Jul
31
2009
U.S. Economy Contracted at 1% Annual Rate in Second Quarter
Author: Randall Goltzman2009-07-31 12:30:01.257 GMT
By Shobhana Chandra
July 31 (Bloomberg) — The U.S. economy shrank at a slower pace in the second quarter, a sign the worst recession since the Great Depression is winding down.
Gross domestic product contracted at a less-than-projected 1 percent annual rate after shrinking 6.4 percent in the prior three months, the most in 27 years, Commerce Department figures showed today in Washington. Revisions showed the economic downturn last year was even deeper than previously estimated.
Profits at companies from Caterpillar Inc. to Dow Chemical Co. signal the slump is easing as government efforts to revive lending and President Barack Obama’s stimulus gain traction.
Consumer spending, which accounts for 70 percent of the economy, may take time to recover as job losses mount, eroding the growth analysts anticipate will start this quarter.
“We’re well on our way to a recovery but, inevitably, it’ll be choppy,” Joseph LaVorgna, chief U.S. economist at U.S. Deutsche Bank Securities in New York, said before the report.
“The consumer is taking a back seat as we still have major job losses. The labor market really needs to show a lot of improvement.”
The economy was forecast to shrink at a 1.5 percent pace, according to the median estimate of 78 economists surveyed by Bloomberg News. Estimates ranged from a 0.7 percent gain to a decline of 2.9 percent.
GDP was down 3.9 percent from the second quarter in 2008, the biggest drop since quarterly records began in 1947. Last quarter’s decline was the fourth in a row, also the longest losing streak on record.
To contact the reporter on this story:
Shobhana Chandra in Washington at +1-202-624-1888 or schandra1@bloomberg.net
To contact the editors responsible for this story:
Chris Anstey +1-202-624-1972 or canstey@bloomberg.net
U.S. Second-Quarter Labor Costs Increase 0.4% on Government
2009-07-31 12:30:05.74 GMT
By Courtney Schlisserman
July 31 (Bloomberg) — Employment expenses in the U.S. rose 0.4 percent in the second quarter as the recession continued to restrain private-sector wages and benefits.
The increase in the employment cost index, while more than expected, compares with a 0.3 percent gain in the first three months of the year which was the smallest on record, the Labor Department said today in Washington. In the last 12 months, costs rose 1.8 percent, an all-time low, after a 2.1 percent increase the previous quarter.
Companies may continue to keep a lid on labor costs, which account for about two-thirds of corporate expenses, even as the U.S. economy shows signs of emerging from the worst recession in at least half a century. Economists surveyed by Bloomberg News say the jobless rate will rise to 10 percent by the end of the year, making it harder for workers to negotiate pay raises.
“With wage pressures non-existent it will be very difficult for inflationary pressures to build,” Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “The very weak growth in overall ECI is bad news for households but a positive for business inflation.”
The index was estimated to rise 0.3 percent, according to the median forecast of 54 economists in a Bloomberg News survey.
Estimates ranged from increases of 0.1 percent to 0.5 percent.
The employment cost gauge measures the cost to companies of wages, benefits and employer-paid taxes such as Social Security and Medicare.
To contact the reporter on this story:
Courtney Schlisserman in Washington at +1-202-624-1943 or cschlisserma@bloomberg.net
To contact the editor responsible for this story:
Chris Anstey at +1-202-624-1972 or canstey@bloomberg.net
Treasuries Rise as Consumer Spending Falls More Than Forecast
2009-07-31 13:40:06.940 GMT
By Susanne Walker
July 31 (Bloomberg) — Treasuries gained, with 10-year yields falling for a fourth day, after a report showed spending by U.S. consumers, which accounts for more than two-thirds of the economy, fell more than forecast in the second quarter.
Longer-maturity debt led the gains as Commerce Department figures showed personal spending fell 1.2 percent, more twice as much as forecast, easing concern over potential inflation.
Revisions showed the first year of the recessions was worse than estimated.
“Personal consumption was down and much weaker than expected,” said Martin Mitchell, head of government-bond trading at the Baltimore unit of Stifel Nicolaus & Co. “It shows the consumer is still struggling. For those that thought the recovery would be consumer-driven, this number tells you, ‘not so fast.’”
The yield on the 10-year note fell five basis points, or 0.05 percentage point, to 3.56 percent at 9:24 a.m. in New York, according to BGCantor Market Data. The 3.125 percent security maturing in May 2019 rose 11/32, or $3.44 per $1,000 face amount, to 96 13/32.
Gross domestic product contracted at a less-than-projected 1 percent annual rate after shrinking 6.4 percent in the prior three months. The first 12 months of the U.S. recession saw the economy shrink 1.9 more than twice as much as previously estimated, reflecting even bigger declines in consumer spending and housing, revised figures showed.
To contact the reporters on this story:
Susanne Walker in New York at +1-212-617-1719 or swalker33@bloomberg.net
To contact the editor responsible for this story:
David Liedtka at +1-212-617-8988 or dliedtka@bloomberg.net
ISM-Chicago Purchasers’ Index Increased to 43.4 in July
2009-07-31 13:45:17.760 GMT
By Bob Willis
July 31 (Bloomberg) — U.S. business activity contracted at a slower pace in July, a sign the economic outlook is improving entering the second half of the year.
The Institute for Supply Management-Chicago Inc. said today its business barometer increased to 43.4 from 39.9 the prior month. Readings below 50 signal a contraction.
The factory slump is easing as lean inventories, small cutbacks in business investment and improving demand from overseas reinforce forecasts that the recession will end this year. A federal “cash-for-clunkers” program will boost demand for cars in coming months, helping to revive the auto industry.
“The worst declines in auto manufacturing are likely behind us,” Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “Manufacturing will resume growth, supported by auto production and inventory adjustment.”
Economists projected the index would rise to 43, based on the median estimate of 51 economists in a Bloomberg News survey.
Forecasts ranged from 38.1 to 46.
The economy shrank at a better-than-forecast 1 percent annual pace in the second quarter as a jump in government spending masked a deeper retrenchment by consumers. The drop in gross domestic product followed a 6.4 percent contraction in the prior period, the most in 27 years, Commerce Department figures showed today in Washington.
To contact the reporter on this story:
Bob Willis in Washington at +1-202-624-1837 or bwillis@bloomberg.net
To contact the editor responsible for this story:
Chris Anstey at +1-202-624-1972, or canstey@bloomberg.net
Heard on the street…
The market is backing off the highs as trade slows looks to get back to pre-supply announcement levels, while remaining wary of the next offering announcement (Aug 5) for the 3-10-and-30-yrs. The given, as in priced-in, expectation is for new record levels on the offerings, but there has been renewed talk of lessened funding needs, and that is helping add support. Global bonds bounced as the data hit, getting the bund yield back to mid-month lows. Thinned volumes will continue to effect activity, and the PMI will be the last chance for the market to ride anything of substance, once that’s done, things will deteriorate into choppy, Friday summer trade. The 10-yr has already swung to tag the 3.553% level from the early 3.643% point