Economy Slows in the 2Q

Elena
30 Nov, -0001
New York City

Investments by businesses in equipment, government spending and rising exports was outweighed the inventory liquidation by businesses. The pace of business investment is likely pick up in the third quarter. Wendy

U.S. MARKET AVERAGES

The economic growth in the second quarter declined in the second quarter as businesses liquidated inventories. However, large part of the economic growth has to do with the residential construction and government spending.

In the early market averages are flat as flood of earnings continue. Archer Daniel Midlands, Anadarko, American Electric Power reported better-than-anticipated earnings. Chevron reported decline in earnings.

Oil in New York is trading above $60 per barrel.

ECONOMIC NEWS

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 3.4 percent in the second quarter of 2005, according to advance estimates released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 3.8 percent.

The major contributors to the increase in real GDP in the second quarter were personal consumption expenditures, exports, equipment and software, residential fixed investment, and

government spending. The contribution of these components were partly offset by a negative

contribution from private inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased.

The deceleration in real GDP growth in the second quarter primarily reflected a downturn in

private inventory investment that was partly offset by a downturn in imports and accelerations in exports and in equipment and software.

Final sales of computers contributed 0.43 percentage point to the second-quarter change in real GDP after contributing 0.37 percentage point to the first-quarter change. Motor vehicle output subtracted 0.08 percentage point from the second-quarter change in real GDP after contributing 0.15 percentage point to the first-quarter change.

The price index for gross domestic purchases, which measures prices paid by U.S. residents,

increased 3.2 percent in the second quarter, compared with an increase of 2.9 percent in the first. Excluding food and energy prices, the price index for gross domestic purchases increased 2.0 percent in the second quarter, compared with an increase of 3.0 percent in the first.

Real personal consumption expenditures increased 3.3 percent in the second quarter, compared with an increase of 3.5 percent in the first. Durable goods purchases increased 8.3 percent, compared with an increase of 2.6 percent. Nondurable goods purchases increased 3.3 percent, compared with an increase of 5.3 percent. Services expenditures increased 2.3 percent, compared with an increase of 2.8 percent.

Real nonresidential fixed investment increased 9.0 percent in the second quarter, compared with an increase of 5.7 percent in the first. Nonresidential structures increased 3.1 percent, in contrast to a decrease of 2.0 percent. Equipment and software increased 11.0 percent, compared with an increase of 8.3 percent. Real residential fixed investment increased 9.8 percent, compared with an increase of 9.5 percent.

Real exports of goods and services increased 12.6 percent in the second quarter, compared with an increase of 7.5 percent in the first. Real imports of goods and services decreased 2.0 percent, in contrast to an increase of 7.4 percent.

Real federal government consumption expenditures and gross investment increased 1.3 percent in the second quarter, compared with an increase of 2.4 percent in the first. National defense increased 2.0 percent, compared with an increase of 3.0 percent. Nondefense decreased 0.1 percent, in contrast to an increase of 1.1 percent. Real state and local government consumption expenditures and gross investment increased 2.4 percent, compared with an increase of 1.6 percent.

The real change in private inventories subtracted 2.32 percentage points from the second-quarter change in real GDP after adding 0.29 percentage point to the first-quarter change. Private businesses reduced inventories $6.4 billion in the second quarter, following increases of $58.2 billion in the first quarter and $50.1 billion in the fourth.

Real final sales of domestic product -- GDP less change in private inventories -- increased 5.8percent in the second quarter, compared with an increase of 3.5 percent in the first.

Gross domestic purchases

Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever

produced -- increased 1.7 percent in the second quarter, compared with an increase of 4.0 percent in the first.

Disposition of personal income

Current-dollar personal income increased $143.0 billion (5.8 percent) in the second quarter,compared with an increase of $64.4 billion (2.6 percent) in the first.

Personal current taxes increased $38.1 billion, compared with an increase of $79.7 billion. Disposable personal income increased $105.0 billion (4.8 percent) in the second quarter, in contrast to a decrease of $15.3 billion (0.7 percent) in the first. Real disposable personal income increased 1.4 percent, in contrast to a decrease of 2.9 percent.

Personal outlays increased $147.1 billion (6.8 percent) in the second quarter, compared with an increase of $129.6 billion (6.1 percent) in the first. Personal saving -- disposable personal income less personal outlays -- was $18.4 billion in the second quarter, compared with $60.5 billion in the first. The personal saving rate -- saving as a percentage of disposable personal income -- decreased from 0.7 percent in the first quarter to 0.2 percent in the second.

Current-dollar GDP

Current-dollar GDP the market value of the nation's output of goods and services -- increased 5.9 percent, or $177.4 billion, in the second quarter to a level of $12,376.2 billion. In the first quarter, current-dollar GDP increased 7.0 percent, or $203.6 billion.


INTERNATIONAL MARKET NEWS

Asian stocks closed mostly higher on earnings reports, economic data, indicating strong improvements in the job market in Japan, and U.S. equities gains. The Japanese stocks reached a four-and-a-half-month high, closing up 0.4% as investors welcomed news that the unemployment rate inJune fell 4.2% and the industrial output climbed 1.5%. The Nikkei was also supported by earnings reports from chip maker Matsushita Electric Industrial, machinery maker Komatsu, and cosmetics maker Shiseido. Among the other regional gainers were Hong Kong’s Hang Seng which advanced 0.5% on oil stocks and South Korea’s Kospi which was up 0.6% on U.S. markets’ gains and local economic data. Taiwan finished down 1%, dragged by liquid-crystal-display panel makers. In Tokyo the dollar traded at the lower end of 112 yen.

European shares traded up at mid-day as oil majors gained on rising crude-oil prices and miners on record-high copper prices. The markets were also helped by hopes for the automotive sector. The German index DAX 30 advanced for sixth consecutive session, reaching 0.3%, the French CAC 40 rose 0.3%, and London’s FTSE 100 climbed 0.6%. Crude-oil futures hovered over $60 a barrel. The euro slipped 0.3% to $1.2097.

ENERGY, METALS AND CURRENCIES MARKETS

Crude-oil prices surpassed $60 a barrel after an explosion at BP PLC’s Texas City refinery raised supply concerns. Light sweet crude for September delivery rose 56 cents to $60.50 a barrel in NY. Gasoline advanced 7.8 cents to $1.90 a gallon on NYMEX; heating oil rose about 0.2%.

Copper is expected to rise in London as talks to end a strike at U.S. mines were delayed and that helped copper for delivery in three months climb to a record price of $3,546 a metric ton on LME.

The Chinese yuan reached its highest level to close at 8.1056 to the dollar. It has gained 0.05% since July 21 when China abandoned the yuan’s fixed-rate link to the U.S. dollar.

In early European trading the dollar was up, while gold was down. The euro traded at $1.2097; the dollar stood at 112.27 yen and quoted at $1.7558 per pound. Gold traded at $427.15 per ounce, down from $427.45. Silver was trading $7.13 per ounce, up from $7.08.


EARNINGS NEWS

Volkswagen, German auto maker, posted 2Q profit decline of 333 million euros compared with 357 million euros a year ago , despite higher operating profit due to sales growth and cost cuts. The quarterly results missed analysts’ expectations of 367 million euros.

Unocal, oil and gas producer, posted 2Q net earnings of $1.73 a share, up from $1.25 a share in the same period a year ago, beating forecasts of $1.63 on strong revenue.

Broadwing, optical network communications firm, reported its 2Q loss narrowed to 52 cents vs. 78 cents a share in the year-ago period on revenue.

NBTY, manufacturer of vitamins, minerals and nutritional supplements, posted fiscal 3Q earnings of 23 cents a share, down vs. 37 cents a share in the same period last year, topping. analyst expectations.

United Industrial, military electronics and aerospace systems producer, posted 2Q income fall of 60 cents a share, down from 78 cents a share in the year-ago period, despite a rise in sales.

Electronic Data, information technology solutions company, posted 2Q earnings of 9 cents a share, excluding non-recurring items, beating expectations of a loss of 5 cents a share on strong revenue growth.

Wyndham International, hotel and resort operator, reported narrower 2Q loss to 45 cents a share, vs. $2.33 the same period last year on revenue growth


Applica, kitchen and home products producer, posted a 2Q net loss of 77 cents a share, less than the year-earlier loss of $5.16 a share on revenue fall.

Nicor, gas distributor and containerized freight transporter, posted 2Q earnings of 75 cents a share, up against 44 cents a share in the same period a year earlier on revenue growth, beating estimates by 4 cents a share.

Woodhead Industries, producer of network and electrical infrastructure products, announced 3Q net income rise to 26 cents a share, vs. 13 cents in the year-ago period on strong revenue growth, ahead of company estimates for 22 cents.

Lear, automobiles and interior systems and components manufacturer, posted a 2Q loss of 66 cents a share, vs. a profit of $1.58 a share in the same period last year, despite a rise in revenue, missing analyst expectations of earnings of 20 cents a share.

American Electric Power, electric power company, posted 2Q net earnings of 58 cents a share, up vs. 25 cents, gained in the same period a year ago, beating forecasts of 43 cents a share, despite fall in revenue.

Archer Daniels Midland, agricultural commodities and products group, posted fiscal 4Q earnings of 30 cents a share, up from 16 cents a share in the same period last year, despite fall in revenue, topping analyst estimate of 28 cents a share.

Moodys, credit rating and risk analysis group, posted 2Q net income of 47 cents a share, up vs. 34 cents a share last year the same period on revenue growth, beating analyst expectations of 44 cents a share.

Landry's Restauraunts, owner and operator of dining restaurants, reported 2Q earnings rise of 78 cents a share compared with 76 cents, in spite of revenue decline, beating analyst forecasts by a penny.

Peoples Energy, energy company, posted fiscal 3Q net income rise to 18 cents a share, vs. 15 cents the year-ago period, missing expectations of 28 cents a share.

Burlington Resources, oil and gas producer, reported 2Q net income rise of $1.40 per share, up from 96 cents per share on revenue of $1.69 billion, exceeding estimates of $1.26 per share.

St. Paul Travelers, property and casualty insurer, posted 2Q profit jump of $1.52 a share compared with a net loss of 42 cents a year ago on higher investment income and good weather. The quarterly results exceeded expectations of $1.13 per share.

Metro One, provider of directory assistance and other telecom services, posted 2Q net loss of 37 cents a share vs. 22 cents in the year-ago period on lower revenue.

Citizens, provider of wireline services, posted 2Q net income rise of 13 cents a basic share up from 8 cents in the same period last year, beating estimates by 2 cents.

R&B, supplier of replacement parts and household hardware, posted net income decline to 25 cents a share, down from 29 cents in the year-ago period on thinner profit margins.

Baker Hughes, oil services group, reported 2Q net profit was up to 64 cents a share, topping forecasts of 53 cents a share on revenue growth.

Lloyds, British bank, reported first-half pretax profit soared to 1.7 billion pounds, vs. 1.6 billion pounds last year the same period, maintaining the dividend at 10.7 pence and matching analyst expectations.

Printronix, enterprise printing solutions manufacturer, posted 1Q net income fall of 3 cents a share vs. 4 cents a year ago on 4.5% lower revenue.

Priority Healthcare, distributor of specialty pharmaceuticals, posted earnings of 26 cents a share, down from 28 cents a share the year-ago period, slightly missing analyst forecasts of 28 cents a share.

Anadarko, oil and gas producer, posted 2Q net income of $2.12 a share, up from $1.59 a share the year-ago period on revenue growth, in line with analyst expectations.

Constellation Energy reported a second-quarter profit of 66 cents per share, excluding one-time items, up vs. 54 cents per share last year and above the 62 cents per share, seen by analysts. The company backed its target for the full year of $3.35-$3.60 per share.

Myers, automotive underbody repair manufacturer, posted its 2Q profit fell to 15 cents a share, down from 18 cents, in the year-earlier period, despite sales rise.

Chevron, petroleum and coal mining company, posted a drop in 2Q net income of $1.76 a share, down from $1.94 a share in the same period a year ago, beating though analyst forecasts of $1.69 a share

Yellow Roadway, transportation services corporation, posted 2Q net income of $1.38 a share, up from 97 cents a share in the same period a year ago on revenue growth.
CORPORATE NEWS


Italian prosecutors are expected to request indictments of several global banks and securities firms, including Citigroup, UBS, Deutsche Bank and Morgan Stanley, for alleged securities-law violations in their dealings with failed Italian dairy company Parmalat.

The investment arm of Goldman Sachs and Allianz of Germany are close to an agreement to buy a 9.9% stake in Industrial & Commercial Bank of China for about $3.5 billion, higher than the $1 billion in earlier reports.


OTHER NEWS

Before the opening bell in Tokyo, the Japanese government reported that the unemployment rate declined to 4.2% in June versus 4.4% in May and industrial output advanced a seasonally adjusted 1.5% in June vs. last month. The Ministry of Economy, Trade and Industry announced spending by households, headed by salaried workers, increased in the period, and deflationary pressure declined.