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SMF Blogs > Economic Analysis > June 2009

US durable goods orders rise unexpectedly in May

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WASHINGTON (AP) -- Orders to U.S. factories for big-ticket manufactured goods rose sharply for a second straight month in May, and a key indicator of business investment surged by the largest amount in nearly five years.

The Commerce Department says demand for durable goods rose 1.8 percent last month, far better than the 0.6 percent decline that economists expected.

It followed a similar 1.8 percent rise in April, with both months posting the best performance since December 2007, the month the recession began.

Orders for non-defense capital goods, a key proxy for business investment plans, jumped 4.8 percent, the biggest increase since September 2004. Demand for commercial aircraft, machinery and computers all rose sharply.

Prepare yourself for the "New Economy"

Posted: 6/24/2009 8:05:48 AM by StockMarketFunding | with 0 comments

World Bank cuts 2009 global growth forecast

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BEIJING (AP) -- The World Bank has cut its 2009 global growth forecast, saying the world economy will shrink by 2.9 percent and warning that a drop in investment in developing countries will increase poverty.

"The global recession has deepened," the Washington-based multilateral lender said in a report. Global trade is expected to plunge by 9.7 percent this year, while total gross domestic product for high-income countries contracts by 4.2 percent, the bank said. It said economic growth in developing countries should slow to 1.2 percent -- but excluding relatively strong China and India, developing economies will contract by 1.6 percent.

The bank's latest forecast is a sharp reduction from its March prediction of a 1.7 percent global contraction, which it said then would be the worst on record. Economic damage to developing countries "has been much deeper and broader than previous crises," warned the report, issued Sunday in Washington.

"Unemployment is on the rise, and poverty is set to increase in developing economies," it said. The global economy should start to grow again in late 2009, but "the expected recovery is projected to be much less vigorous than normal," the report said.

It said banks' ability to finance investment and consumer spending would be hampered by the overhang of unpaid loans and devalued assets. "To break the cycle and revive lending and growth, bold policy measures, along with substantial international coordination, are needed," the World Bank said. Investment and other financial flows to developing countries plunged by an estimated 39 percent in 2008 to $707 billion, the World Bank said.

It said foreign direct investment in developing countries is projected to drop by 30 percent this year to $385 billion. Eastern Europe and Central Asia have been hit hardest and the region's gross domestic product is expected to plunge by 4.7 percent this year, the bank said.

It said growth should recover next year to 1.6 percent. GDP in Latin America and the Caribbean should shrink by 2.3 percent this year before rebounding to expand by 2 percent in 2010, the report said.

In the Middle East and North Africa, growth is expected to fall by half this year to 3.1 percent, while that of sub-Saharan Africa will drop to 1 percent from an annual average of 5.7 percent over the past three years, the bank said. East Asia should post a 5 percent expansion, supported in part by China's stimulus-fueled growth, the bank said.

Prepare yourself for the "New Economy"

Posted: 6/22/2009 7:54:30 AM by StockMarketFunding | with 0 comments

10 Banks to Repay TARP money

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The Treasury Department will allow 10 banks to pay back Troubled Asset Relief Program funds, Bloomberg said, citing people familiar with the matter. JPMorgan Chase & Co is one of the banks, the news agency said, citing an anonymous source.

The Treasury did not immediately respond to a Reuters email, seeking comment on the report, that was sent outside normal business hours.

The government conducted "stress tests" on the 19 largest U.S. banks to assess their exposure to risky real estate and other loans and to weigh how they might fare if economic conditions deteriorated.

Nine banks were considered healthy enough that they did not need to add more capital, while the other 10 were told they needed to fatten their capital cushions by a combined $74.6 billion. The results of the tests were released in May.

On Monday, the Federal Reserve said all 10 of the banks that were ordered to raise capital had come forward with plans that, if implemented, would raise the needed funds.

Prepare yourself for the "New Economy"

Posted: 6/9/2009 8:05:27 AM by StockMarketFunding | with 0 comments

U.S. planned layoffs fall to lowest in 8 months

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NEW YORK (Reuters) - Planned layoffs at U.S. firms fell for a fourth consecutive month in May, reaching the lowest level in eight months and offering another sign that the United States may be pulling out of a steep economic tailspin.

Planned job cuts announced by U.S. employers totaled 111,182 in May, down 16 percent from the 132,590 layoffs recorded the previous month, according to a report released on Wednesday by global outplacement consultancy Challenger, Gray & Christmas, Inc.

May marked the lowest monthly total since 95,094 job cuts announced last September. Since reaching a peak in January, job-cut totals have fallen by an average of 17.5 percent per month, according to the report.

However, the decline in layoffs may not continue for long. "This decline in job cuts could be short-lived. The second quarter is typically the lowest quarter of the year when it comes to job cuts," John A. Challenger, chief executive officer of Challenger, Gray & Christmas, said in the report.

"Corporate downsizing may continue to remain slow during the summer months, but if the past is any indication, we could see the pace accelerate again in the latter half of the third quarter through the end of the year," he said. Much of the downsizing in coming months may come from state and local governments, which have been hard hit by shrinking tax revenues, according to the report.

The government and nonprofit sector led in job cuts, announcing 22,317 layoffs last month and marking the third straight month the sector was the top job cutter. While job cuts in the automotive sector have already been heavy, they are likely to continue at a strong pace after General Motors Corp (Other OTC:GMGMQ.PK - News) declared bankruptcy this week.

"While the automakers expect a rebound in the second half of the year, we could continue to see heavy job cuts in the sector, as low output across the board trickles down through the supplier chain," Challenger said, adding "we have not even counted the job-cut figures resulting from dealership closures since the number of jobs affected has not been confirmed."

Overall, U.S. employers have announced 822,282 job cuts so far this year, more than double the 394,193 cuts announced through the same point last year, according to the report. (Reporting by Chris Reese; Editing by Chizu Nomiyama)

Prepare yourself for the "New Economy"

Posted: 6/3/2009 7:35:08 AM by StockMarketFunding | with 0 comments

GM hoping for speedy sale and exit from Chapter 11

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NEW YORK (AP) -- General Motors hopes to follow the lead of fellow U.S. automaker Chrysler by transforming its most profitable assets into a new company in just 30 days and emerging from bankruptcy protection soon after.

But Detroit-based General Motors Corp. is much larger and complex than its Auburn Hills, Mich.-based rival and isn't up against Chrysler LLC's tight June 15 deadline with Fiat. Sharon Lindstrom, managing director at business consulting firm Protiviti, said the companies pose different challenges.

But as with Chrysler, she notes that the Treasury Department made sure many of GM's moving parts were in order ahead of time so a quick bankruptcy reorganization might be possible.

"They had a lot of their ducks in a row because the terms of the government financing forced them to get all the parties to the table in a very, very short period of time," Lindstrom said. GM nailed down deals with its union and a majority of its bondholders and arranged to sell off most of its Opel operations in Europe in order to appear in court Monday with a near-complete plan to quickly emerge with a chance to become profitable.

The government has said it expects GM to come out of bankruptcy protection within 60 to 90 days. By comparison, the judge overseeing Chrysler's case approved the sale of its assets to a group led by Italy's Fiat Group SpA in just over a month. Some industry observers think Chrysler could emerge as early as this week.

During Monday's hearing GM Attorney Harvey Miller stressed the magnitude of the case and the importance of moving GM through court oversight as fast as possible. He noted that the automaker only has about $2 billion in cash left. "If there's going to be a recovery of value, it's absolutely crucial that a sale take place as soon as possible," Miller said in his opening statement. The automaker wants to sell the bulk of its assets to a new company in which the U.S. government will take a 60 percent ownership stake.

The Canadian government would take 12.5 percent of the "New GM," with the United Auto Workers union getting 17.5 percent and unsecured bondholders receiving 10 percent. Existing GM shareholders are expected to be wiped out.

Attorneys for GM stakeholders packed the stuffy courtroom well ahead of the automaker's first-day Chapter 11 hearing. U.S. Judge Robert Gerber moved swiftly through the agenda's more than 25 mostly procedural motions. Gerber set GM's sale hearing for June 30, putting it on a path similar to that of Chrysler.

Objections are due on June 19, with any competing bids required to be submitted by June 22. Gerber also gave GM immediate access to $15 billion in government financing to get it through the next few weeks, and interim approval for use of a total $33.3 billion in financing, with final approval slated to be ruled on June 25.

The funds are contingent on GM's sale being approved by July 10. Gerber also approved motions allowing the company to pay certain prebankruptcy wages, along with supplier and shipping costs. The sheer size of GM makes it a more complicated case than Chrysler. GM made twice as many vehicles as Chrysler's 1.5 million last year and employs 235,000 people compared with Chrysler's 54,000.

GM also has plants and operations in many more countries, meaning it will likely have to strike separate deals to navigate the bankruptcy laws of those places. The company is moving forward with just four core brands -- Chevrolet, Cadillac, Buick and GMC. GM China Group President Kevin Wale said late Monday an announcement on the sale of the iconic Hummer brand is expected "imminently." Plans for Saturn are expected within weeks.

GM Chief Executive Fritz Henderson said GM has learned a few things by watching Chrysler's case. "Certainly the court showed that it can address 363 (sale) transactions in an expeditious fashion," Henderson said at a press conference Monday.

"Particularly in our case with what will be a very large 363 transaction." GM's Monday filing for Chapter 11 bankruptcy protection is the largest ever for an industrial company. GM, which said it has $172.81 billion in debt and $82.29 billion in assets, had received about $20 billion in low-interest loans before entering bankruptcy protection.

AP Auto Writer Dan Strumpf in New York and Associated Press writer Joe McDonald in Beijing contributed to this report.

Prepare yourself for the "New Economy"

Posted: 6/2/2009 7:17:42 AM by StockMarketFunding | with 0 comments

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