Archive for May, 2011

Gasoline price falls 5.5 cents to 7-week low: Energy Department

Tuesday, May 31st, 2011 | Finance News

WASHINGTON (Reuters) – Gasoline fell to its lowest level in seven weeks and diesel fuel dropped below $4 a gallon for the first time in two months, the Energy Department said on Tuesday.

The national price for regular unleaded gasoline declined 5.5 cents over the last week to $3.79 a gallon, the department said in its weekly survey of service stations.

Diesel fuel prices fell a nickel to $3.95 a gallon, falling under the $4 threshold for the first time since April 4.

Pump prices began falling shortly after the cost of U.S. crude dropped some $16 a barrel earlier this month. Oil prices have recovered about $5, rising $2 on Monday alone on news on the shutdown of a major pipeline carrying Canadian crude to U.S. oil refineries.

Still, the full savings from the net decline in oil prices has yet to be passed on to consumers.

(Reporting by Tom Doggett; Editing by Lisa Shumaker)

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Weak data point to sluggish economy

Tuesday, May 31st, 2011 | Finance News

NEW YORK (Reuters) – A double-dip in home prices, pessimistic consumers and a slowdown in regional manufacturing raised concerns on Tuesday that the economy's soft patch could become protracted.

"The question is, 'Is the softer data we're seeing transitory, or is it likely to persist throughout the remainder of 2011?' Right now, that's an open question that investors are trying to figure out," said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

The U.S. economy grew at a tepid 1.8 percent annual rate in the first three months of the year, and these fresh signs suggest the recovery is still struggling to gain momentum.

The consumer also appears to be struggling, with data last week showing consumer spending was crimped by high gasoline prices in April. Consumer spending makes up more than two-thirds of economic activity.

A drop in a gauge of business activity in the Midwest added to other regional reports that have pointed to slower growth in manufacturing this month amid supply chain disruptions from the major earthquake in Japan in March.

It also boded poorly for a national factory report due on Wednesday, which is expected to slow, and casts a cloud ahead of a report on national employment on Friday.

"While weakness in manufacturing may simply reflect auto parts shortages, this is the fifth regional manufacturing index to fall sharply in May," wrote Chris Low, chief economist at FTN Financial.

"(It) reinforces the general sense the economy is losing steam," he added.

U.S. stocks trimmed gains after the consumer confidence and manufacturing data, but Wall Street was higher in late day trading as the data was outweighed by optimism that new financial aid for debt-laden Greece was on the horizon.

HOUSING DOUBLE-DIP

Single-family home prices dropped in March to fall below the low hit in April 2009 during the financial crisis, a closely watched survey showed.

The S&P/Case-Shiller composite index of 20 metropolitan areas declined 0.2 percent from February on a seasonally adjusted basis, in line with economists' expectations.

A glut of houses for sale along with foreclosures, tight credit and weak demand have kept the housing market on the ropes even as other areas of the economy start to recover.

Home prices had been supported last spring by a tax credit, but the housing market has struggled since the credit expired. Prices in the 20 cities fell 3.6 percent year over year, worse than expectations for a decline of 3.3 percent.

"The declines sustained in the last 12 months have almost erased the gains of the previous 12 months," said Cary Leahey, managing director at Decision Economics in New York. "The housing market is treading backward but not drowning."

The Conference Board, an industry group, said its index of consumer attitudes fell to 60.8 in May from a revised 66.0 in April, well below a median forecast of 66.5.

Consumers took a more negative view of business and labor market conditions, while inflation expectations jumped after easing in April.

The Institute for Supply Management-Chicago business barometer dropped to 56.6 in May from 67.6 in April, its lowest reading since November 2009 and missing forecasts for a reading of 62.6.

The index of new orders sank to 53.5 from 66.3, while the employment component fell to 60.8 from 63.7.

Economists expect Wednesday's larger ISM manufacturing survey to ease to 57.7 in May from 60.4 the month before. Friday's payrolls data is forecast to show the economy added 180,000 jobs in May, easing from 244,000 in April.

(Additional reporting by Ellen Freilich and Caroline Valetkevitch in New York and Ann Saphir in Chicago; Editing by Kenneth Barry)

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Gas prices likely dampened May retail sales

Tuesday, May 31st, 2011 | Finance News

NEW YORK (Reuters) – U.S. retailers are expected to show a moderate increase in May sales, as high gas prices likely tempered consumer demand for summer clothing and other discretionary items.

Analysts on average are expecting a 5.3 percent increase in May sales at stores open at least a year, according to Thomson Reuters data. That compares with gains of 8.9 percent in April, when sales were fueled by a late Easter holiday, and 2.6 percent in May 2010, when the economy was still fitful and many experts feared a double-dip recession.

The easy comparison with last year could mean a higher number this year, said Frank Badillo, a senior economist with Kantar Retail, a research and consulting firm.

"But the big issue is to what extent will the jump in fuel prices continue to take the edge off of growth," Badillo said. "So far we haven't seen a lot of strong evidence that it's having an impact, but as we move into several months of high fuel prices, I think we'll start to see some effects in May."

U.S. gasoline prices fell to an average of $3.90 per gallon in the latest Lundberg Survey, which tracks prices across the country. Gas hit $4 per gallon earlier in May and has been above $3 per gallon for most of the year, due in part to unrest in the Middle East.

"High fuel prices affect shopping behavior. The longer those fuel prices persist, it's more likely to affect the household budget as well," Badillo said.

U.S. consumers turned more pessimistic in May, according to an index of consumer sentiment, while home prices fell back below crisis-era lows in March, pointing to an economy that continues to struggle.

MIXED BAG

May is not often a big month for shopping, since it falls after the Easter holiday and before the back-to-school season. Retailers have also been grappling with a slow job recovery that has kept spending at bay, especially for lower-income households.

What is more, the weather across much of the country was cool and rainy, said Nomura analyst Paul Lejuez, noting that many retailers also blamed bad weather for lackluster sales in the first quarter.

The biggest May sales increase, 7.3 percent, is expected from discount stores that appeal to consumers on a tight budget, such as Costco Wholesale Corp (COST.O) and Target Corp (TGT.N), according to Thomson Reuters.

Clothing companies such as Gap Inc (GPS.N), TJX Cos Inc (TJX.N) and Limited Brands Inc (LTD.N) are expected to turn in the smallest gain, of 2.5 percent.

Lejuez said TJX, Chico's FAS Inc (CHS.N) and Ann Taylor parent Ann Inc (ANN.N) had indicated that May was off to a strong start, while Pacific Sunwear of California Inc (PSUN.O), Aeropostale Inc (ARO.N) and Urban Outfitters Inc (URBN.O) "saw no change in generally weak trends."

Though they have not commented on May trends, Lejuez said Limited and Ross Stores Inc (ROST.O) probably performed well, while Gap was likely weak.

Richard Hastings, a consumer strategist at Global Hunter Securities, said retailers that cater to lower-income consumers are expected to struggle throughout the year, since their customers are more affected by unemployment and higher food and fuel prices than a recovering stock market.

"America has an extensive pocket of vulnerability to inflation ... that causes severe bifurcation in the retailer results," Hastings said. "That's what we're going to continue to see for the rest of the year."

(Reporting by Martinne Geller; editing by Richard Chang and Andre Grenon)

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