Financial Freedom. Best business news.

Richard Jerram of Macquarie Group Ltd. will become the company’s head of Asian economics and leave his position as top Japan analyst, a move that reflects China’s rise and a shift toward regional rather than country- based coverage.

The Tokyo-based economist will start publishing reports on the region on Feb. 8, Jerram said by phone today. The company hasn’t named anyone to replace him as Japan economist, he said.

“We’re not differentiating between Japan and the rest of the region,” said the 46-year-old Englishman. “The ties at the company level, the sector level and the economic level are increasingly making these distinctions artificial.”

Jerram, known for criticizing the Bank of Japan’s deflation-fighting credentials, came to the country in 1987 during the economic bubble that saw the Nikkei 225 Stock Average peak at almost four time’s today’s level. In the two decades that followed the 1990 crash, the economy fell into four recessions and grew at an average pace of 1.5 percent.

“The thing which becomes tiresome after a while is the reluctance to address problems that have fairly orthodox solutions,” the economist said. “Why would you have a policy framework that pretty much guarantees the occurrence of deflation?”

Price Declines

Even as the economy struggled to escape a cycle of declining prices that drove wages down more than 10 percent in the past decade, the Bank of Japan said price stability was anything between “about between zero and 2 percent.” That language invited the perception the bank tolerated zero growth in prices, Jerram has said.

The central bank in December revised its “understanding of stable prices,” saying stability was anything “in the positive range at or below 2 percent.” The shift came after Deputy Prime Minister Naoto Kan voiced concern the recovery was under threat from deflation.

Kan has continued his pleas for the Bank of Japan to fight price declines since he added the finance portfolio to his responsibilities in January. Bank of Japan Governor Masaaki Shirakawa this week responded by saying there’s no “magic” solution for defeating deflation.

“The government’s given them a bit of a push, but not getting much back,” Jerram said of the bank’s move. “They’re still saying a lot of stuff in terms of ‘there’s nothing more we can do.’”

London School of Economics

After a stint in England, where he got a doctorate from the London School of Economics, Jerram returned to Japan, where he worked for eight years as chief economist at ING Securities before the business was bought in 2004 by Macquarie, Australia’s biggest investment bank.

Macquarie agreed yesterday to buy the equity trading and research operations of Sal. Oppenheim Jr. & Cie. KGaA to expand its business in Europe. The Sydney-based bank is also adding to its Asia research staff, particularly in China and India, Jerram said.

“Asia has been far ahead on the global recovery cycle and its going to face some interesting challenges,” Jerram said. “Quite a lot of these countries, in contrast to previous times when they lagged behind the policy cycle in the U.S., are going to have to lead this time.”

Source

Get instant health insurance quotes, compare medical insurance plans, and find affordable health insurance to fit your health care coverage needs.

Visa and MasterCard now have prepaid cards, which provide enhanced security for online shopping. They’re issued by Canadian financial institutions and sold in large retail chains, such as Shoppers Drug Mart.

But when buying prepaid cards, you have to beware of hidden baggage they carry – such as monthly fees, activation fees and expiry dates.

Mary Vandersteen ran into problems trying to use her Vanilla Prepaid MasterCard with her PayPal account.

"I only use prepaid cards for online transactions with companies I don’t know," she says, "because once the funds have been used up, the companies cannot add any more service fees or charges without my knowledge."

Needing help with a severance package, she did a Google search and found FairSeverancePay.ca. She agreed to make three deposits of $100 each with the prepaid MasterCard, which she linked to her PayPal account.

PayPal rejected the first deposit, but later accepted it when she found a staff member to help her. Then it rejected her other attempts to make a $100 payment using the same card.

"So far, I have paid $4.36 to PayPal and I can’t complete the transaction," she says.

The problem is that prepaid Visa and MasterCard gift cards can be purchased anonymously, says Darrell MacMullin, general manager of PayPal Canada.

"Whenever you add a financial instrument to PayPal, we like to make sure you are who you say you are. In this case, there was no user information associated with the prepaid card. When we check and no information comes back, it throws up a red flag in our system."

PayPal charges $1 for each attempt to authorize a payment card and refunds the fees once the card is authorized. (Vandersteen got a refund once I contacted the company.) But PayPal won’t authorize a card unless it can identify the user, MacMullin emphasizes.

Hal Whitcomb ran into problems trying to use his My Treat Visa prepaid cards, issued by Citizens Bank in Vancouver.

"These were gifts from the parents of the softball team I coach. They are advertised as just like cash," he says. "However, there’s an activation fee. There’s also a monthly administration fee after a few months. I’ve also found they have expiry dates, despite the laws that prevent expiry dates on gift cards."

Citizens Bank spokesman David Chong said Visa and MasterCard gift cards can be used anywhere that Visa and MasterCard credit cards are accepted.

"They are what we call `open network’ cards. As a result, issuers like us have to give 24/7 access to cardholders. There are significant costs to ensuring this occurs flawlessly."

Activation fees are a common industry practice to cover the expense of printing and packaging the cards, as well as to reimburse merchants, he explains.

The monthly administration fee kicks in after the first few months of ownership. However, most cardholders use up their entire card balances in one transaction or within a month or two after receiving their cards, Chong says.

As for expiry dates, Ontario and other provinces do have laws banning expiry dates on gift cards. But Visa and MasterCard fall under federal law and don’t have to abide by the provincial rules.

So, if you get a prepaid Visa or MasterCard card, try to make a major purchase right away. Don’t let them linger in your wallet, piling up fees.

Next week, we’ll dig into those online offers of "free samples," which end up enrolling you in expensive monthly plans.

eroseman@thestar.ca

Source

For no fax payday loans and payday advance loans, apply today and maximize your payday cash!

European industrial output rose for a fourth month in August, led by consumer durable goods, adding to signs the euro-area economy is emerging from the deepest recession since World War II.

Production in the economy of the 16 nations using the euro increased 0.9 percent from July, when it gained 0.2 percent, the European Union’s statistics office in Luxembourg said today. Output of durable goods such as washing machines jumped 5.3 percent, the biggest gain since the data began in 1990. From a year earlier, August output fell 15.4 percent, the slowest annual drop in eight months.

The global economy is gathering strength after central banks cut interest rates to near zero and governments pledged $2 trillion in stimulus measures. The European Central Bank last week kept borrowing costs at a record low and ECB President Jean-Claude Trichet said the euro-area economy is recovering “at a gradual pace.” Exports from China, the world’s fastest growing major economy, fell at the slowest pace in nine months in September, data showed today.

“Manufacturing surveys continue to paint a rosy picture of the near-term outlook,” said Carsten Brzeski, an economist at ING Groep NV in Brussels. “The industrial recovery will continue but, of course, no recovery follows a straight upward line. New setbacks are likely.”

Potential Growth

The International Monetary Fund said on Oct. 3 that it expects the euro-region economy to shrink 4.2 percent this year before expanding 0.3 percent in 2010. While the crisis has hampered Europe’s medium-term economic outlook, potential growth should return to its historic trend in most of the region’s advanced economies, the Washington-based IMF projected.

Adding to evidence of recovery is gaining steam, confidence in the world economy increased for a third month in October amid gains in manufacturing and equities, a Bloomberg survey of users on six continents showed today. The Bloomberg Professional Global Confidence Index rose to a record 61.7.

Confidence in the European economic outlook improved to a one-year high last month and a gauge of euro-area manufacturing and services industries showed a stronger expansion than initially estimated. German business confidence is at a 12-month peak. European imports from China rose last month to the highest value since that nation’s export collapse began in November, the Chinese customs bureau said today.

Leipzig Factory

Bayerische Motoren Werke AG, the world’s largest maker of luxury cars, is among companies stepping up output on reviving demand. The Munich-based company has boosted production at its Leipzig factory to a record 730 cars a day from 600, Harald Krueger, BMW’s personnel chief, said in an interview on Oct. 7.

“There is no short-time work at any of the auto-assembly plants in Germany,” Krueger said.

European output of capital goods such as factory machinery rose 1.1 percent from July, when it fell 1.6 percent, today’s report showed. Energy production increased 0.5 percent after a 0.1 percent gain in the prior month.

A recovery may remain too fragile to encourage companies to hire workers. Europe’s unemployment rate rose to 9.6 percent in August from 9.5 percent in the previous month. That was the highest since March 1999.

Volkswagen AG, Europe’s largest carmaker, said on Oct. 8 that the worldwide automotive market won’t return to pre- recession levels before 2013. Chief Executive Officer Martin Winterkorn said the Wolfsburg, Germany-based company will still face a “very difficult year” in 2010. ArcelorMittal, the world’s largest steelmaker, said last month that “markets are not expected to normalize in Europe and the U.S. in 2010.”

Covered Bonds

The Frankfurt-based ECB has offered banks unlimited cash over 12 months and purchased covered bonds to encourage lending. Trichet said on Oct. 9 that it is “not the time to exit yet.” ECB council member George Provopoulos said earlier this month that it will be a “challenge” to choose the right time to withdraw stimulus measures.

An 8.8 percent gain by the euro against the dollar over the past five months is threatening to curb the recovery by making European exports less competitive. Trichet said last week that U.S. authorities’ preference for a strong dollar is “extremely important in the present circumstances.” The euro traded at $1.4898 at 3 p.m. in London, up 0.3 percent on the day.

“In the current beginning of a very fragile recovery, the ECB is becoming increasingly aware that a stronger euro must be absolutely avoided,” said Aurelio Maccario, chief euro-area economist at UniCredit Group in Milan. “A strong euro is another solid argument in favor of our view of a refinancing rate stuck at 1 percent throughout 2010.”

Source

Orders placed with U.S. factories fell unexpectedly in August, restrained by long-lasting items such as commercial aircraft, construction machinery and electrical equipment.

Bookings fell 0.8 percent after a revised 1.4 percent increase in July that was larger than previously estimated, the Commerce Department said today in Washington. Excluding transportation equipment, orders rose 0.4 percent.

Today’s report follows others this week that showed manufacturing contracted or slowed in September. With excess capacity close to a record, companies have less reason to ramp up production until they see stronger gains in demand. While the “cash for clunkers” program boosted automakers’ output in August, it’s now expired, pointing to an uneven rebound.

“We could have a choppy recovery,” Benjamin Reitzes, an economist at BMO Capital Markets in Toronto, said before the report. “Employment is still falling, and until that turns around the economy is going to have trouble gaining any momentum.”

Factory orders were forecast to be unchanged, after an originally estimated 1.3 percent gain in June, according to the median of 65 estimates in a Bloomberg News survey. Projections ranged from a decrease of 1.7 percent to an increase of 2.1 percent.

Employers cut more jobs than forecast last month and the unemployment rate rose to a 26-year high, Labor Department data showed today, calling into question the sustainability of the economic recovery.

Durable Goods

The unemployment rate rose to 9.8 percent, the highest since 1983, from 9.7 percent in August. Payrolls fell by 263,000, following a revised 201,000 decline the prior month that was less than previously reported.

Orders for durable goods, which make up 47 percent of total factory demand, fell 2.6 percent, the biggest drop since January. The government last week estimated they had dropped 2.4 percent.

Demand for transportation equipment, which tends to be volatile, fell 9.1 percent, led by a 43 percent decline in commercial aircraft and parts. Autos increased 2 percent.

Ford Motor Co, General Motors Co. and Honda Motor Co. are among automakers that cited the popularity of the cash-for- clunkers plan as they announced production increases for the coming months.

Clunkers Program

The program, which ended Aug. 24, offered auto buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles. The plan produced almost 700,000 auto sales before it ended, the Transportation Department said Aug. 26.

Auto sales fell 35 percent in September from the previous month to a 9 low rate payday loans.2 million annual rate, after the clunkers plan expired, according to Bloomberg data. Sales had reached the highest level in more than year a month earlier.

Bookings for capital goods excluding aircraft and military equipment, a measure of future business investment, fell 0.9 percent after dropping 1.3 percent in July. Shipments of those goods, used in calculating gross domestic product, decreased 2 percent.

Economists earlier this week said the end of the clunkers incentive may have helped fuel a weaker-than-forecast September reading for the Institute for Supply Management- Chicago’s business survey, which found activity dropped. The Chicago group is not affiliated with the national Institute for Supply Management.

Factory Stockpiles

The Institute for Supply Management yesterday said its factory gauge edged down to 52.6, from 52.9 in August. Readings above 50 signal expansion.

Another Commerce Department report this week showed the record drop in stockpiles in the second quarter was even larger than previously estimated, paving the way for gains in manufacturing in the second half of the year.

Today’s report showed factory stockpiles fell 0.8 percent in August, the smallest drop since May, after falling a revised 0.9 percent a month earlier. Manufacturers had enough goods on hand to last 1.38 months — the lowest since October — at the current sales pace, down from 1.39 months in July.

Micron Technology Inc., the biggest U.S. producer of computer-memory chips, this week reported a narrower loss after an industry glut eased and product prices rebounded.

Bankruptcies and factory shutdowns have helped the memory industry pare an oversupply of chips, pushing up prices closer to the cost of production. Micron makes dynamic random access memory, or DRAM, for personal computers, as well as Nand flash chips, which store data in devices such as Apple Inc.’s iPhone.

Job Cuts

Timothy Main, chief executive officer of Jabil Circuit Inc., the Florida electronics manufacturer, said this week that the worst of the recession had likely passed. Even so, the company stepped up a job-cutting program. Jabil now expects to eliminate 4,500 positions, up from the 3,000 already planned.

Today’s factory report showed orders of non-durable goods gained 0.8 percent. The increase may have been influenced by an 8 percent gain in wholesale energy costs in August, according to Labor Department figures released Sept. 15.

Source

Sales at U.S. retailers surged in August by the most in three years, showing unexpected strength in consumer demand that extended beyond auto purchases spurred by the government’s “cash-for-clunkers” program.

The 2.7 percent increase exceeded economists’ forecasts and followed a 0.2 percent drop in July, Commerce Department figures showed today in Washington. Purchases excluding automobiles climbed 1.1 percent, topping the highest forecast.

Stocks climbed as the report eased investor concerns that consumers will make a limited contribution to the recovery, leaving the economy dependent on government spending a year after the collapse of Lehman Brothers Holdings Inc. Morgan Stanley was among banks and investment firms raising forecasts for third-quarter economic growth after the report.

“The most remarkable thing is it wasn’t all cash-for- clunkers,” said Robert Stein, a senior economist at First Trust Advisors LP in Lisle, Illinois, who forecast a gain of 2.9 percent. “The consumer is in recovery and the U.S. economy is in recovery.”

Stocks advanced for the seventh time in eight days. The Standard & Poor’s 500 index rose 0.3 percent to close at 1,052.63, its highest level in almost a year. The yield on the 10-year Treasury note rose two basis points, or 0.02 percentage point, to 3.44 percent at 4:45 p.m. in New York. It climbed as high as 3.49 percent immediately after the report.

Retail sales were projected to rise 1.9 percent after an initially reported 0.1 percent decline in July, according to the median estimate of 73 economists in a Bloomberg News survey. Forecasts ranged from gains of 0.8 percent to 3.8 percent. Last month’s gain was the biggest since January 2006.

Year-Over-Year

Purchases were down 5.3 percent from August 2008, the smallest year-over-year drop since October.

Separate reports today signaled manufacturers will help the economy pull out of the worst slump since the Great Depression as they ramp up production after a record inventory drawdown in the first half of 2009.

Business inventories declined 1 percent in July, exceeding economists’ forecasts, to $1.33 trillion, the lowest level since March 2006, a Commerce Department report showed today. Sales climbed 0.1 percent after a 1.1 percent gain in June.

Manufacturing in the New York region grew in September at the fastest pace in almost two years, according to the Federal Reserve Bank of New York. The New York Fed’s general economic index increased to 18.9 from 12.1 in August, the bank said today.

Median Forecast

Excluding automobiles, the increase in sales was the biggest in six months. Purchases minus cars were forecast to increase 0.4 percent, according to the survey median.

The auto plan, which ended Aug. 24, offered buyers discounts of as much as $4,500 to trade in older cars and trucks. The program prompted almost 700,000 purchases, the Transportation Department said.

The economy has lost about 6.9 million jobs since the recession started in December 2007, the worst of any downturn since World War II. Gross domestic product contracted at a 1 percent annual rate in the second quarter, the fourth consecutive drop.

President Barack Obama yesterday said job losses are “bottoming out” and pointed to gains in exports and manufacturing as signs the U.S. economy is expanding again.

Obama

“I don’t think we’re out of the woods yet,” Obama said in an interview with Bloomberg News. “What we have to be careful about is taking the crutches away from the patient too early.”

Fed Chairman Ben S. Bernanke added to the note of caution as he answered questions today following a speech at the Brookings Institution in Washington.

“Even though from a technical perspective the recession is very likely over at this point, it’s still going to feel like a very weak economy for some time,” he said.

Economists also warned that stagnant wages and a loss of wealth resulting from the drop in home prices will probably restrain consumer spending in the months to come.

“All the reasons for concern about consumer spending are still out there,” said Louis Crandall, chief economist at Wrightson ICAP LLC, a Jersey City, New Jersey-based research firm. “If there is any sign of resilience in September, that will be very encouraging.”

Sales at automobile dealerships and parts stores jumped 11 percent, today’s report showed, the most since October 2001 when carmakers such as General Motors Corp. offered zero- percent financing to spur sales following the terrorist attacks the previous month.

Broad-Based

Service stations, clothing, sporting goods and department stores all recorded gains of more than 2 percent last month, today’s report showed. Only furniture and building-material stores showed losses.

Excluding autos, gasoline and building materials — the retail group the government uses to calculate gross domestic product figures for consumer spending — sales increased 0.7 percent, after a 0.3 percent decrease. The government uses data from other sources to calculate the contribution from the three categories excluded.

“This is a sign that consumers are beginning to feel a little more comfortable about the economy,” Rebecca Blank, Commerce undersecretary for economic affairs, said in an interview. “I wouldn’t want to say that we are solidly there yet. We need several more months of these types of numbers.”

Spending Outlook

Consumer spending, which accounts for 70 percent of the economy, is projected to grow at a 1.7 percent pace from July through September and then slow to 1 percent in the last three months of the year, according to the median estimate of economists surveyed this month by Bloomberg News.

Purchases rose at an average 3.5 percent pace in the decade before the current recession began in December 2007.

Economists at Morgan Stanley raised their estimate for third-quarter growth to 3.9 percent from 3.7 percent after the sales report.

In the Fed’s Beige Book business survey, published two weeks before officials meet to set monetary policy, the central bank reported “flat” retail sales in July and August and cited some auto-industry contacts as saying the cash-for- clunkers effect may be temporary. The Fed released the survey on Sept. 9.

“Despite some encouraging signs in the global economy, it is difficult to predict the timing and pace of any economic recovery,” Alan Graf, chief financial officer for FedEx Corp., said last week in a statement. FedEx, the second-largest U.S. package-shipping company, said first-quarter profit topped its forecast.

FedEx and larger rival United Parcel Service Inc. are considered proxies for the U.S. economy because they handle almost 80 percent of domestic package shipments.

Source

The Bank of England is throwing open its doors to the public again in an annual event that was pared back a year ago following the collapse of Lehman Brothers Holdings Inc., a sign the financial crisis has now abated.

The central bank will allow visitors to see parts of its main building including the Court Room, where its governing board meets, as part of the Open House London weekend event on Sept. 19-20, according to the bank’s Web site. Last year the bank limited the tour to its museum as staff worked overtime on the Saturday and Sunday of Sept. 20-21 to save Britain’s financial system.

That was the weekend after Lehman filed for the biggest bankruptcy in history and the U.S. loaned $85 billion to bail out American International Group Inc. Bank of England staff then went to work on a plan to rescue the banking system, which Deputy Governor Paul Tucker said afterward came “preciously close” to collapse.

“People get pulled off teams and put into crisis groups where they’re often not allowed to talk to each other, and that happened when Lehman went under,” said Colin Ellis, who worked at the central bank until October and is now an economist at Daiwa Securities SMBC in London. “All those people who had been running to stand still are now able to go out and smell the roses more.”

Lehman filed for bankruptcy on Sept. 15, 2008, and the Federal Reserve rescued AIG the next day. Meanwhile, U.K. officials struggling to shore up HBOS Plc engineered the bank’s acquisition by rival Lloyds TSB Group Plc. That was announced on Sept. 18, the same day the Bank of England participated in a joint coordinated dollar swap with the Fed.

Economic Recovery

Bank of England Governor Mervyn King said Aug. 12 the U.K. may be heading for a “relatively slow recovery” as it emerges from the worst contraction in a generation, though the world financial system is in “a fragile condition.” To battle the crisis, the bank has cut the key interest rate to 0.5 percent, the lowest since it was founded in 1694, and is printing 175 billion pounds ($290 billion) of money to buy bonds. An official at the bank had no comment on this year’s tour.

Bank officials may have met and worked in rooms visitors would otherwise have seen on the tour of the historic chambers. Its headquarters take up a 3 1/2-acre block in the heart of London’s financial district, designed by Herbert Baker between 1925 and 1939 and incorporating elements of a previous building by Sir John Soane, the bank’s architect from 1788 until 1833.

Weather Vane

In the Court Room, a remnant of the original building close to where the bank’s Monetary Policy Committee meets to set interest rates each month, visitors will be able to see a dial linked to a weather vane and once used to set policy free credit report online. Changes in wind speed and direction on the River Thames signaled that cargo ships may dock more quickly, and the heavier trading could boost demand for money and credit.

The Lehman collapse provoked a storm in financial markets. Bank officials started work “pretty much straight away” on a rescue plan which led to the government taking stakes in Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc, former Deputy Governor John Gieve told the BBC last month.

“The pace at which things were moving in those two weeks after the Lehman’s bankruptcy is almost impossible to exaggerate,” Adair Turner, chairman of the U.K. Financial Services Authority, told lawmakers in November 2008.

Joint Action

The U.K. rescue plan was announced on Oct. 8, the same day the central bank made a surprise half-point interest rate cut in joint action coordinated with other central banks.

Alan Greenspan, former chairman of the U.S. Federal Reserve and an informal adviser to Prime Minister Gordon Brown, said today Britain will be slow to rebound from the slump after the global recession battered exports.

“It’s going to take a long while for you to work your way through this,” he told the BBC. “Britain is more globally oriented as an economy.”

“The prime minister’s view is that this is not a time for complacency,” Simon Lewis, Brown’s spokesman, told reporters today in London. “The prime minister feels strongly about the need to keep recovery going by maintaining the appropriate level of expenditure.”

The crisis created “exceptional levels of stress” in many parts of the bank, according to its annual report released in May. The Bank of England expanded its bonus pool and took on the most staff in more than two decades as events unfolded. The number of employees rose by about 6 percent and the bonus pot was widened to encompass 8.1 percent of salaries.

“It really struck me just how hard people were working,” said Daiwa’s Ellis. “The bank’s very lucky to have such a dedicated and able staff at its fingertips. Now the projects that had been put on hold can start up again.”

Source

Manufacturing in the U.S. shrank at the slowest pace since August 2008 and pending sales of existing homes advanced for a fourth month, underscoring signs the economy began to stabilize in the second quarter.

The Institute for Supply Management’s factory index rose in June for a sixth straight month, to 44.8; readings less than 50 signal contraction. The National Association of Realtors said the number of Americans signing contracts for existing homes increased 0.1 percent in May after a 7.1 percent gain.

“We’re going to see a temporary substantial improvement” in the economy, said Martin Feldstein, the Harvard University economist and former Reagan administration adviser who is a member of the U.S. recession-dating panel. “It’s a bounce that is coming from the beginning of the fiscal stimulus,” he said in an interview with Bloomberg Radio.

Still, Feldstein warned that the economy will be “going down again” into 2010. Underscoring that danger was a survey issued today by ADP Employer Services that showed U.S. companies eliminated 473,000 jobs in June after a 485,000 drop the previous month. The report also foreshadowed a jump in the unemployment rate in tomorrow’s Labor Department report that will temper any rebound in consumer spending.

Stocks advanced on optimism the worst of the recession, the deepest in half a century, is over. The Standard & Poor’s 500 Stock Index gained 0.4 percent to 923.33 at 4:16 p.m. in New York. Yields on benchmark 10-year notes were little changed, increasing to 3.544 percent from 3.535 percent late yesterday.

Construction Slump

Spending on construction projects dropped 0.9 percent in May after increasing in April for the first time in seven months, a report from the Commerce Department also showed.

The gain in the ISM factory index was paced by improvements in production, which expanded for the first time since August, and employment. A gauge of export orders also increased, almost reaching the breakeven level of 50.

“Things are starting to look up,” Norbert Ore, chairman of the ISM’s manufacturing survey, said on a conference call with reporters. “With the exception of inventories, which were still hitting a bottom in terms of rate of decline, all of the other indexes have moved in the right direction and should get us to 50 in the next few months.”

One disappointing reading was in new orders, where the index fell to 49.2 from a reading of 51.1 in May that showed the first expansion in bookings in more than a year.

Auto Shutdowns

Bankruptcies at General Motors Corp. and Chrysler LLC have rippled through the auto industry and have also caused some suppliers to file for protection from creditors no teletrack payday loans.

“The next three months are going to be critical,” Tony Brown, purchasing chief for Ford Motor Co., said June 24 in an interview. “The Chapter 11 filings have increased the cash-flow pressure on the supply base.”

Even so, government efforts to revive auto sales may give manufacturing and the economy a boost in the third quarter. The “cash for clunkers” bill that passed Congress in June gives consumers as much as $4,500 to trade in their old cars for more fuel-efficient vehicles.

An increase in auto sales will come as automakers slashed inventories to get rid of unwanted stocks, meaning manufacturers will need to crank up production again to meet the new demand, according to Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York.

Maki last week boosted his forecast for economic growth in the second half of 2009 by half a percentage point to 3 percent.

Crisis ‘Behind Us’

Other companies are already seeing an improvement.

The period of crisis management at General Electric Co. is “behind us” and some level of economic growth will take place next year, Chief Executive Officer Jeffrey Immelt said earlier this week.

“In some way, shape or form, 2010 and beyond will see economic growth,” Immelt said at the London School of Business on June 29. “How positive it is remains to be seen.”

One reason for concern is mounting unemployment. A Labor Department report tomorrow may show employers cut 363,000 workers from payrolls in June and unemployment rose to a 26-year high of 9.6 percent. Still, following May’s 9.4 percent jobless rate, the increase would be the smallest since November.

The housing market is stabilizing after a collapse in prices, historically low mortgage rates and tax incentives made properties more affordable for Americans. Still, with unemployment forecast to reach 10 percent this year, home purchases may languish at low levels for months before a recovery emerges.

Pending resales are considered a leading indicator because they track contract signings. The National Association of Realtors’ existing-home sales report tallies closings, which typically occur a month or two later.

The agents’ association reported last week that home resales increased 2.4 percent in May, a second consecutive gain that reinforced the case that the slump in home sales may level out this year. The median price dropped 17 percent from a year earlier, the third-biggest decline on record.

Source

The U.S. manufacturing sector contracted at a slower rate in May, while consumer spending fell modestly in April, according to reports on Monday that were further evidence the deep recession was easing.

The Institute for Supply Management said its index of national factory activity rose to 42.8 in May from 40.1 in April. This was the index’s highest reading since September and was the fifth straight monthly rise.

Separately, the Commerce Department said consumer spending slipped 0.1% in April after a 0.3% fall in March and spending on construction projects rose 0.8% in April from March, the biggest increase since August.

"Severe recessionary conditions appear to have subsided in the second quarter," said Michael Woolfolk, senior currency strategist at the Bank of New York-Mellon.

U.S. stock indexes extended gains after the economic data, while U.S. Treasury debt prices extended losses. The U.S. dollar extended losses versus the euro.

A reading below 50 in the manufacturing index indicates contraction. ISM said the index has been below this threshold for 16 straight months.

However, the fifth straight monthly rise in this measure of U.S. manufacturing followed encouraging signs from China and Europe that the world has moved past the worst the current downturn.

"It was better than expected, and I would put particular emphasis on the new orders component, which broke above 50," said Michael Darda, chief economist at MKM Partners LLC, Greenwich, Connecticut. "In my view, this is more evidence that we’re getting closer to the end of the recession payday loan.

But this hopeful economic outlook was mitigated by the widely expected bankruptcy of General Motors (GM, Fortune 500), the biggest ever in U.S. manufacturing.

The Commerce Department report showed personal income rose 0.5%, the biggest increase since May last year, after falling by a revised 0.2% in March. Analysts polled by Reuters had forecast income to fall 0.2% in April.

Disposable income surged 1.1% in April, boosted by tax cuts and increased social benefit payments under the government’s record $787 billion stimulus package, the Commerce Department said. Excluding the stimulus package, disposable income increased 0.7% in April.

Savings jumped to a record annual rate of $620.2 billion. The savings rate rose to 5.7% in April, the highest level since February 1995, from 4.5% the previous month.

Households, buffeted by job losses and falling asset values, are cutting spending on nonessential items, preferring to save any extra income.

In another report, the Commerce Department said private construction spending jumped 1.4% in April from March, the biggest advance since August. Private residential construction rose 0.7%, also the biggest increase since August, after declining 3.6% in March.

Spending on public construction fell 0.6% in April after increasing 1% in March. Federal spending on construction projects plummeted 6.5% in April, the biggest drop since January. 

Source

U.S. manufacturing probably shrank in May at the slowest pace in eight months, a further sign that the worst of the recession may be over, economists said before a report today.

The Institute for Supply Management’s factory index rose to 42, the highest level since September, according to the median forecast of 63 economists surveyed by Bloomberg News. Readings below 50 signal contraction. Other reports may show spending by consumers and construction firms dropped in April.

More companies are moving past the severe cuts in output and payrolls that came after Lehman Brothers Holdings Inc.’s collapse last September deepened the economic slump. Still, restructuring at automakers Chrysler LLC and General Motors Corp. will ripple through the economy, increasing unemployment and tempering a return to growth forecast for later this year.

“It’s going to be slow-going,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Businesses are a little more cautious. Their outlook depends on consumer demand, and we can see consumer spending isn’t setting any records here.”

The Tempe, Arizona-based ISM’s report is due at 10 a.m. New York time. Forecasts ranged from 38.6 to 45.5, after a reading of 40.1 in April. Manufacturing accounts for about 12 percent of the world’s largest economy.

In China, reports today showed manufacturing expanded for a third month, adding to evidence that the world’s third-largest economy is recovering from its deepest slump in almost a decade.

Confidence Climbs

The U.S. economy shrank less than previously estimated last quarter, the government said last week, and a Reuters/University of Michigan index showed confidence among consumers rose in May to the highest level since September. A gauge of current conditions though, which reflects whether Americans are likely to buy big-ticket items such as cars, slipped.

Stocks have surged and Treasuries have dropped amid reports showing the worst of the downturn may have passed. The Standard & Poor’s 500 Index has gained 36 percent since March 9, when it hit the lowest level in more than 12 years, closing at 919 same day payday loans.14 on May 29 in New York. Yields on the benchmark 10-year note climbed to 3.46 percent last week from 2.86 percent during that period.

The Commerce Department’s personal spending report is due at 8:30 a.m. Economists projected purchases would drop 0.2 percent, according to the survey median. Incomes probably declined 0.2 percent in April, the third straight drop.

Spending on construction projects fell 1.5 percent in April, the sixth decline in seven months, economists projected a 10 a.m. report from Commerce will show.

Regional Reports

The ISM report would reinforce regional data showing the factory industry’s contraction slowed in May. The Federal Reserve Bank of New York’s manufacturing gauge rose to the highest level since August, the Philadelphia Fed’s measure jumped to an eight-month high and the Richmond Fed’s index showed the first expansion in more than a year.

Still, the Institute for Supply Management-Chicago Inc.’s gauge of business activity shrank at a faster pace than anticipated. Part of the drop may have resulted from the auto slump in neighboring Detroit, economists said.

More pain for some factories and workers is ahead. Chrysler filed for bankruptcy on April 30, followed by Visteon Corp., the former parts-making unit of Ford Motor Co., and chassis manufacturer Metaldyne Corp.

The outlook is improving for other companies. Alcoa Inc., the largest U.S. aluminum producer, said distributors of the lightweight metal are showing renewed buying interest after seeing signs that demand will revive.

Metal distributors have “seen some green shoots” and are concerned they won’t be able to cover orders once demand returns because their inventories are near zero, Alcoa Chief Executive Officer Klaus Kleinfeld said May 29 in New York.

Source

The U.S. Treasury’s plan to regulate the over-the-counter derivatives market outlined by Secretary Timothy Geithner on May 13 contains recommendations similar to those made by Goldman Sachs Group Inc., JPMorgan Chase & Co., Credit Suisse Group AG and Barclays Plc three months earlier.

The banks sent the Treasury a plan written in February titled “Outline of Potential OTC Derivatives Legislative Proposal,” saying the Federal Reserve should extend capital and margin requirements to companies and hedge funds that trade in the $592 trillion unregulated market, according to a document obtained by Bloomberg News and confirmed by the Treasury. Energy companies, corporations and hedge funds don’t face such requirements now, while banks do under central bank oversight.

“The banks appear to wish to maintain the intra-dealer market and raise barriers to new entrants to keep the OTC business as compartmentalized as possible and to protect their profitable market conditions,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. “The Street’s lobbyists appear to be asking for a ‘club’ structure in OTC trading.”

On May 13, U.S. officials called for increased oversight of over-the-counter derivatives to reduce risk to the financial system. Derivatives contributed to the failures last year of Lehman Brothers Holdings Inc. and American International Group Inc., leading to the seizure of credit markets and causing more than $1.4 trillion in writedowns and losses amid the worst financial crisis since the Great Depression.

‘Little Impact’

The Treasury hears from many interested participants while crafting policy, said spokesman Andrew Williams. Derivatives are contracts whose values are tied to assets including stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.

“This proposal had little impact on our final result,” he said. “Our proposal calls for dramatically increased transparency and the enhancement of regulatory powers to prevent market manipulation that go well beyond anything in that draft.”

Bruce Corwin, a spokesman for Zurich-based Credit Suisse, and Goldman Sachs spokesman Michael DuVally and JPMorgan spokesman Brian Marchiony declined to comment on the bank draft. Representatives from New York-based Goldman Sachs and London- based Barclays didn’t immediately return calls and messages for comment left after normal business hours.

‘Robust Regime’

Geithner sent a proposal to Congressional leaders on May 13 laying out his plan to police the unregulated market where swaps based on interest rates, currencies, commodities and a company’s ability to repay debt are traded.

“All OTC dealers and other firms who create large exposures to counterparties should be subject to a robust regime of prudential supervision and regulation,” the proposal said pay day advance. These included “conservative capital requirements,” “reporting requirements,” and “initial margin requirements.”

The bank-written plan, dated Feb. 13, said the systemic regulator “shall promulgate rules” requiring “capital adequacy,” “regulatory and market transparency” and “counterparty collateral requirements.”

“Better the devil you know than the devil you don’t,” said Robert Webb, a finance professor at the University of Virginia in Charlottesville, describing the bank’s preference for their current regulator.

Shifting Views

The banks sought sole authority for the Fed over the market and limited the role of the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, according to the document. The three agencies currently share information in the $28 trillion credit-default swap market.

Geithner’s proposal didn’t specify what agency or combination of agencies should oversee the market.

The Obama administration favors the Fed becoming the new systemic risk regulator to oversee financial companies that could pose a danger to the banking system, according to participants in a May 8 White House meeting.

While the central bank has been favored to take the job since a proposal by former Treasury Secretary Henry Paulson last year, lawmakers and some regulators have shifted away from that view. Federal Deposit Insurance Corp. Chairman Sheila Bair and SEC Chairman Mary Schapiro earlier this month recommended that a council of regulators assume the role.

Geithner’s plan goes further in many aspects than what the banks laid out in their draft.

No Clearing Requirement

The Treasury Secretary is proposing mandatory guaranteeing of private contracts with clearinghouses for standardized OTC contracts such as interest-rate swaps or indexes of credit- default swaps and increased electronic trading to improve price transparency for customers. He also wants required reporting of positions and trades.

The bank proposal doesn’t endorse clearing of OTC derivatives. In annotations to the draft it states “Note that the proposed outline does not propose any specific OTC derivatives clearing requirement.” It also says reporting requirements on trade data should be made to regulators “upon request.”

Webb said any regulation over the market should be applied evenly. “It’s not clear requiring everyone to have the same capital requirements is necessary,” he said. He added that banks have worked closely with the Fed for many years.

“You’re going to see some close ties between the industry and the regulator,” he said.

Source