Spending stumbles in October as income growth stalls

1:30 PM growth, income, October, spending, stalls, stumbles No Comments

Reuters

US consumer spending fell in October for the first time in five months as income growth stalled, what slowdown of economic growth in the fourth quarter.

The U.S. Commerce Department said Friday consumer spending fell 0.2 percent after an unrevised 0.8 percent increase in September.

It said it could not quantify the implications of Superstorm sandy, but added that where the source data was not made, adjustments still available or the effects of the storm not reflected.

Although the storm that slammed late October for the East Coast, was automobile sales brake, the decrease in expenditure last month partially a reflection of the weak economic fundamentals.

By Reuters surveyed economists had expected, would be the consumer spending, which accounts for 70 percent of the U.S. economy, flat last month.

Adjusted for inflation, fell 0.3 percent, the first decline since June, after rising 0.4 percent of the previous month consumer spending.

It was also the largest decline since September 2009 and implied increase in consumer spending this quarter would fight 1.4 percent in the third quarter annual rate, exceeding was the slowest in more than a year.

While the economy in the third quarter after 1.3 percent in the previous three months to advance came from much of the boost the recovery of the Dunmore and robust Government spending, grew 2.7 percent. That is lost in the last three months of the year.

Growth also on the terms of the storm could be pressure and automatic deep spending cuts on Government and increased taxes, the $600 billion could release early next year, when the Congress and the Obama administration on a cut less-severe budget deficits some.

Income was in October for the first time since April unchanged and followed a gain of 0.4 percent in September. The Department said, private wages and salaries fell through caused work stoppages reflecting Sandy.

The amount of the income of private households after inflation and taxes dipped 0.1 percent after his apartment in September available. Despite weak income growth, the saving rate rose to 3.4 percent from 3.3 percent of the previous month.

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Business spending plans gauge rebounds

2:00 PM Business, gauge, plans, rebounds, spending No Comments

Reuters

WASHINGTON - A gauge of planned U.S. business spending increased by the most in five months in October, but a fourth straight month of declines in shipments underscored the damage that fears of tighter fiscal policy next year are inflicting on the economy.

The Commerce Department said on Tuesday non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rebounded 1.7 percent last month after falling 0.4 percent the prior month.

Economists had expected so-called core capital goods orders to fall 0.5 percent.

Shipments of non-defense capital goods orders excluding aircraft, used to calculate equipment and software spending in the gross domestic product report, slipped 0.4 percent. It was the fourth straight month of declines in shipments.

The Commerce Department said there was no indication that superstorm Sandy, which lashed the East Coast in late October, had an immediate impact on factories in that region.

Businesses are cutting back on capital spending, wary of automatic government spending cuts and tax increases, known as the fiscal cliff, that are scheduled to kick in early next year unless the U.S. Congress and the Obama administration can agree on a plan to cut the budget deficits.

The fiscal cliff could drain about $600 billion from an already fragile economy. Business spending is also being undermined by the long-running debt problems in Europe and slowing global demand, especially in China.

Despite the headwinds, the manufacturing sector continues to grow, though modestly. Durable goods orders were unchanged in October as gains in machinery, fabricated metal products, and computer and electronic products offset the drag from automobiles, defense and civilian aircraft.

Economists polled by Reuters had forecast orders for durable goods, items from toasters to aircraft that are meant to last at least three years, falling 0.6 percent last month after rising 9.2 percent in September.

Excluding transportation, orders rose 1.5 percent after increasing 1.7 percent in September.

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Rising taxes would hit middle-class spending: White House

6:30 AM House, middleclass, rising, spending, taxes, White, would No Comments

Reuters

WASHINGTON - A White House report says that if that Congress allows taxes to go up on middle-class families, consumers will spend $200 billion less in 2013.

The report by the White House's National Economic Council and Council of Economic Advisers, released on Monday, was the latest salvo by President Barack Obama to encourage lawmakers to extend tax cuts for families making less than $250,000 a year and fix a tax aimed at making sure wealthy people pay a minimum amount.

The newly re-elected Democratic president is negotiating with Republicans in Congress over the "fiscal cliff" - a combination of tax increases and spending cuts that would go into effect next year if the two sides do not reach a deal to stop it.

While the White House and Republican leaders wrangle over raising taxes on the wealthy - a key campaign promise of the president's - Obama would like Congress to pass measures now to lock in lower tax rates for the middle class, the primary constituency he courted in his re-election campaign.

"The president has called on Congress to act now on extending all income tax cuts for 98 percent of American families and not to hold the middle-class and our economy hostage over a disagreement on tax cuts for households with incomes over $250,000 per year," the report said. "The Senate has passed this bill and the president is ready to sign it."

The White House also wants lawmakers to fix the alternative minimum tax, which was set up decades ago so that wealthy Americans could not avoid taxes using legal tax breaks and loopholes. The AMT was not indexed for inflation and has to be updated or "patched" every year to avoid sweeping in millions of less affluent taxpayers.

"Allowing the middle-class tax rates to rise and failing to patch the Alternative Minimum Tax could cut the growth of real consumer spending by 1.7 percentage points in 2013," the report said.

"This sharp rise in middle-class taxes and the resulting decline in consumption could slow the growth of real GDP by 1.4 percentage points, which is consistent with recently published estimates from the Congressional Budget Office."

The CEA estimated that consumers would spend nearly $200 billion less next year as a result of higher taxes. The drop would hurt the retail industry, which has accounted for nine percent of employment growth since the U.S. recession ended in June 2009, the report said.

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Amazon is spending, and investors are buying

10:30 AM Amazon, buying, investors, spending No Comments

Mark Lennihan / AP

The Kindle Fire is displayed at a news conference in September, 2011.

Ordinarily, if a company announces its profit dropped by more than a third and predicts a small profit or a possible loss for the following quarter, investors don't reward it with a stock bump of more than 15 percent. Amazon is an exception.

The Internet retailing giant reported a first-quarter drop in net income of 35 percent on Thursday, the result of big-ticket investments in its Kindle line, and in shipping and fulfillment equipment. It fell to $130 million or 28 cents a share, from $201 million or 44 cents per share a year ago.

"2Q12 operating income guidance still implies a 22 percent decline on the high end as Amazon continues to invest aggressively," Raymond James analyst Aaron Kessler pointed out in a research note, although he characterized the long-term outlook at "positive."

On the positive side, Amazon reported a 34 percent jump in revenue over last year, on the high end of what it told analysts to expect last quarter, and offered a prediction of second quarter revenues ranging from $11.9 billion to $13.3 billion. Investors liked what they heard; as of Friday afternoon, Amazon's share price was up more than 16 percent, to nearly $228.

The company has been adding features and offerings to Amazon Web Services, its cloud-based services platform. This month, it also began offering its Instant Video service via Sony's PlayStation 3 gaming console. It is rolling out the Kindle Touch to more countries and investing in the Kindle Fire as sales of ebooks outstrip physical book sales.

"Given the company accounted for roughly a fifth of the print book market in years prior, the number of eBook units that the company has been selling has clearly become significant," Heather Bellini, an analyst at Goldman Sachs, wrote in a recent research note.

Earlier this week, Amazon unveiled an initiative to sell business and industrial equipment and supplies. Last month, the company announced plans to purchase Kiva Systems, a company that makes robots used in shipping and fulfillment functions.

None of this comes cheap. Kiva, for instance, will cost Amazon $775 million. But the company has a long track record of right-venture, right-time spending, said Gene Alvarez, vice president of research at Gartner Inc.

"During the dot-com collapse, when a lot of companies scaled down on e-commerce, they continued to invest," he said. When the economy recovered and more people began buying things online, Amazon was far ahead of its competitors. "Part of me is saying that mindset is still there and that's what they're doing," he said.

Even as Americans' media consumption shifts more from the physical to the digital, analysts think Amazon is well-positioned to handle the transition.

"It is important to point out that Amazon continues to gain share in the physical world, while their Kindle footprint puts them in pole position to capitalize on the transition to digital," Bellini wrote.

Alvarez said he expects competition from other tablets and e-readers, especially Apple's iPad, to intensify, which makes Amazon's investments in growing its Kindle offerings look smart. "This rivalry is going to continue to heat up. it's going to come down to the consumers choice and the customer experience," he said.

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Clint Eastwood: Cut spending now

9:51 PM Clint, Eastwood, spending No Comments

By msnbc.com staff

After his “halftime, America” Super Bowl ad, in which he urges the nation to follow in Detroit’s footsteps in rising from the recession, movie actor and director Clint Eastwood appeared on CNBC Friday to discuss another big issue he thinks the country needs to focus on right now: cutting spending.

“The last couple of regimes have been putting us deep in the hole,” Eastwood said.

“It’s such a basic thing,” he continued. “Your parents always tell you … when you don’t have a dollar in your pocket, you don’t spend two dollars. And that’s a basic philosophy of life. People think you can just put if off. If you put it off you just print more money, and the money in your pocket becomes devalued, and it’s not worth as much, and eventually it comes down to zero.”

Eastwood also weighed in on the Simpson-Bowles debate, saying he was “amazed” that President Obama ignored the recommendations of the co-chairs of the Simpson-Bowles deficit reduction commission: former Clinton chief of staff Erskine Bowles and Alan Simpson, a former Republican senator from Wyoming.

“They came back with a recommendation, which was to exactly stop spending, and then everyone said that’s enough from you guys, go home,” Eastwood said. “I thought, that’s a waste of money, a waste of time, a waste of effort from everybody, and not very spirited for the country. I think both those gentlemen are smart and worth listing to, if you’ve gone ahead and assigned them to this project.”

Eastwood appeared in a Chrysler ad that aired during the Super Bowl last weekend.

“How do we come from behind? How do we come together? And how do we win?” Eastwood asks in the commercial, adding that “Detroit is showing us it can be done, and what’s true about them is true about all of us.”

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