Archive for August, 2009

Consumer sentiment at 4-month low (Reuters)

Friday, August 28th, 2009 | Finance News

NEW YORK (Reuters) –
U.S. consumer confidence fell to its lowest level in four months in August on worries over high unemployment and dismal personal finances, though the mood improved from earlier this month, a survey showed on Friday.

The Reuters/University of Michigan Surveys of Consumers said its final index of confidence for August fell to 65.7 from 66.0 in July.

That was the lowest since 65.1 in April but above economists' expectations for 64.5 and higher than this month's preliminary reading of 63.2.

"This tells me consumers are still in rebuilding phase," said Christopher Low, chief economist at FTN Financial in New York.

"Investors still have to be worried about the sustainability of the recovery. It's clear to me that we cannot count on growth through next year as long as consumers are still on the ropes."

U.S. stocks hit session lows (.SPX) after the data, while the dollar slipped versus the yen.

U.S. government bonds, which are favored by investors during times of economic weakness, trimmed earlier losses.

Consumers rated the current economic conditions as the worst since March, when the stock market hit 12-year lows. The index fell to 66.6 from 70.5 in July, but was an improvement from 64.9 earlier this month.

"Confidence rebounded in late August as consumers increasingly expected improved conditions in the national economy even as they reported the worst assessments of their finances since the surveys began in 1946," the report said.

Consumers' one-year inflation expectations fell to 2.8 percent -- the lowest since May -- from July's 2.9 percent. Five-year inflation expectations dropped to 2.8 percent from July's 3.0 percent, reaching their lowest point since April.

(Additional Reporting by Richard Leong; editing by Jeffrey Benkoe)


“Cash-for-clunkers” lifts consumer spending, incomes flat (Reuters)

Friday, August 28th, 2009 | Finance News

WASHINGTON (Reuters) –
U.S. consumer spending edged up in July, lifted by the government's "cash-for-clunkers" program that fueled demand for autos, offering hope a rise in consumption will help fuel an economic recovery.

Incomes, however, were flat after a steep 1.1 percent drop in June, underscoring the pressure on households still faced with falling housing prices and rising unemployment.

The Commerce Department said on Friday spending, which accounts for about two-thirds of U.S. economic activity, rose 0.2 percent after increasing by an upwardly revised 0.6 percent in June.

July's rise was in line with market expectations. Adjusted for inflation, spending was up 0.2 percent after a 0.1 percent gain in June.

Analysts said the data bodes well for a turnaround in consumer spending and supported views the economy would return to growth in the third quarter.

"That puts us in pretty good stead for an upturn in consumer spending in the third quarter," said David Resler, chief economist at Nomura Securities International in New York.

"We don't expect a big rise, but growth in the neighborhood of 1 percent or so in consumer spending for the third quarter will be an important element of an expected turnaround from decline to growth."

U.S. stock index futures pared gains on the report, while U.S. Treasury debt trimmed losses.

On Thursday, the department said spending fell at a 1 percent annual rate in the second quarter, slightly less than the 1.2 percent decline it had estimated last month. Spending nudged up 0.6 percent in January-March period.

Fears are growing that weak consumer spending, as unemployment stays high and eats into household incomes, will constrain the economy's recovery from the longest and deepest recession in 70 years.

However, labor market distress has subsided in recent months, with the pace of layoffs slowing, though companies are still reluctant to hire new workers.

Personal income was flat in July, the department said. Analysts polled by Reuters had forecast income rising 0.2 percent. Real disposable income edged down 0.1 percent in July. However, private wage and salary disbursements increased $6.7 billion in July after a $24.5 billion drop in June.

"The personal income number continues to reflect the anemic job market that we're facing in the U.S. We're still destroying jobs, not creating them, and that's going to pressure personal income for a while," said Craig Hester, chief executive officer at Hester Capital Management in Austin, Texas.

With disposable income declining, savings slipped to an annual rate of $458.5 billion. That took the saving rate to 4.2 percent from 4.5 percent in June, the department said.

Subdued demand is keeping a lid on inflation pressures, the reported showed. A measure of inflation closely watched by the Federal Reserve, the year-on-year personal consumption expenditures price index excluding food and energy, rose 1.4 percent after a 1.5 percent increase in June.

"We don't think inflation will be something we'll have to worry about until the economy gains traction. But down the road, because of the amount of money the government has put into the economy, we'll have inflation issues later," said Hester.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)


Tiffany results beat estimates; FY outlook raised (Reuters)

Friday, August 28th, 2009 | Finance News

BANGALORE (Reuters) –
Tiffany & Co (TIF.N) reported higher-than-expected quarterly earnings on cost cuts, and the retailer raised its full-year outlook as demand for jewelry increased, sending its shares up more than 7 percent.

The company, which reduced selling, general and administrative expenses by 14 percent in the quarter, said it was pursuing a more modest pace of store expansion this year because of the recession.

"While economic and retail conditions remain challenging, we were encouraged to see many stores achieving either smaller year-over-year rates of sales declines or modest sales growth compared with the past two quarters," Chief Executive Officer Michael Kowalski said.

Net profit fell to $56.8 million, or 46 cents a share, in the second quarter ended July 31, from $80.8 million, or 63 cents a share, a year earlier.

Excluding items, the profit was 39 cents a share, beating the analysts' average forecast of 33 cents, according to Reuters Estimates.

Net sales fell 16 percent to $612.5 million. Analysts on average had expected $604.9 million.

Tiffany has said that its U.S. sales decline will ease a little in the second half of the year, as it comes up against dismal results from a year ago.

The company forecast full-year earnings of $1.65 to $1.75 a share from continuing operations, up from its prior forecast of $1.50 to $1.60. Analysts on average were expecting $1.58.

Tiffany now sees sales declining about 10 percent this year. It had earlier forecast a drop of 11 percent.

Jewelers have suffered in the recession as consumers stay away from pricey purchases and save money for essentials like groceries instead.

New York-based Tiffany has vowed to hold the line on prices even as rivals tried to attract shoppers with discounts and bankrupt chains such as Whitehall Jewelers and Friedman's Inc held fire sales to get rid of merchandise.

Analysts expect the continued consolidation and store closings in the jewelry business to help Tiffany gain market share.

Tiffany shares were up 7.1 percent at $36.15 in premarket trading.

(Reporting by Dhanya Skariachan in Bangalore and Aarthi Sivaraman in Seattle, editing by Gerald E. McCormick and Lisa Von Ahn)