Archive for June, 2011

Consumer Spending in U.S. Stagnated in May

Consumer spending unexpectedly stagnated in May as employment prospects dimmed and rising inflation caused Americans to cut back.

Purchases were little changed, the weakest outcome since June 2010, after a revised 0.3 percent gain the prior month that was smaller than previously estimated, Commerce Department figures showed today inWashington. The median estimate of economists surveyed by Bloomberg News called for a 0.1 percent gain. Prices excluding food and energy rose more than forecast.

Walgreen Co. (WAG) is among retailers that indicated 9.1 percent unemployment and higher gas and grocery bills have prompted shoppers to pare back purchases of less essential goods. Federal Reserve policy makers said the restraint on purchasing power may prove temporary as commodities prices start to decline, allowing the economy to pick up later this year.

“The quarter is going to be very slow,” said Christopher Low, the chief economist at FTN Financial in New York who correctly forecast household spending. “The biggest explanation for that is gas prices, so obviously the fact that oil has fallen quite a bit in the last couple of weeks is a really good thing. Relief just in time.”

Stocks rose on news that Greek creditors may be able to reach an agreement that will prevent a default. The Standard & Poor’s 500 Index rose 0.4 percent to 1,273.2 at 10:05 a.m. in New York. Treasury securities were little changed.

Survey Results

Estimates from 70 economists surveyed by Bloomberg ranged from declines of 0.3 percent to gains of 0.3 percent after a previously reported 0.4 percent gain the prior month.

The report showed incomes increased 0.3 percent for a second month. The gain was also less than forecast.

Wages and salaries increased 0.2 percent in May after climbing 0.4 percent a month earlier. Disposable incomes, or the money left over after taxes, were up 0.6 percent from a year earlier after adjusting for inflation, the smallest 12-month gain since May 2010.

Because incomes rose as spending stagnated, the savings rate rose to 5 percent from 4.9 percent in April.

Today’s report also showed inflation picked up from a year ago. The gauge tied to consumer spending patterns increased 2.5 percent from May 2010, following a 2.2 percent gain in the 12 months ended in April.

More Inflation

The Fed’s preferred price measure, the so-called core inflation reading that excludes food and fuel, rose 1.2 percent in May from a year earlier, compared with the 1.1 percent advance in April. It rose 0.3 percent in May from the prior month, the biggest one-month gain since October 2009.

Today’s report also showed that spending adjusted for inflation figures, which are used to calculate gross domestic product, dropped 0.1 percent for a second month. It was the first back-to-back decline in two years.

Economic growth slowed in the first quarter after surging energy costs strained consumer finances. Labor markets have begun to worsen this quarter, with payrolls growing by 54,000 workers in May, the fewest in eight months. Unemployment rose to 9.1 percent, the highest this year, the Labor Department showed June 3.

“Persistent high unemployment, a weak housing market, high fuel prices and inflation all put pressure on consumers,” Greg Wasson, president and chief executive officer of Walgreen, said on a June 21 earnings call. In response to the economic outlook, customers of the largest U.S. drugstore chain are shifting more spending to essential goods, he said.

Raising Prices

The Deerfield, Illinois-based company has been raising prices to combat more expensive input costs, including fuel, Chief Financial Officer Wade Miquelon said during the call.

In May, cars and light trucks sold at an 11.8 million annual rate, the slowest since September and down from a 13.1 million pace a month earlier, according to researcher Autodata Corp. Some of the drop in demand last month reflected a shortage of Japanese-made vehicles after the earthquake and tsunami in March disrupted supplies. With inventories running low, companies offered smaller discounts, deterring buyers.

Fed officials decided last week to keep the central bank’s balance sheet at a record to spur the slowing recovery after they complete a $600 billion bond purchase program by the end of this month.

“The economic recovery appears to be proceeding at a moderate pace, though somewhat more slowly than the committee had expected,” Fed Chairman Ben S. Bernanke said at a press conference after a meeting of the Federal Open Market Committee on June 22. He said the slowdown is caused in part by “factors that are likely to be temporary,” including more expensive commodities as well as supply chain disruptions associated with Japan’s natural disaster.

Gasoline prices have fallen about 11 percent through June 26 after reaching an almost three-year high of $3.99 on May 4, according to data from AAA, the nation’s largest auto group.

Read the full article here.

Apple starts selling unlocked iPhone 4 for $649, $749

Apple has officially started selling an unlocked iPhone 4.

The company’s online store now lists both a 16GB and 32GB unlocked version of the smartphone. Customers can choose between a black or white model. The company’s 16GB version retails for $649, while the 32GB option is available for $749.

Apple currently sells locked versions of the iPhone for $199 and $299 for the 16GB and 32GB models, respectively.

“If you don’t want a multiyear service contract or if you prefer to use a local carrier when traveling abroad, the unlocked iPhone 4 is the best choice,” Apple writes on the device’s product page. “It arrives without a micro-SIM card, so you’ll need an active micro-SIM card from any supported GSM carrier worldwide.”

That last statement is perhaps most important to potential customers. Apple’s unlocked smartphones will only be capable of running on AT&T and T-Mobile networks in the U.S. The company said it will also work around the world on “supported GSM carriers.”

Unlocking the iPhone has long been the practice of some iPhone owners. Over the years, several unlocking tools have been made available to people who wanted to break from the grasps of AT&T and try out T-Mobile in the U.S. Last August, for instance, the iPhone Dev Team released an unlock solution for the iPhone 4, called “ultrasn0w,” that allowed users who had jailbroken their iPhone 4, iPhone 3GS, and iPhone 3G to bring the device to another carrier.

Read more: here.
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