Archive for September, 2013

Consumers boost spending 0.3%; income grows

WASHINGTON (AP) — U.S. consumers increased their spending slightly last month as their income grew at the fastest pace in six months. The figures point to only modest economic growth in the July-September quarter.

Consumers’ spending on goods and services rose 0.3% in August, the Commerce Department said Friday. That’s up from a 0.2% gain in July, which was slightly more than the 0.1% reported last month.

CONFIDENCEDrops for second straight month

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Income rose 0.4% in August, the best gain since February and up from a 0.2% July increase. Private wages and salaries rose 0.5%, while the government wages and salaries rose 0.2%.

The government figures would have been higher if not for forced federal furloughs that reduced wages and salaries by $7.3 billion.

Consumer spending drives 70% of economic activity. Many analysts say the increases are not enough to accelerate economic growth in the third quarter from the 2.5% annual rate in the April-June quarter.

“With more money coming in, consumers spent a little, just a little, more freely,” said Jennifer Lee, senior economist at BMO Capital Markets.

Paul Ashworth predicts the economy is growing at an annual rate of 2% to 2.5% in the July-September quarter. Still, the pickup in August could signal stronger growth in the final three months of the year.

Other economists are less hopeful. Peter Newland, an economist at Barclays, said that the modest increase did not change Barclay’s forecast for growth at a 1.7% rate.

Americans saved some of the extra money they earned last month. The personal savings rate edged up to 4.6% of after-tax income, a slight improvement from 4.5% in July.

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Olive Garden parent company’s profit falls

The parent of Olive Garden and Red Lobster is replacing its president after reporting a sharp drop in profits over its summer quarter.

Darden Restaurants said it earned $70.2 million, or 53 cents per share, for the three months ended Aug. 25. That’s compared with $110.8 million, or 85 cents per share, in the year-ago period. Analysts expected a profit of 70 cents per share.

Sales rose to $2.16 billion, helped by the opening of new locations. That was short of the $2.19 billion Wall Street expected, according to FactSet.

The company said Drew Madsen, 57, will retire and be succeeded by the president of its specialty restaurant group, Gene Lee. The appointment is effective immediately.

Darden also will reduce its workforce by 80 to 85 positions and take other steps to save $50 million — half of that in its current 2014 fiscal year. It forecast net earnings per share in this fiscal year will fall between 3% and 5% from a year ago.

The company has struggled despite revamped menus and changes in pricing. Sales at Olive Garden, Darden’s biggest chain, fell 4% at restaurants open at least a year in the latest quarter. At Red Lobster, they fell 5.2%. Longhorn Steakhouse‘s same-store sales were up 3.2%.

The company’s specialty restaurant group, which includes chains such as The Capital Grille and Bahama Breeze, has performed better than the company’s flagship chains. Within that group, sales ticked up 0.5% at restaurants open at least a year. The metric is a key gauge because it strips out the impact of newly opened and closed locations.

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Wall Street little changed after data as eyes on Fed

(Reuters) – U.S. stocks were little changed on Friday, after a host of economic data did little to cause investors to recalibrate expectations the Federal Reserve may begin to scale back its stimulus measures next week.

Retail sales rose 0.2 percent in August, below economists’ expectations of a 0.4 percent increase and the 0.4 percent climb in July. Sales were weaker than expected despite increased demand for automobiles and other big-ticket items and added to signs economic growth slowed in the third quarter.

In a separate report, producer prices rose 0.3 percent in August, slightly above expectations, as energy prices rose. However, the Producer Price Index excluding volatile food and energy costs was unchanged.

The Fed is widely expected to announce a reduction in stimulus when it concludes a two-day policy meeting on Wednesday.

“These were the two big numbers, the PPI and retail sales and I don’t think either of them change the outlook, which our base case is the Fed goes in and begins the (tapering) process here on the September 17-18 meeting,” said Darrell Cronk, regional chief investment officer at Wells Fargo Private Bank in New York.

“We’ll do a little bit of moving sideways probably, at least until we see the Fed meeting next week.”

Equities were unfazed as the Thomson Reuters/University of Michigan‘s preliminary reading on the overall index of consumer sentiment fell to 76.8 in September, the lowest since April and well shy of August’s 82.1 and the 82.0 economists had expected.

In the last major piece of economic data on Friday’s schedule, business inventories rose 0.4 percent in July, their largest increase in six months and above the 0.2 percent estimate, suggesting restocking could provide a boost to third-quarter economic growth.

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Stocks slump in early trading after weak jobs report

NEW YORK — Stocks slumped in early trading Friday as investors weighed what August’s unemployment report could mean for continued Federal Reserve stimulus.

The Dow Jones industrial average fell 109.25 points, or 0.73%, to 14,828.23 shortly after the opening bell.

The broader Standard & Poor’s 500 shed 8.71 points, or 0.53%, to 1,646.37. The technology-focused Nasdaq composite index lost 25.09 points, or 0.69%, to 3,633.69.

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The federal government Friday morning issued a lackluster report on the nation’s labor market in August. The U.S. economy added 169,000 net new jobs in August, fewer than the 177,000 analysts had expected, and the Labor Department revised significantly downward earlier months’ job gains.

The Labor Department said the unemployment rate ticked lower to 7.3%, from 7.4% in July.The Fed has signaled that it could begin scaling back its extraordinary monetary stimulus program as early as this month, depending on how data portray the economy’s health.

When the Fed will “taper” its so-called quantitative easing program has been the obsession of investors for months. By buying bonds, the Fed has pushed down interest rates and made riskier investments like stocks more attractive, helping to fuel this year’s stock rally.

Despite the less-the-stellar jobs report, some analysts predict the Fed will nonetheless start to wean the economy off of its easy-money policies starting this month.

Douglas Coté, chief market strategist for ING U.S. Investment Management, said in a note that he was skeptical the Labor Department report would mean a delayed Fed taper.

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