Consumer Spending Boosts Second-Quarter U.S. Economic Growth

Nichole Harper
30 Jul, 2015
New York City

U.S. economic growth accelerated in the second-quarter from the first boosted by consumer spending on falling energy price. In addition, improving labor market also encouraged consumers to shop more often.

[R]2:45 PM New York City, New York – U.S. economic growth accelerated in the second-quarter from the first boosted by consumer spending on falling energy price. In addition, improving labor market also encouraged consumers to shop more often.[/R]

Market averages hovered around the recent highs after economic growth in the second-quarter came in ahead of expectations.

First quarter GDP, was revised up to an increase of 0.6% from the previous estimate of 0.2% shrinkage. In the first-half, economy expanded at 1.5% compared to 1.9% in the same period a year ago.

In the preliminary estimates U.S. economy increased at 2.3% in the second-quarter compared to the revised 0.6% increase in real GDP in the first-quarter, the Department of Commerce said.

Cheaper gasoline helped consumer spending to increase at 2.9% rate from a 1.8% pace in the first-quarter.

However, business investment in the purchase of new equipment declined at a 4.1% pace. Energy sector continued to drag the economy as spending on mining exploration, wells and shafts plunged at a 68.2% pace in the quarter compared to 44.5% in the first-quarter.

Seasonally adjusted weekly jobless claims jumped 12,000 to 267,000 from the previous week’s unrevised claims of 255,000, the Department of Labor announced today.

On Wall Street, Tollbooth Strategy Index slid 19.70 or 0.2% to 10,845.18.

S&P 500 index edged down 1.19 to 2,107.32 and the Nasdaq Composite Index rose 12.12 or 0.2% to 5,123.91.

Crude oil in New York added 20 to $48.99 a barrel and gold fell $3.60 to $1,089.70 an ounce.

U.S. Movers

Facebook Inc ((FB)) declined 3.8% or $3.66 to $93.33 after the social networking site operator reported revenues in the second-quarter ending in June climbed 39% to $4.04 billion form a year ago period.

Net income in the quarter dropped 9.1% to $719 million or 25 cents per diluted share compared to $791 million or 30 cents from the same quarter last year.

Facebook said advertising revenue in the quarter surged 43% to $3.83 billion, consists mobile ad revenue soared 62% from the prior year quarter and 73% in the first-quarter.

As of June 30, the company’s monthly active users in the quarter climbed 13% to 1.49 billion while daily active users jumped 17% to 968 million and Mobile monthly active users surged 23% to 1.31 billion from a year ago.

Procter & Gamble Co ((PG)) declined 3.5% or $2.84 to $77.79 after the consumer packaged goods maker reported total revenues in the fourth-quarter ending in June dropped 9% to $17.79 billion form a year ago period.

Net income in the quarter tumbled 80% to $521 million or 18 cents per diluted share compared to $2.58 billion or 89 cents from the same quarter last year.

P&G took a more than $2 billion write-down on its Venezuelan operations.

Time Warner Cable Inc ((TWC)) gained $1.39 to $190.82 after the video, high-speed data and voice services provider said revenues in the second-quarter ending in June jumped 3.5% to $5.93 billion form a year ago period.

Net income in the quarter declined 7.2% to $463 million or $1.62 per diluted share compared to $499 million or $1.76 from the same quarter last year.

The company record best second-quarter residential subscriber numbers since 2008; high-speed data net additions of 172,000, voice net additions of 252,000 and triple play net additions in the quarter of about 233,000.

Time Warner added 172,000 internet customers but lost video customers of about 45,000 and average monthly cost that it pays for content per customer climbed 11.6% to $42.73.

The company struggling with declining in subscriber numbers as viewers shift to cheaper and more flexible streaming services providers like Netflix, Amazon, Hulu and now Charter Communications.

European Markets

In London trading, FTSE 100 index increased 46.95 or 0.7% to 6,677.95 and in Frankfurt the DAX index edged up 4.58 to 11,216.78.

In Paris, CAC 40 index gained 25.28 or 0.5% to 5,042.72.

BT Group Plc dropped 1.5% to 466.30 pence after the U.K.-based communications services provider stated revenues in the first-quarter ending in June was nearly flat at £4.36 billion from £4.35 billion in a year ago period.

Net profit in the period climbed 16% from a year ago to £632 million compared to £546 million and diluted earnings per share increased to 6.1 pence from 5.6 pence.

Royal Dutch Shell Plc soared 4.2% to 1,838.29 pence after the Netherlands-based oil and gas refiner reported revenues in the second-quarter ending in June tumbled 34.9% to $72.40 billion from $111.22 billion in a year ago period.

Net profit in the period plunged 25% from a year ago to $3.99 billion compared to $5.31 billion and diluted earnings per share slipped to 62 cents from 84 cents.

Separately, Shell agreed to sell its 125.3 million shares or 33.24% stake in Showa Shell Sekiyu KK for about 169 billion yen or US$1.4 billion and retain a 1.80% holds in the company.

Asian Markets

Nikkei average increased 1.1% and industrial output jumped 0.8% in June. However, auto sales in the month declined 5.3% on 5.1% decline in sales. Nintendo soared after posting profit in the latest quarter. Sony Corp quarterly net tripled.

Stocks and market indexes in Tokyo jumped after industrial output increased in June and auto sales struggled.

The seasonally adjusted industrial output in June jumped 0.8% followed by 2.1% drop in May, the Ministry of Economy, Trade and Industry said.

For the twelve months to June, industrial output increased 2% from the decline of 3.9% in last twelve months to May.

Automobile production in June declined 5.3% to 811,864 units from 857,415 units in a year ago month, the Japan Automobile Manufactures’ Association said today.

Total passenger cars sales in June plunged 6.1% to 683,472 units and total truck sales fell 1.8% to 115,485 compared to the same month a year ago.

The association added, in the first-half, production of passenger cars tumbled 9.5% to 3,910,535 and total truck production decreased 1.1% to 670,049 while total buses production jumped 2.3% to 70,256. Motorcycle production in June plummeted 21.6% to 34,973 units.

Total domestic passenger car sales in the first-half declined 12.3% to 2,251,753 units and truck sales dropped 3.5% to 418,070 units but sales of buses soared 12.1% to 6,811 units.

Total vehicles exports in June jumped 3.3% to 403,730 units after declining in the previous month.

The Nikkei 225 Stock Average jumped 219.92 or 1.1% to 20,522.83 and the broader Topix index increased 13.27 to 1,647.21.

The yen declined to 124.19 against a dollar.

Nintendo Co., Ltd surged 8.3% to 22,195 yen after the portable and console game machines and software developer said net sales in the first-quarter ending in June soared 20.8% to 90.22 billion yen from 74.70 billion yen in a year ago period.

Net in the quarter swung to profit 8.28 billion yen compared to a loss of 9.92 billion yen and diluted earnings per share swung to 68.97 yen from diluted loss per share of 83.84 yen the same period a year ago.

The game developer said it sold 1.62 million copies of new shooting game Splatoon for the Wii U console and expects its first games for smartphone devices to release by the end of this year.

For the year ending in March 2016, Nintendo forecasted net sales to jump 3.7% to 570 billion yen but net income to decline 16.4% to 35 billion yen.

Sony Corporation dropped 2.1% to 3,585 yen after the electronic products maker reported net sales in the first-quarter ending in June edged down 0.1% to 1.808 trillion yen from 1.810 trillion yen in a year ago period.

Net income in the quarter surged 207.5% to 82.4 billion yen compared to 26.8 billion yen and earnings per share jumped to 70.36 yen from 22.94 yen the same period a year ago.

Sony said revenues in mobile communication segment declined 16.3% to 280.5 billion yen while revenues in game and network services business soared 12.1% to 288.6 billion yen and revenues in music segment climbed 8.5% to 130.2 billion yen.

Financial services revenue jumped 13.1% to 279.4 billion yen.

For the year, Sony forecasted net sales to decline 3.8% to 7.90 trillion yen and net income swung to about 140 billion yen from estimated net loss of 126 billion yen as announced on April 30.

Market indexes in Mumbai gained and rupee dropped to a new low in the year as the U.S. dollar edged up against most international currencies.

U.S. Federal Reserve policy makers left interest rates at zero and said labor and economic conditions continue to improve.

Economists and market watchers are still looking for the central bank to lift rates either at September or December meeting.

Despite the collapse in oil and gold prices, rupee continues to slide as the Reserve Bank of India led the currency drift lower.

Lower rupee has been one of the main drivers of inflation in India and most market watchers are puzzled at the RBA stance on the currency.

With the fall in oil and gold prices and rising fund flows from the non-residents, India is likely to eliminate most of its $100 billion annual deficit for the first time in the next fiscal year.

However, the rupee has been sliding lower for the most of the year and in today’s trading weakened 13 paisa to 64.04 against one U.S. dollar.

The Sensex Index jumped 141.92 or 0.5% to close at 27,705.35. The CNX Nifty gained 46.75 or 0.6% to 8,421.80.