U.S. economic news
U.S. unemployment rate drops, jobless numbers grow
The official U.S. unemployment rate fell to 9.5% in June from 9.7% in May, in a report released Friday morning by the Labor Department. The U.S. economy shed 125,000 jobs in June, mainly driven by the elimination of temporary census jobs. Private sector jobs grew by 83,000. While the news was not rosy, it was better than had been expected and caused a minor rebound in the major U.S. stock indices Friday morning.
Weekly jobless claims climb
Weekly initial jobless claims rose 13,000 to 472,000 in the week ended June 26. The four-week moving average, which smooths the data’s volatility, rose 3,250 to 466,500.
U.S. consumer confidence declines
Consumer confidence fell substantially in June as concerns grew about the U.S. economic recovery. The Conference Board’s index of consumer confidence for June declined to 52.9 from 62.7 in May, far below the 62.5 reading economists had expected in a survey conducted by Dow Jones Newswire.
U.S. manufacturing activity grows more slowly
U.S. factory activity slowed in June. The Institute for Supply Management index dropped to 56.2 from 59.7. This measure indicates that manufacturing activity was growing but at a slower pace. The ISM business barometer slipped to 59.1 in June from 59.7 in May.
Pending home sales plummet
U.S. pending home sales fell 30% in May with the termination of the federal tax credit program that had given a key boost to the housing market. The National Association of Realtors index for pending sales of existing homes dropped to 77.6 from 110.9 in April. Pending home sales in May were down almost 16% from a year earlier.
Automakers’ sales stall
New vehicle sales in the United States decelerated in June, providing another signal that the economy could be stalling. According to Autodata, U.S. auto sales fell about 4.7% from May to June. Sales fell 14% for Toyota, 13% for General Motors, 12% for Chrysler, and 11% for Ford, levels that exceeded the typical annual May-to-June 3% sales decline. However, all automakers reported increases from a year earlier.
U.S. and global corporate news
General Mills’ profit declines
Packaged food company
General Mills reported a 41% decline in its fourth-quarter earnings, and its sales fell 2% from the year-earlier period, which included an extra week. However, excluding the extra week, earnings fell only 5%, and sales rose 4%.
Monsanto earnings fall
Agricultural biotechnology company Monsanto posted a 45% drop in its third-quarter profit, hurt by weed-killer competition and a backlash by farmers against high-priced genetically modified seeds. Sales fell 6.3% for the quarter.
Global economic news
Factory growth continues but gains slow globally
Manufacturing activity expanded globally in June, but the pace of growth slowed in most countries. Only Greece, Hungary, and South Africa had a contraction in manufacturing, while Germany, Brazil, Italy, Russia, and Poland saw a pickup in the pace of growth in their purchasing manager indices, according to The Wall Street Journal. Countries that recorded slower growth included the United States, China, the United Kingdom, Japan, France, and Spain.
Japan’s economy slows slightly
Industrial output in Japan fell a seasonally adjusted 0.1% in May, due largely to a 1.7% slowdown in exports, which were hurt by the fading impact of economic stimulus measures, recalls from Toyota and other Japanese automakers, and strikes at Chinese factories. Japanese industrial output had risen the three previous months.
Eurozone economic recovery falters
The Conference Board’s Leading Economic Index for the eurozone fell 0.5% to 109.7 in May, its first decline in 14 months. However, the LEI for the eurozone is still almost 15% higher than its trough in March 2009.
Consumer confidence climbs in eurozone
Consumer confidence rose slightly in June in the Eurozone, according to the European Commission’s overall Economic Sentiment Indicator, which rose to 98.7 from 98.4. Economists had forecast a decline to 98. However, consumer confidence in the United Kingdom fell in June to its lowest level since last August.
German unemployment ebbs for the 12th straight month
Despite problems facing other European countries, Germany continues to make progress on its economic recovery, as German unemployment fell for a twelfth consecutive month in June. The unemployment rate in Europe’s largest economy declined to 7.5% from 7.7% in May. The number of jobless fell by 88,000 to 3,153 million, according to the Federal Labor Agency. However, when adjusted for seasonal swings, the jobless rate was 7.7%, unchanged from May, and the number of jobless declined by only 21,000.
U.S. and global corporate news
Nike profit leaps 53%
Nike's fourth-quarter profit was a healthy 53% higher than a year earlier as the athletic shoe maker benefited from streamlined costs and trimmed inventory along with robust sales growth in the United States, Europe, and emerging markets.
Oracle profit rises 25%
Oracle posted strong sales and earnings results on an increase in sales of database and other business software and new revenue from its acquisition of Sun Microsystems. Oracle's revenue rose 39% to $9.5 billion, including $1.8 billion of revenue from Sun products and support services.
Dell forecasts revenue growth
Dell issued a statement ahead of its annual analyst meeting next week, forecasting revenue growth of 14% to 19% for the rest of the fiscal year. Dell, once the world's largest personal computer maker, but now ranked third, also said it expects adjusted operating income to rise 18% to 23%.
Global economic news
China eases USD currency peg
In a move to help escape criticism for manipulating global currency markets, China removed the yuan's two-year peg to the U.S. dollar, allowing it a limited amount of flexibility. It is expected that a stronger Chinese currency will help the exports of other countries, including the United States, become more competitive. The move comes just before this weekend's G-20 meeting in Toronto.
Greek debt costs more to insure
In yet another reflection of market anxiety over Greek debt levels, the cost of insuring Greek sovereign debt against default rose early Friday, reaching a record. Greece's five-year sovereign credit default swaps reached 11.31 percentage points. This means that it would cost $1.131 million annually to insure $10 million of Greek government debt for five years. It implies a 69% probability of default over the next five years.
Germany, France, United Kingdom to levy banks
Governments in Germany, France, and the United Kingdom said they will introduce bank levies to pay for future financial crises, and they will urge their counterparts at the Group of 20 industrial and developing nations to take similar actions at this week's G-20 meeting in Toronto.
German business confidence rises
German business confidence rose in June based on an index of German business sentiment published by Ifo, which reached 101.8 in June from 101.5 in May. Economists had forecast a drop below 101. A sub-index measuring current business conditions was strong, but another index indicating expectations of trade conditions in the next six months declined.
Taiwan raises rates
In a surprise move, Taiwan's central bank raised interest rates, its first such move since June 2008. The Central Bank of the Republic of China (Taiwan) raised its key rates by 12.5 basis points and stated the economy is performing better than anticipated. Taiwan joins numerous Asian neighboring countries in raising rates as the region's robust economies rebound from the recession. Australia, New Zealand, India, Vietnam, and Malaysia have all increased interest rates, while China, Indonesia, Singapore, and the Philippines have taken other actions to tighten monetary policy.
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Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; boston.com
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