sales that beat analysts’ estimates. The seasonally adjusted sales rate was 10.9 million vehicles, up from 10.45 million in October, according to industry figures released last week. Excluding automobiles , retail sales probably rose 0.4 percent after a 0.2 percent increase the prior month, according to the Bloomberg survey. A gain would be the fourth straight. Holiday shoppers are turning out. Sales on Black Friday and the weekend after Thanksgiving advanced 0.5 percent as discounts on electronics and toys drew budget-conscious crowds, according to the National Retail Federation. Electronics Sales Best Buy Co. , the biggest electronics chain, had bigger early-morning crowds than last year, said Brian Dunn , chief executive officer and president of the Eden Prairie, Minnesota- based company. He said shoppers would continue to see discounted pricing into the year-end holidays. “You’re going to see great values throughout the holiday selling season,” he said in an interview with Bloomberg Television on Nov. 27. TJX Corporation Inc. reported sales up 15 percent in the four weeks ended Nov. 28 from a year earlier. The operator of T.J. Maxx and other low-priced apparel retailers forecasts strong sales through the end of the year. “We are confident in our momentum,” said Carol Meyrowitz , chief executive officer of TJX, said in a statement on Dec. 3. Gaining Confidence The Reuters/University of Michigan preliminary index of consumer sentiment for December probably rose to 69 from 67.4 a month earlier, according to the Bloomberg survey before the Dec. 11 release. The economy grew at a 2.8 percent annual pace in the third quarter following four quarters of contraction that marked the deepest recession since the 1930s. Economists surveyed by Bloomberg early last month forecast growth will accelerate to 3 percent in the current quarter. The recovery is spurring demand for imports. That probably caused the trade deficit to widen to $37 billion in October from $36.5 billion in September, according to the median estimate of economists surveyed by Bloomberg before the Dec. 10 report from the Commerce Department. The collapse in trade earlier this year brought the deficit down to a near-decade low of $26.4 billion in May. With global economies and trade on the mend, oil prices are rising. That helped push up the costs of imported goods by 1.2 percent in November, according to the median estimate of economists surveyed by Bloomberg News. Compared with a year earlier, import prices probably rose 2.9 percent, economists forecast. The Labor Department is due to release the numbers on Dec. 11. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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Manufacturing in U.S. Probably Grew in November, Taking Lead in Recovery

December 1, 2009

By Bob Willis Dec. 1 (Bloomberg) — Manufacturing in the U.S. probably expanded in November for a fourth consecutive month, putting factories at the forefront of the recovery , economists said before reports today. The Institute for Supply Management’s manufacturing index fell to 55 from October’s three-year high of 55.7, according to the median forecast of 72 economists surveyed by Bloomberg News. Other reports may show pending sales of existing homes and construction spending declined in October. Growing exports and lean inventories may keep manufacturing growing into 2010, helping drive the economic expansion. Factory production , which rose at the fastest pace in a quarter century in the three months through September, will probably climb at a slower pace in coming months as mounting unemployment restrains American consumers. October was “strong by historical standards,” said Michael Moran , chief economist at Daiwa Securities USA Inc. in New York. “Such results seem out of line with the moderate pace of growth in the economy and corrections are likely to unfold.” The Tempe, Arizona-based ISM’s report is due at 10 a.m. New York time. Forecasts ranged from 53.5 to 57. Fifty is the dividing line between expansion and contraction. Manufacturing accounts for about 12 percent of the economy. Factory output increased 3.4 percent from July through September, the biggest three-month gain since 1984, according to figures from the Federal Reserve. Government Help Government-assisted rebounds in housing and auto-making, two of the most depressed areas during the recession, contributed to the initial burst of activity. Reports today may show those areas are now stabilizing. Pending homes sales fell 1 percent in October, the first decrease in nine months, according to the survey median ahead of a report from the National Association of Realtors at 10 a.m. in Washington. Cars and light trucks probably sold at a 10.5 million annual pace last month, little changed from October, industry figures may show. President Barack Obama last month signed legislation extending a first-time homebuyers credit through April, and expanded it to include to current owners. The $8,000 tax credit gave home sales and construction a lift for much of this year. Also at 10 a.m., a Commerce Department report may show spending on construction projects fell 0.5 in October after rising 0.8 percent a month earlier, according to the survey median. Rising Stocks The Standard & Poor’s 500 Index gained 5.7 percent in November, capping a 62 percent increase since it reached a 12- year low March 9, on prospects the economy was recovering. Other manufacturing surveys have shown improvement. The Institute for Supply Management-Chicago Inc.’s business barometer rose in November to 56.1, its highest level since August 2008, the group said yesterday. Gains in the gauges for new orders and backlogs signaled the recovery will persist. Regional Fed Bank reports last month showed manufacturing in the New York district expanded in November for a fourth month and grew in the Philadelphia region at the fastest pace in more than two years. General Motors Co . is among auto companies leading the rebound in output after emerging from bankruptcy. Sales are now stabilizing after slumping in September following the expiration of the government’s “cash-for-clunkers” incentives. Auto Sales “The encouraging thing for the industry and for GM is that this is being accomplished now without either ‘cash for clunkers’ or any federal stimulus,” Michael DiGiovanni , GM’s sales analyst, said on a conference call on Nov. 19. “Our sales appear to be right on target.” Economists surveyed by Bloomberg at the beginning of November forecast the economy would grow at a 3 percent pace in the last three months of the year, following a 2.8 percent pace in the third quarter. A rebound in global growth and a 16 percent drop in the dollar since March against a basket of six major trading partners is helping spur demand from abroad. Exports climbed 9.4 percent in the five months through September, the biggest such gain since comparable records began in 1992, according to figures from the Commerce Department. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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London Luxury Homes Post First Gain in 17 Months as Bankers Resume Buying

November 28, 2009

By Peter Woodifield Nov. 28 (Bloomberg) — Luxury-home prices in central London rose on an annual basis for the first time in 17 months as bank and hedge-fund executives bought houses and apartments in anticipation of bonuses, Knight Frank LLP said. Values of properties costing more than 1 million pounds ($1.6 million) were 1.6 percent higher in November than a year earlier, the first annual increase since June 2008, the London- based broker said in an e-mailed statement today. Still, prices are 15 percent below their peak in March 2008. “Anecdotal evidence from across our offices suggests that City money is becoming more apparent as we get closer to the end-of-year bonus season,” Liam Bailey , head of residential research at Knight Frank, said in the statement. “Demand from senior management is driving the market.” Bonuses for financial-services employees in the City of London and Canary Wharf, the two largest financial districts, may rise 50 percent this year to 6 billion pounds, according to Knight Frank. Finance industry workers account for half the demand for luxury homes. Prices rose 1.2 percent from in November from October, the eighth straight month-on-month increase, Knight Frank said. The most expensive homes didn’t start recovering in value until May, the broker said. While bonuses being paid by banks such as Goldman Sachs Group Inc. are likely to help the housing market, the number of properties available will remain low, Louise Hewlett, managing director of London-based Ayslesford International said by e- mail. False Bouyancy “It is the shortage of supply which has given the rather false impression of a buoyant market,” said Hewlett. “In some instances, high prices have been paid purely based on the lack of choice and competition from other buyers.” Prices increased the most among properties costing more than 10 million pounds, gaining 1.9 percent in November from a month earlier, Knight Frank said. Houses and apartments in Chelsea, Kensington and Knightsbridge, districts favored by bankers, rose the most. Luxury residences may return to peak prices in 2012, a year or two sooner than the rest of the U.K. housing market, Knight Frank and Savills Plc estimate. The pound’s 19 percent decline against a basket of currencies since the home market’s peak has revived demand from foreign investors. Prices in Kensington and Knightsbridge may also have been boosted by Italian buyers benefiting from the combination of the weak pound against the euro and a tax-evasion amnesty in July, according to Savills. Italians accounted for almost half of European buyers of London property this year, compared with 20 percent in 2008, Savills said. “With stock levels still 25 percent below normal at the current time and new buyer registrations up by 30 percent on last year, the pressure on prices in the short term at least is likely to be upwards,” Bailey said. For Related News and Information: Stories on the U.K. property industry: TNI UK REL Today’s top Bloomberg News real estate stories: TOP REL Stories on the London housing market TNI LONDON HSNG Luxury housing stories TNI LUX HSNG Stories on personal wealth: PERW

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South Korean Manufacturers’ Confidence Declines on Uncertainty Over Demand

November 25, 2009

By Seyoon Kim Nov. 26 (Bloomberg) — South Korean manufacturers’ confidence slipped to the lowest level in four months due to uncertainty about the outlook for domestic demand. An index measuring expectations for December fell to 85 from 93 a month earlier, according to a survey of 1,475 manufacturers released by the Bank of Korea today in Seoul. A measure of non-manufacturing companies’ expectations was unchanged at 84. Consumer confidence fell in November for the first time in eight months on concern about the sustainability of the economic recovery. The benchmark Kospi stock index has declined 3.7 percent since October and the won gained 2.3 percent in the same period against the dollar. Finance Minister Yoon Jeung Hyun said yesterday the currency’s gain may hurt corporate profitability. Asia’s fourth-largest economy expanded 2.9 percent in the third quarter, the fastest pace in seven years, as South Korea led a regional rebound with China and Singapore. Samsung Electronics Co. and Hyundai Motor Co. , among the nation’s largest exporters, reported higher earnings in the quarter. Today’s report showed an index measuring the outlook for exports dropped to 98 from 102 a month ago, and a gauge for domestic sales in December fell to 98 from 101. The Bank of Korea surveyed the manufacturers and 801 non- manufacturers between Nov. 13 and Nov. 20. To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net

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Japanese Exports Fall By Least in a Year as Global Stimulus Boosts Demand

November 24, 2009

By Keiko Ujikane and Kyoko Shimodoi Nov. 25 (Bloomberg) — Japan’s exports fell at the slowest pace in a year in October as stimulus spending by governments worldwide boosted demand, sustaining the nation’s recovery from its deepest postwar recession. Shipments abroad dropped 23.2 percent from a year earlier, compared with a 30.6 percent decline in September, the Finance Ministry said today in Tokyo. The median estimate of 18 economists surveyed by Bloomberg was for a 26.8 percent drop. Renewed demand from emerging nations including China is spurring sales for Japanese manufacturers from Honda Motor Co. to Hitachi Construction Machinery Co. Exports helped Japan’s economy expanded at the fastest pace in more than two years in the third quarter, even as prices of goods declined and the yen gained 7.4 percent against the dollar. “China’s demand is considerably strong, actually stronger than we thought,” said Junko Nishioka , chief economist at RBS Securities Japan Ltd. in Tokyo. “That means the export-led recovery story will go on in the fourth quarter, despite the yen appreciation.” The yen traded at 88.59 per dollar at 8:54 a.m. in Tokyo from 88.61 before the report was published. Imports slid 35.6 percent, resulting in a trade surplus of 807.1 billion yen ($9.1 billion), the ministry said. From a month earlier, exports rose 2.5 percent. Japanese exporters are benefiting from a global trade rebound that’s being driven by interest-rate cuts and more than $2 trillion in government spending worldwide. Stimulus Boost Honda Motor, Japan’s second-largest carmaker, almost tripled its full-year profit forecast as government stimulus measures boosted demand for fuel-efficient vehicles in China and Japan. The automaker expects net income of 155 billion yen ($1.7 billion) in the year ending March, compared with an earlier forecast of 55 billion yen, it said on Oct. 27. Hitachi Construction Machinery, Asia’s second-largest excavator maker, returned to profit last quarter as cost cuts countered a sales slide triggered by the global recession. “Looking ahead, Japan’s economy may sustain a gradual recovery driven by an increase in exports, although personal consumption and public works spending are expected to decline,” said Yoshiki Shinke , a senior economist at Dai-Ichi Life Research Institute in Tokyo. China’s economy will probably expand 10.5 percent in the fourth quarter from a year earlier, after growing 8.9 percent in the previous quarter, according to the median forecast of 38 economists surveyed by Bloomberg News. The country’s 4 trillion yuan ($586 billion) stimulus plan and record lending growth has helped the nation’s economic growth accelerate. Falling Prices Even as exports rebound, falling prices in Japan threaten to squeeze profits and wages, smothering demand in an economy that analysts say may slow in coming months once global stimulus effects wane. The yen’s advance against the dollar in the past three months is also eroding exporters’ profits. The government last week declared the economy is in deflation for the first time in three years, pressing the Bank of Japan to be more aggressive about tackling price declines. The domestic demand deflator , a measure of price levels that excludes the cost of imports, fell 2.6 percent in the third quarter from a year earlier, the most since 1958, Cabinet Office figures showed last week. Gross domestic product jumped 4.8 percent, the most since early 2007. “Japan’s economy is in chronic deflation,” said Yasunari Ueno , chief market economist at Mizuho Securities Co. in Tokyo. “Deflation is strengthening little by little” because weak demand and a higher yen are exerting downward pressure on prices, he said. To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net

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U.S. Two-Year Treasury Yields Fall to Lowest This Year on Refuge Buying

November 21, 2009

By Susanne Walker Nov. 21 (Bloomberg) — Treasury two-year note yields fell to the lowest level this year on concern the rally in risk assets has outpaced growth prospects and as Federal Reserve officials signaled interest rates will remain near zero. Three-month bill rates turned negative on Nov. 19 for the first time since last year’s credit freeze as a 62 percent rally in the Standard & Poor’s 500 Index from a 12-year low in March pushed valuations to about 22 times its companies’ earnings, the highest level since 2002. The minutes of the Fed’s Nov. 4 Federal Open Market Committee meeting will be released Nov. 24. “Investors are trying to lock in a good year and are reversing risk positions,” said Michael Pond , an interest-rate strategist in New York at Barclays Plc, one of the 18 primary dealers that trade directly with the Fed. “They are not taking new risks as they go into year-end.” The two-year note yield touched 0.67 percent yesterday, the lowest level since December. It fell nine basis points on the week, the most since the five days ended Oct. 30, to 0.72 percent, according to BGCantor Market Data. The 1 percent note due in October 2011 rose 5/32 this week, or $1.56 per $1,000 face amount, to 100 17/32. The three-month bill rate was 0.005 percent, down five basis points, or 0.05 percentage point, for the week, according to Bloomberg data. The 10-year yield fell six basis points to 3.36 percent on the week. Bill rates were negative last December for the first time since the government began selling the securities in 1929 as investors sought to preserve their principal following the collapse of Lehman Brothers Holdings Inc. Bullard Comments Fed Bank of St. Louis President James Bullard said on Nov. 18 that experience indicates policy makers may not start to increase borrowing costs until early 2012. “If you look at the last two recessions, in each case the FOMC waited two and a half to three years before we started our tightening campaign,” Bullard said in a speech in St. Louis. “If we took that as a benchmark, that would put us in the first half of 2012.” Bullard’s comments followed a Nov. 16 speech by Chairman Ben S. Bernanke in which he indicated that the central bank’s extended period of low borrowing costs may be even longer amid economic “headwinds.” “There have been recent comments from a lot of people at the Fed hinting that they may not hike for a long, long time,” said Ajay Rajadhyaksha , head of U.S. fixed-income strategy in New York at Barclays. “That’s why the two year has gotten the support it has.” Consumer Prices The Fed cut its target for overnight lending between banks to a range of zero to 0.25 percent in December and repeated that pledge on Nov. 4 at the end of a two-day meeting. At that time, Fed officials also specified for the first time that policy will stay unchanged as long as inflation expectations are stable and unemployment fails to decline. They said businesses are reducing staffing and investment “at a slower pace” and household spending appears to be growing slowly. Consumer prices rose 0.3 percent last month, according to figures from the Labor Department on Nov. 18. Economists forecast the consumer price index would rise 0.2 percent, according to the median of a Bloomberg News survey. A report on Nov. 17 showed producer prices increased less than forecast in October. The 0.3 percent increase in prices paid to factories, farmers and other producers was smaller than forecast and followed a 0.6 percent drop in September, according to Labor Department data. ‘Dovish Stance’ “The emphasis on low inflation and economic slack solidifies the message once again that the Fed’s dovish stance of a lower-for-longer policy with respect to rates is here to stay,” said John Spinello , chief technical strategist in New York at primary dealer Jefferies Group Inc. The difference between rates on 10-year notes and Treasury Inflation Protected Securities, or TIPS , which reflects the outlook among traders for consumer prices, widened to 2.19 percentage points yesterday from about zero at the end of last year. The figure is in line with the five-year average. The Treasury will auction a record $118 billion of 2-, 5- and 7-year notes on three consecutive days beginning Nov. 23. Treasury Purchases Foreign purchases of U.S. debt totaled $44.7 billion in September compared with purchases of $28 billion a month earlier, according to Treasury data released on Nov. 17. China remained the biggest foreign holder of U.S. Treasuries, after its holdings rose $1.8 billion to $798.9 billion, according to data from the Treasury Department’s Treasury International Capital report. Japan, the second-largest holder, increased its holdings $20.3 billion to $751.5 billion. U.S. marketable debt totaled $6.95 trillion in October, after climbing to a record $7.01 trillion in September as President Barack Obama borrows unprecedented amounts to fund spending programs and service record deficits. Two-year notes , among the most sensitive to Fed interest rates because of their short maturity, returned 1.65 percent this year through Nov. 19, according to indexes compiled by Bank of America’s Merrill Lynch unit. Ten-year notes, which are more sensitive to inflation, have fallen 6.4 percent. To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net .

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Producer Prices in U.S. Rise Less Than Forecast, Easing Inflation Concern

November 17, 2009

By Courtney Schlisserman Nov. 17 (Bloomberg) — Wholesale prices in the U.S. increased in October for just the second time in the past four months, indicating inflation will not be a concern for the Federal Reserve. The 0.3 percent increase in prices paid to factories, farmers and other producers was smaller than forecast and followed a 0.6 percent drop in September, according to Labor Department data released today in Washington. Excluding food and fuel, so-called core prices unexpectedly dropped 0.6 percent, capping the smallest 12-month gain in five years. Excess capacity near June’s record low of 68.3 percent will probably prevent suppliers from passing on the recent rebound in commodity costs for months to come. The report underpins Fed expectations, reiterated yesterday by Chairman Ben S. Bernanke , that inflation will be “subdued,” allowing policy makers to keep interest rates low for an “extended period.” “With weak final demand and limited cost pressure, there’s no reason to see core inflation turn up here,” said Zach Pandl , an economist at Nomura Securities International Inc. in New York. The slower gain in core prices from a year earlier “is closer to what the Fed would like to see.” Industrial production rose less than forecast in October, restrained by reductions in the manufacturing of autos and business equipment such as computers, a report from the Fed also showed today. Less Than Forecast Output at factories, mines and utilities rose 0.1 percent following an increase of 0.6 percent in September. Manufacturing production fell for the first time in four months, while utility output jumped 1.6 percent. Stock-index futures and Treasury securities were down after the reports. The Standard & Poor’s 500 contract fell 0.2 percent to 1,104.2 at 9:21 a.m. in New York. The yield on the benchmark 10-year note climbed to 3.36 percent from 3.34 percent late yesterday. Economists forecast prices would rise 0.5 percent, according to the median of 73 estimates in a Bloomberg News survey. Estimates ranged from no change to an increase of 1.3 percent. The decrease in prices excluding food and energy last month was the biggest since July 2006. The core measure was forecast to rise 0.1 percent after a 0.1 percent drop a month earlier, according to the Bloomberg News survey. Prices Falling Compared with a year earlier, companies paid 1.9 percent less for goods today’s report showed. Core costs were up 0.7 percent from a year earlier, the smallest 12-month gain since March 2004. Prices overall were buoyed by 1.6 percent increases in both food and fuel as the cost of everything from gasoline to vegetables and fruit climbed. Declining prices of light trucks and passenger cars, which reflected the switch to the 2010 model year, pushed core costs lower. Producer prices are one of three monthly inflation gauges reported by the Labor Department. The cost of imported goods rose 0.7 percent in October and increased 0.4 percent excluding energy. The government is scheduled to release its consumer price report tomorrow. “Inflation seems likely to remain subdued for some time,” Bernanke said yesterday in a speech to the Economic Club of New York. He also said “significant economic challenges remain.” One challenge is trying to absorb excess capacity. The share of plants in use reached 70.7 percent in October compared with an average 81.1 percent since records began in 1967, the Fed’s production report showed. Economists track operating rates to gauge factories’ ability to produce goods with existing resources. Lower rates reduce the risk of bottlenecks that can force prices higher. Fed policy makers this month reiterated plans to keep interest rates near zero for “an extended period” and specified for the first time that policy will stay unchanged as long as inflation expectations are stable and unemployment fails to decline. Some companies still see pressure to hold down costs. Wal- Mart Stores Inc. Chief Executive Officer Michael T. Durke said the company continues “to experience ongoing deflation across our businesses.” Huntsman Corp., a chemical maker, said Nov. 4 that third- quarter sales fell 23 percent to $2.11 billion as a 3 percent increase in volumes could not make up for a 25 percent drop in prices. Nonetheless, the dollar’s 15 percent drop since March 5 according to the index which IntercontinentalExchange Inc. uses to track the currency’s value against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, and expanding global economies are forcing up commodity costs. The U.S. last week raised its forecast for crude-oil prices this year and next on speculation that demand will rise as the global economy improves. To contact the reporter on this story: Courtney Schlisserman at cschlisserma@bloomberg.net

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Japanese Machinery Orders Rise 10.5%, More Than Twice as Much as Estimated

November 10, 2009

By Jason Clenfield and Tatsuo Ito Nov. 11 (Bloomberg) — Orders for Japanese machinery rose more than economists estimated in September, signaling that a recovery in corporate profits may be encouraging firms to start spending on plant and equipment. Orders , an indicator of business investment in three to six months, climbed 10.5 percent from a month earlier, the Cabinet Office said today in Tokyo. The median estimate of 25 economists surveyed by Bloomberg was for a 4.1 percent gain. Today’s report suggests that Japanese companies are becoming confident enough to increase spending as their earnings recover since plunging in the first quarter of the year. Companies from Toshiba Corp. to Elpida Memory Inc. have announced plans to build new factories or increase capacity in the past month after beating their own earnings estimates. “The bottom is probably behind us for capital spending,” said Masamichi Adachi , a senior economist at JPMorgan Chase & Co. in Tokyo. “The retrenchment phase is over and the corporate sector as a whole should gradually pick up in a self-sustained way.” The yen traded at 89.75 per dollar at 8:54 a.m. in Tokyo from 89.76 before the report was published. A report due Nov. 16 will probably show Japan’s economy grew at a 2.9 percent annualized pace last quarter, according to the median estimate of economists surveyed by Bloomberg. It will be the second consecutive expansion since the economy emerged from its worst postwar recession and the first since Prime Minister Yukio Hatoyama’s government took power in September. Add to Growth Business investment may add to growth for the first time since the first three months of 2008, analysts predict. An increase in capital spending, which accounted for about a third of the economy’s growth during the six-year expansion that ended in 2007, would lend stability to a recovery that has depended on temporary factors including government stimulus and a rebound in production spurred by run down inventories. Improved earnings have provided companies with money to invest, while economic growth in Japan’s overseas markets has rekindled demand. Exports grew 10.4 percent last quarter from the previous period, according to Cabinet Office trade figures measured by volume. Pretax profit at the more than 900 Japanese companies that had announced earnings as of Nov. 10 doubled in the quarter ended Sept. 30 from the previous three months, according to data compiled by Bloomberg News. Even after the gain, profit was still 40 percent below the same period last year. More Spending Better earnings are already encouraging companies to spend. Toshiba, Japan’s biggest maker of semiconductors, said last month it will spend 25 billion yen ($277 million) to build a new lithium-ion battery plant in Niigata, northern Japan. Cost cuts last quarter helped the company narrow its loss to 200 million yen from 27 billion yen during the same period last year. Elpida Memory , Japan’s largest computer memory-chip maker, last week raised its estimate for capital spending in the fiscal year by 50 percent to 60 billion yen, citing increased orders for gear to make more advanced semiconductors. Shares of machinery makers have risen this year, with Fanuc Ltd. up 21 percent and Advantest Corp. climbing 41 percent. “Executives feel that we’ve escaped the crisis and now we have to think about a more normal situation,” said JPMorgan’s Adachi. “It’s less benign than in the five years through 2007, but there’s still going to be positive growth and you have to compete with competitors in Asia.” To contact the reporters on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net ; Tatsuo Ito in Tokyo at tito@bloomberg.net .

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Tighter Bank Lending Standards Reinforce Fed’s Decision to Keep Rates Low

November 10, 2009

By Scott Lanman Nov. 10 (Bloomberg) — The Federal Reserve said U.S. banks kept tightening lending standards for companies and consumers last quarter, reinforcing the central bank’s decision to leave its benchmark interest rates at record lows for a long time. At the same time, the number of banks making it tougher to borrow diminished, the Fed said yesterday in its quarterly Senior Loan Officer survey. Demand for most types of loans weakened at a smaller number of banks than in the second quarter, the survey showed. The report helps explain why Fed policy makers last week said “tight credit” remains a drag on the economy and pledged to keep their benchmark interest rate near zero for an “extended period.” JPMorgan Chase & Co. is among the banks that have reduced lending in response to stricter underwriting standards for consumer loans and lower demand among companies. “The fact that banks are still tightening standards is just another reason why the Fed is not going to be raising rates anytime soon,” said Dean Maki , chief U.S. economist at Barclays Capital Inc. in New York, who predicts the Fed won’t tighten until September. While the Fed isn’t about to raise rates, with fewer banks making it tougher to borrow, “credit may be less of a headwind to growth in coming quarters than is commonly believed,” said Maki, a former Fed economist. The percentage of banks tightening standards was “quite similar” to the end of the last recession, in 2001, he said. Separately, the Fed said yesterday that nine of 10 bank holding companies deemed short of capital in May have raised their reserves enough to withstand the risk of higher unemployment and slower economic growth. Talks With Treasury The one exception, GMAC Inc., “is expected to meet its remaining buffer need by accessing” one of several government programs to help the auto industry, the Fed said. GMAC is “in discussions with the U.S. Treasury on the structure of its investment,” it said. The survey of loan officers at 57 U.S. banks and 23 U.S. branches of foreign banks was conducted from about Oct. 6 to Oct. 20, the central bank said. The report doesn’t identify respondents. Loans and leases held by U.S. commercial banks have declined for 10 straight months, falling to $6.7 trillion as of Oct. 28 from $7.2 trillion at the end of 2008, according to a separate statistical release from the Fed. Commercial and industrial loans have dropped to $1.37 trillion from $1.6 trillion, commercial real-estate loans have declined to $1.66 trillion from $1.72 trillion, and consumer loans have fallen to $847 billion from $857 billion at the end of last year. Commercial Loans In response to a special question on the decline in commercial and industrial loans, banks cited lower originations of loans and decreased draws on revolving credit lines as the two most important reasons for the drop. About a net 15 percent of banks tightened standards on commercial and industrial loans, half of the prior survey and below the peak of about 80 percent a year ago, the Fed said. Also, about a net 15 percent of respondents said they tightened standards for credit-card loans, the smallest since April 2008 and down from 35 percent in the July survey. Banks were extending commercial real estate loans more often than refinancing them, the survey showed. About 75 percent reported extending more than one-fourth of construction and land development loans scheduled to mature by September. The Standard & Poor’s 500 Index advanced 2.2 percent to 1,093.08 at 4:05 p.m. in New York for its sixth straight gain. Financial companies gained the most of 10 industry groups in the S&P 500, adding 3.6 percent collectively. ‘Work Constructively’ Last month, the Fed and other regulators urged commercial real estate lenders to “work constructively” to arrange modifications with borrowers who show a willingness to repay debt. Loan originations by the biggest U.S. banks receiving government assistance fell by 17 percent in August from a month earlier, the Treasury Department said Oct. 15. In its monthly survey of lending by the top 22 recipients of capital injections from the $700 billion Troubled Asset Relief Program, the Treasury also said total loan balances fell by 1 percent in August from a month earlier. Loans at New York-based JPMorgan fell to $653.1 billion at the end of the third quarter from $761.4 billion a year earlier. The decline reflected “some tightening of underwriting standards” on consumer loans, including credit cards, Chief Financial Officer Michael Cavanagh told analysts during an Oct. 14 call following the release of the quarter’s results. Loan demand from companies also fell, he added. Bank of America Corp.’s loans and mortgages shrank to $878.4 billion from $922.3 billion a year earlier. The drop was due to “lower consumer spending and a resurgence in the capital markets” that allowed corporations to issue bonds and equity to pay off debt, Kenneth Lewis , chief executive officer of the Charlotte, North Carolina-based bank, said on an Oct. 16 conference call with analysts after the third-quarter report. To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net .

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Geithner Says U.S. Recovery Requires Banks to Take Risks, Resume Lending

November 1, 2009

By Alison Fitzgerald Nov. 1 (Bloomberg) — U.S. Treasury Secretary Timothy Geithner said the country’s economic recovery and job creation hinge on banks taking more risk and restoring the flow of credit to businesses. “The big risk we face now is that banks are going to overcorrect and not take enough risk,” Geithner said in an interview today on NBC’s “Meet the Press” program. “We need them to take a chance again on the American economy. That’s going to be important to recovery.” Geithner judged the banking system to be “dramatically more stable” than it’s been in more than a year. U.S. banks have been reluctant to lend as the economy emerges from a recession and unemployment approaches 10 percent. Loans by the biggest banks receiving the most government assistance from the $700 billion Troubled Asset Relief Program fell by 17 percent in August to $234.7 billion, the third time in six months that lending declined. Bank of America Corp.’s total loan originations fell 22 percent to $57.1 billion in August from a month earlier, according to an Oct. 15 report from the Treasury. Lending by Wells Fargo & Co. fell 18 percent to $55 billion for the month, and JPMorgan Chase & Co.’s loan originations dropped 5 percent to $43.8 billion, the report showed. Household and business borrowing have plummeted in the last year. Consumer credit fell in the second quarter by 6.5 percent, according to the Federal Reserve’s flow of funds report. Non- financial business debt fell at a 1.75 percent annual rate. U.S. Savings Rate U.S. households are saving more, which Geithner said is a logical response to the economic crisis. Geithner said he expects the recovery to be “a little choppy.” The U.S. economy expanded in the third quarter for the first time in a year, the Commerce Department said last week. Gross domestic product grew at a 3.5 percent pace from July through September. Geithner declined to say whether he thinks the recession is over. “A lot of damage was caused by this crisis. It’s going to take some time for us to grow out of this,” he said. “It could be a little choppy. It could be uneven. And it’s going to take awhile.” While the GDP report was a “good number,” he said a better measure of economic recovery will be job growth. The unemployment rate rose to 9.8 percent in September. Geithner said the rate is likely still rising, and he noted that most economists expect it to eclipse 10 percent. October Jobs A Labor Department report Nov. 6 will probably show joblessness nationwide reached 9.9 percent in October, according to a Bloomberg News survey of 61 economists. That would be the highest level since June 1983. “This is a tough economy still for huge numbers of American businesses,” he said. “The real test will be when we have unemployment come down.” The Treasury secretary said it’s not yet time to announce steps to cut the U.S. deficit , which has shot up to a record $1.4 trillion in the last year, triple the previous year, after the U.S. Congress committed billions to bailing out banks and President Barack Obama and lawmakers committed $787 billion to an economic stimulus package. Geithner said it’s “not yet” time to discuss whether another economic stimulus package should be considered, because only about half of the first one has been spent. To contact the reporters on this story: Alison Fitzgerald in Washington at Afitzgerald2@bloomberg.net

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Ford Says October Sales Climbed as Auto Industry Ended `Clunkers’ Hangover

October 30, 2009

By Keith Naughton and Alex Ortolani Oct. 30 (Bloomberg) — Ford Motor Co. said U.S. auto sales rose in October from a month earlier as the industry probably rebounded from the drop in demand that followed the so-called cash for clunkers program. “The roller coaster is pretty much over,” Ken Czubay , the U.S. sales chief, told reporters today at Ford’s headquarters in Dearborn, Michigan. “People aren’t all of a sudden popping Champagne corks, but they are feeling on the bubble of being more stable.” Industrywide October sales of cars and trucks ran at a seasonally adjusted annual rate of 10.3 million, based on the average of 9 analyst estimates compiled by Bloomberg. The rate was 10.6 million a year earlier. Sales at a pace of 10 million or more would make October the first month this year to top that mark without the benefit of the government’s clunkers incentives, which ran from July 27 through Aug. 24. September deliveries slumped after the U.S. rebates drained demand and depleted dealers’ inventory. “Industry sales of light vehicles appear to have continued their steady recovery since the post-clunkers trough of last month, benefiting from improved vehicle availability, and from higher incentive spending and marketing activity by the automakers,” Brian Johnson , a Chicago-based analyst with Barclays Capital, said in a note to investors Oct. 28. While Czubay didn’t project Ford’s results for the month, he said the second-largest U.S. automaker was “pleased” with its performance and that it was still “too close to call” whether sales would rise from a year earlier. “We are getting back to sequential business improvements,” Czubay said. Ford will join the rest of the industry in reporting October sales on Nov. 3. Before a 5.1 percent drop in September, Ford posted U.S. sales gains in July and August, powered by consumer demand for the clunkers cash. That was the first time that Ford, General Motors Co. or Chrysler Group LLC increased deliveries for two or more months since GM’s August-October streak in 2007. To contact the reporters on this story: Keith Naughton in Dearborn, Michigan at Knaughton3@bloomberg.net ; Alex Ortolani in Southfield, Michigan, at aortolani1@bloomberg.net

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Hong Kong Developers Seek Cheaper Land as Government Wants to Curb Prices

October 27, 2009

By Chia-Peck Wong Oct. 28 (Bloomberg) — Hong Kong’s biggest developers signaled they want cheaper land as the government seeks to increase supply and curb speculation after home prices surged 28 percent this year. “The developers are requesting the government put the prices closer to the market level,” Stewart Leung , an executive director at New World Development Ltd., told reporters in Hong Kong yesterday after a meeting with the city’s Financial Secretary John Tsang . “We also hope that the government will increase the opportunities for selling land via applications.” Sun Hung Kai Properties Ltd. , the world’s biggest developer by market value, and rivals including Cheung Kong (Holdings) Ltd. fell in Hong Kong trading yesterday after the government tightened downpayment requirements for luxury homes, and suspended mortgage insurance for rental properties. On Oct. 14, Hong Kong Chief Executive Donald Tsang expressed concern about a possible property “bubble.” “These measures are unlikely to cool down the market significantly as they won’t hurt the ability of those who can afford to buy these homes or want to rent properties for yield,” Patrick Chow , a Hong Kong-based analyst at Everbright Securities Co., said. Sun Hung Kai dropped 3.4 percent to HK$118.20, trimming this year’s gains to 83 percent. Cheung Kong, controlled by Li Ka- shing , Asia’s second-richest man, fell 3 percent to HK$102.30. Land Auctions The government in January 2004 introduced a system of selling land through auctions only after developers promise to pay a minimum amount, part of an undisclosed reserve price. On May 5, the government sold a residential building site for a higher-than-estimated HK$61 million ($7.9 million), the first of the fiscal year that started April 1. It was the first public sale of a building site at least partially designated for housing since May 2008, according to the Lands Department. Executives from some of the city’s largest developers, including Thomas Kwok , vice chairman of Sun Hung Kai; Cheung Kong Deputy Chairman Victor Li ; Robert Ng , chairman of Sino Land Co.; and Hang Lung Properties Ltd. Chairman Ronnie Chan met John Tsang at government headquarters yesterday. Henderson Land Development Co. earlier this month said it sold a flat for what it called a world-record HK$88,000 a square foot. That announcement came hours after Donald Tsang said the government may release more land for developers to stem price increases. The index that tracks six of the city’s biggest developers had HK$20.7 billion wiped off its value yesterday after the Hong Kong Monetary Authority raised deposit levels for luxury apartments on Oct. 23. The city’s de facto central bank made the change, the first since 1991, after record-low interest rates fueled a surge in home prices this year. ‘Stop Price Appreciation’ The measures gave investors a reason to sell property stocks to profit from this year’s gains, Everbright’s Chow said. He downgraded Sun Hung Kai to “accumulate” from “buy” “simply because the stock has risen so much,” he said. Sino Land , this year’s best performer on the Hang Seng Property Index , fell 5.4 percent to HK$15.52. The index declined 3.6 percent, making it yesterday’s weakest performing sub-group on the benchmark Hang Seng Index. The measures “may reduce volumes in primary and secondary markets, which could indirectly slow or stop price appreciation for the rest of the year,” David Ng , head of regional property research at Royal Bank of Scotland Plc, said in a report e- mailed yesterday. Henderson, controlled by billionaire Lee Shau-kee , fell 4.3 percent to HK$52.90. New Mortgages Banks in the city of 7 million people have cut mortgage rates to the lowest since records began. Hong Kong home prices have risen 28 percent this year as of the week ended Oct. 18, according to the Centa-City Leading Index compiled by Centaline Property Agency Ltd. and the City University of Hong Kong. New mortgage loans approved dropped for a third straight month in September from a month earlier, the HKMA said yesterday. Loans last month fell 2.5 percent to HK$33.3 billion from August, it said. Of the mortgage loans approved, 42.4 percent have an interest margin of more than 2.5 percentage points below the nominal best lending rate, according to the statement on HKMA’s Web site. That compares with 46.9 percent in August. Sales of homes in Hong Kong worth more than HK$10 million almost tripled in September, according to the Land Registry. The property market has been boosted by an influx of money from China, where a $585 billion stimulus package has driven an economic rebound. Maximum Loan The Hong Kong Mortgage Corp., a government-backed home-loan insurer, said Oct. 23 it will limit coverage on loans of more than 70 percent of a residence’s value to borrowings of HK$12 million or less, down from a maximum of HK$20 million. The impact on property prices will “probably start at the beginning of next year when buyers become more convinced that interest rates are going to go up in the middle of the year,” Stanley Wong , deputy general manager at Industrial & Commercial Bank of China Asia Ltd., the Hong Kong unit of China’s biggest lender, said in an interview yesterday. For home buyers wishing to borrow as much as 95 percent of a property’s value, the corporation cut the maximum loan to HK$6 million from HK$8 million, the HKMC said. The agency will also suspend insurance for homes that aren’t owner-occupied, it said. The HKMA said banks can lend as much as HK$12 million for homes priced below HK$20 million, effectively meaning that downpayments on properties between HK$17 million and HK$20 million would range from about 60 percent to about 70 percent. To contact the reporter on this story: Chia-Peck Wong in Hong Kong at cpwong@bloomberg.net

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Foreclosures Rise 5 Percent From Summer To Fall

October 14, 2009

WASHINGTON — The number of households caught up in the foreclosure crisis rose more than 5 percent from summer to fall as a federal effort to assist struggling borrowers was overwhelmed by a flood of defaults among people who lost their jobs. The foreclosure crisis affected nearly 938,000 properties in the July-September quarter, compared with about 890,000 in the prior three months, according to a report released Thursday by RealtyTrac Inc. That puts foreclosure-related filings on a pace to hit about 3.5 million this year, up from more than 2.3 million last year. Unemployment is the main reason homeowners are falling into trouble. While the economy is likely out of recession, the unemployment rate – now at a 26-year high of 9.8 percent – isn’t expected to peak until the middle of next year. Mortgage companies sometimes allow unemployed homeowners to defer three to six months of payments while they are looking for a job. But there’s little else they can do. “The sheer scale of the problem is preventing the loan modification programs from having the kind of impact we’d all like” said Rick Sharga, RealtyTrac’s senior vice president for marketing. Last week, the Obama administration hailed a milestone in its mortgage relief effort, reporting that 500,000 homeowners have received help since the program was launched in March. But new defaults are still exceeding the number of borrowers getting help. Mortgage companies have slowed down the pace of foreclosures as they evaluate whether borrowers qualify for the administration’s program. Analysts, however, forecast that many of those homeowners won’t qualify, and foresee a new wave of foreclosed properties hitting the market next year. That’s likely to further depress home prices. Some homeowners are in such a massive financial hole that it’s hard to design a modification that will actually provide lower payments. And some have avoided paying their monthly bills for a long time. Carlos Estrada, 57, of Tulare, Calif., for example, hasn’t made a mortgage payment since February 2008. The construction jobs that kept him working more than 40 hours a week during the housing boom have all but vanished. Earlier this year, he turned down a modification offer from Bank of America because it would have incorporated his unpaid balance and raised his monthly bill. But a bank spokeswoman said Wednesday that Estrada’s foreclosure sale had been postponed until late next month while the bank reviews whether he can qualify for help. “I’m still here waiting for them to help me resolve this situation,” Estrada said in Spanish. According to the RealtyTrac report, there were nearly 344,000 foreclosure-related filings last month, down 4 percent from a month earlier but still the third-highest month since the report started in early 2005. It was the seventh-straight month in which more than 300,000 households receiving a foreclosure filing, which includes default notices and several other legal notices that homeowners receive before they finally lose their homes. Banks repossessed nearly 88,000 homes in September, up from about 76,000 a month earlier. On a state-by-state basis, Nevada had the nation’s highest foreclosure rate in the July-September quarter. Arizona was No. 2, followed by California, Florida and Idaho. Rounding out the top 10 were Utah, Georgia, Michigan, Colorado and Illinois. __ AP Real Estate Writer Alex Veiga contributed to this report from Los Angeles.

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Ford’s July U.S. Auto Sales Rise 2.3% in First Monthly Increase Since 2007

August 3, 2009

By Mike Ramsey and Alex Ortolani Aug. 3 (Bloomberg) — Ford Motor Co. said July U.S. sales rose 2.3 percent, its first monthly gain since 2007, as the government’s “cash-for-clunkers” incentive may have helped the auto industry to the strongest pace this year

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Japan’s Retail Sales Fall 3%, Extending Longest Losing Streak in Six Years

July 29, 2009

By Toru Fujioka July 29 (Bloomberg) — Japan’s retail sales fell for a 10th month in June, extending the longest losing streak since 2003 as job losses and wage cuts forced households to trim spending. Sales slid 3 percent from a year earlier, the Trade Ministry said today in Tokyo

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Home Prices in U.S. Cities Post Monthly Rise; Consumer Confidence Declines

July 28, 2009

By Courtney Schlisserman and Shobhana Chandra July 28 (Bloomberg) — A gauge of U.S. house prices posted its first monthly gain in three years, providing some solace to consumers shaken by rising joblessness

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Home Prices in 20 U.S. Cities Climbed in May From April, Case-Shiller Says

July 28, 2009

By Courtney Schlisserman July 28 (Bloomberg) — Home prices in 20 U.S. metropolitan areas climbed in May from the previous month for the first time in three years, another sign the market is stabilizing. The S&P/Case-Shiller home-price index rose 0.5 percent from April, the first monthly gain since July 2006 and biggest since May of that year, the group said today in New York.

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Home Prices in 20 U.S. Cities Climbed in May From April, Case-Shiller Says

July 28, 2009

By Courtney Schlisserman July 28 (Bloomberg) — Home prices in 20 U.S. metropolitan areas climbed in May from the previous month for the first time in three years, another sign the market is stabilizing. The S&P/Case-Shiller home-price index rose 0.5 percent from April, the first monthly gain since July 2006 and biggest since May of that year, the group said today in New York

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Wells Fargo Buys Commercial-Mortgage Bonds as Defaults Climb, Sloan Says

July 27, 2009

By Jody Shenn and Ari Levy July 27 (Bloomberg) — Wells Fargo & Co., the bank that boosted its U.S.

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