« August 21, 2005 - August 27, 2005 | Main | September 04, 2005 - September 10, 2005 »
I've been banging the drum on the Two Americas Shopping meme since December 2003. Now there's fresh evidence. Many retailers reported their August sales yesterday, and the Wall Street Journal made a nice chart out of them.
Among department stores, only Nordstrom (same-store sales up 8 percent), and Neiman Marcus (same-store sales up 8.7 percent) had good months. All the others were below 3 percent same-store sales growth. And Costco (same-store sales up 9 percent) crushed Wal-Mart (same-store sales up 3.3 percent) and Dollar General (same-store sales up 0.9 percent).
Posted by dan at 05:04 PM
Northwest Airlines doesn't do a whole lot of business in the Gulf Coast area. But it may be one of the first big corporate casualties of Katrina. And there are some big cram-downs coming.
Amy Merrick reports in today's Wall Street Journal:
In a filing late yesterday with the Securities and Exchange Commission, the airline said it expects its fuel costs this year to increase 50% over 2004, rising to $3.3 billion. Earlier this summer, Northwest forecast that its fuel expenses would be about $3 billion for the year.Now, the carrier says it likely will spend more than $900 million on fuel in the third quarter alone. In 2004, Northwest spent $2.2 billion on fuel, including taxes.
Northwest also warned of the possibility that disruptions caused by Hurricane Katrina could lead to shortages because of the damage to drilling platforms, refineries and pipelines, many of which are still shut down. The St. Paul, Minn., company added that it couldn't predict the probability or severity of such shortages. Yesterday the Federal Aviation Administration said airlines and airports have enough jet fuel to support full commercial operations.
Northwest said it expects to report a loss of $350 million to $400 million for the third quarter, which would continue its rate of losing about $4 million a day. Problems caused by the hurricane could make the loss even greater, the airline added.
The carrier had been saying it needed at least $1.1 billion in annual labor concessions. "However, due to its worsening financial condition, in part the result of dramatically higher fuel prices, it is likely that the company will have to increase the $1.1 billion labor-cost savings target," Northwest said
Posted by dan at 04:59 PM
Car sales were announced yesterday. To nobody's surprise, General Motors' August 2005 sales fell 16.5 percent from the August 2004 levels, a clear sign that the employee discounts earlier in the summer stole demand from August.
Industry-wide, car sales were down .3 percent from the August 2004 level.
Hybrids had another banner month. Toyota sold 9,850 Priuses, 2,925 Highlander hybrids, and 2,607 Lexus SUV hybrids, for a total of 15382, or 7.5 percent of its total vehicle sales.
Honda sold 4,146 Civic hybrids and 2,336 accord hybrids, for a total of 6,482, up 243 percent from August 2004.That represented 4.2 percent of Honda's total unit sales in the month.
In all, the Japanese companies' hybrid sales of 21,864 accounted for about 1.5 percent of total vehicle sales.
Ford doesn't break out its hybrid sales.
Posted by dan at 10:02 AM
My initial take on Katrina's potential economic impact, on Slate.
Posted by dan at 07:23 AM
Amid rising gas prices, President Bush yesterday directed that several hundred million gallons of oil be released from the nation's Strategic Petroleum Reserve. While probably a smart move, it's largely symbolic. The stuff in the SPR is crude oil. The stuff people are lining up to buy in Atlanta for $3.00 is gasoline, or petrol. The bottlenecks in the supply chain aren't just in production, they're in refining and distribution. Katrina has knocked out most of the refineries in the Gulf Coast region.
Unfortunately, the U.S. doesn't have a strategic gasoline reserve. But guess who does?
Carola Hoyos reports in the Financial Times
The US has no emergency reserves of petrol while commercial reserves are near a two-year low and dwindling by the day as refiners are unable to replenish their storage tanks.This is where Europe, the second player in this tug of war, comes into the fray. The EU stipulates that countries must also hold reserves, not only of oil but of petrol. There are 52m barrels of petrol reserves worldwide, most of them in Germany, France, Italy and Spain. But whether it is politically feasible for Europe to send the US petrol while Europe's own prices are at record highs is unclear.
The first signs are not promising. Wolfgang Clement, Germany's economy minister, yesterday implied the petrol shortages in the US were at least in part its own fault.
How do you "stuff it, George," in German?
Posted by dan at 04:15 PM
We've long known that at the Weekly Standard, domestic affairs are subordinate to foreign affairs. But here it is, Thursday, and they don't seem to have gotten the memo that there was a flood of biblical proportions in New Orleans.
Posted by dan at 03:26 PM
Jo Wrighton reports in the Wall Street Journal:
PARIS -- In the latest move by corporate France to snap up a foreign company even as Paris is fending off acquirers of French firms, building-materials group Compagnie de Saint-Gobain SA yesterday confirmed a £3.68 billion ($6.57 billion) hostile bid for U.K. plasterboard maker BPB PLC.The bid comes as the French government moves to further protect "strategic" companies from foreign takeovers with a list of 10 sectors that it wants to keep in French hands. The draft list mostly concerns defense and technology, according to an official in the French Industry Ministry, confirming a report in French newspaper Les Echos.
Posted by dan at 11:05 AM
New Orleans is underwater, so lets further dismantle the New Deal and kick the unions. So says the Wall Street Journal editorial page today:
"The Bush Administration would also be well-advised to remove all federal impediments to a speedy reconstruction effort. One such impediment is the Depression-era Davis-Bacon Act, which requires the government to pay prevailing local wages in federal construction projects. The act effectively excludes non-union workers and contractors from reconstruction projects while adding billions in costs.""Franklin Roosevelt and Richard Nixon both suspended Davis-Bacon during previous emergencies, as did the current President's father in the wake of Hurricane Andrew. The government could also offer incentives and bonuses to contractors who complete projects on or ahead of schedule, as former California Governor Pete Wilson did following the 1994 Northridge earthquake."
Efficiency bonuses? Great. But something tells me temporary suspension of Bacon-Davis isn't what the Journal editorial folks and many of their anti-big-labor pals in Washington are after.
Posted by dan at 11:01 AM
New Orleans is underwater, so lets further dismantle the New Deal and kick the unions. So says the Wall Street Journal editorial page today:
"The Bush Administration would also be well-advised to remove all federal impediments to a speedy reconstruction effort. One such impediment is the Depression-era Davis-Bacon Act, which requires the government to pay prevailing local wages in federal construction projects. The act effectively excludes non-union workers and contractors from reconstruction projects while adding billions in costs.""Franklin Roosevelt and Richard Nixon both suspended Davis-Bacon during previous emergencies, as did the current President's father in the wake of Hurricane Andrew. The government could also offer incentives and bonuses to contractors who complete projects on or ahead of schedule, as former California Governor Pete Wilson did following the 1994 Northridge earthquake."
Efficiency bonuses? Great. But something tells me temporary suspension of Bacon-Davis isn't what the Journal editorial folks and many of their anti-big-labor pals in Washington are after.
Posted by dan at 11:01 AM
Two items today that show how the big establishment broadcast networks continue to lose ground, viewers, and ad dollars to cable, etc.
1. The Wall Street Journal's Ad Notes today, citing Nielsen Monitor-Plus, finds that "In the first half of 2005, the biggest gains in ad spending were notched by Spanish-language TV, cable television and the Internet--each recording growth of more than 10%. Ad spending on network TV, in contrast, was up 4.9%, while ad spending on national newspapers rose 1.1%"
2. John Authers reports in the Financial Times on the success of Univision.
Don Francisco, Hispanic America's most popular broadcaster, landed a blow for Spanish-language TV this month when his programme won the ratings battle for young adult viewers.Don Francisco Presenta was more popular among 18-to 49-year-olds than any English-language offering in its time slot, even its biggest rival, the crime drama Law & Order. It was the first time Spanish programming had achieved this feat in the nation's largest media market.
The milestone, much celebrated at Don Francisco's network, Univision, the biggest US Spanish-language network, came during the quietest period of the year. But Univision has more viewers than any English- language networks in Los Angeles, Miami and San Antonio, and already had plenty to crow about. In the 12 months to July this year, its primetime viewership among those between 18 and 49 rose by 18 per cent.
Charts accompanying the story show that Univision's 18-34 audience is growing by more than 20 percent and that in the second quarter of 2005 Univision had nearly as many 18-34-year-old viewers as NBC.
Posted by dan at 04:58 PM
Interest rates are rising, the yield curve is flattening, and the markets are down for the year. So how do big Wall Street brokerages plan to make money this year? By figuring out ways to remove pennies from their customers' pockets and put them in their own.
Jane Kim reports in the Wall Street Journal:
In a development that hurts investors, brokerage firms are quietly moving their clients' cash from money-market mutual funds -- the traditional default option -- into lower-yielding bank accounts.The shift, which is bolstering brokerage firm profits, means that investors with large cash balances could lose thousands of dollars or more in annual interest payments. These accounts are where brokerages typically park the proceeds from investor stock sales as well as dividends. Some investors also keep their portfolio's cash allocation in such accounts.
The average taxable money-market mutual fund is paying an annualized yield of 2.89%, compared with an average yield of 1.53% on bank money-market deposit accounts, according to iMoneyNet, a Westborough, Mass., research firm. For an account of $100,000, each lost percentage point adds as much as $1,000 a year in lost interest.
Nice.
Posted by dan at 04:51 PM
For retailers that serve lower-income and middle-income consumers, the past quarter has been a tough one. But for those in the carriage trade, it's the best of times. Tiffany rocks the house with a great quarter.
Same-store sales: up 6 percent.
Earnings from operations up 27 percent.
Net income up 53 percent
And to top it all off, lower taxes:
Effective tax rates of 28.0% in the second quarter and 31.5% in the first half were lower than 38.0% in the prior-year periods. The decreases were due to additional tax benefits of $6,600,000, or $0.05 per diluted share, in the second quarter and $8,100,000, or $0.06 per diluted share, in the first half, which were related to the repatriation provisions of the American Jobs Creation Act of 2004.
Posted by dan at 08:43 AM
The Census Bureau released some new facts and figures today. Recall that 2004 was supposed to be a good year, economically speaking.
Some highlights:
Real median household income remained unchanged between 2003 and 2004 at $44,389.The nation’s official poverty rate rose from 12.5 percent in 2003 to 12.7 percent in 2004.
The number of people with health insurance increased by 2.0 million to 245.3 million between 2003 and 2004, and the number without such coverage rose by 800,000 to 45.8 million.
2004 marked the second consecutive year in which real median household income showed no change.
Real median earnings of men age 15 and older who worked full-time, year-round declined 2.3 percent between 2003 and 2004, to $40,798. Women with similar work experience saw their earnings decline by 1.0 percent, to $31,223.
There were 37.0 million people in poverty (12.7 percent) in 2004, up from 35.9 million (12.5 percent) in 2003.
There were 7.9 million families in poverty in 2004, up from 7.6 million in 2003.The percentage of the nation’s population without health insurance coverage remained unchanged, at 15.7 percent in 2004.
The percentage of people covered by employment-based health insurance declined from 60.4 percent in 2003 to 59.8 percent in 2004.
The percentage of people covered by government health insurance programs rose in 2004, from 26.6 percent to 27.2 percent, driven by increases in the percentage of people with Medicaid coverage, from 12.4 percent in 2003 to 12.9 percent in 2004.
The proportion and number of uninsured children did not change in 2004, remaining at 11.2 percent or 8.3 million.
Posted by dan at 03:43 PM
Reuters provides fresh evidence as to why we shouldn't be so sanguine about the prospects of General Motors, Ford, and, to a lesser extent, Daimler Chrysler.
From the New York Times:
DETROIT, Aug. 29 (Reuters) - General Motors lost an average of $1,227 for each vehicle in the first half of the year in North America, while its crosstown rival, the Ford Motor Company, lost $139, according to new research from Harbour Consulting. . .Through the first six months of the year, Chrysler was the lone Detroit automaker to make a profit per vehicle, Ms. Felax said, adding that it averaged a meager $186.
By contrast, the three largest Japanese-owned automakers - Toyota, Honda and Nissan - all made well over $1,000 a vehicle in North America.
Posted by dan at 09:20 AM
David Barstow of the New York Times reports on the latest installment in the long-running saga of McWane, Inc., the Alabama-based industrial ne'er do well.
In court papers unsealed yesterday in Federal District Court in Birmingham, Union Foundry, a McWane plant in Anniston, Ala., admitted that it had willfully violated federal safety rules, resulting in the death of Reginald Elston, a 27-year-old worker who was crushed in a conveyor belt. There was no required safety guard on the conveyor belt, even though an employee at a McWane foundry in Texas had been crushed to death in another unguarded conveyor belt less than two months earlier.
Union Foundry also admitted that it had illegally handled dust contaminated with lead and cadmium, two substances the federal government has linked to lung cancer.
But here's what gets me:
Causing the death of a worker by willfully violating safety rules is a misdemeanor. Illegally disposing of contaminated dust is a felony.
Shouldn't both be felonies?
Posted by dan at 09:17 AM
More evidence that NBC head Jeff Zucker needs a new publicist. From today's Wall Street Journal on television's summer woes:
"Some of the major broadcast networks, in contrast, had a dismal summer, particularly General Electric's NBC. One recent Saturday night, the network, which struggled during the latest regular season, managed just an audience rating of 0.5 point -- the equivalent of 650,000 viewers."
snip. . .
"NBC summer offerings that didn't click include "The Law Firm," a reality show set in a law office and "I Want to be a Hilton."
snip. . .
"Broadcasters note it wasn't all doom and gloom this summer: ABC is up 9% in total viewers. Fox, which had some success with "So you Think You Can Dance," is up 4%.
Posted by dan at 09:13 AM
Among the flood of data suggesting high-end housing may be a bit overpriced, a few items have caught my attention in the past few days.
1. High-end home builder Toll Brothers reported a fine quarter last week. But in a follow-up story, Kemba Dunham of the Wall Street Journal noted that "about 38% of buyers during the third quarter had interest-only mortgages, up from 19% a year ago."
2. Business Week had a small graphic showing that in California, almost 20 percent of households spend more than half their income on housing in 2003. For the rest of the U.S., fewer than 10 percent spend more than half their income on housing.
3. Westportnow.com, the website that covers all doings in my home town, reports that a home for sale in what should be the sweet spot of the local market -- about $1.5 million -- is offering a free Mini Cooper as an inducement.
Posted by dan at 11:25 AM
The big story in the U.S. bond market today may be the approaching inversion of the yield curve.
As Agnes Crane of Dow Jones newswires notes:
The difference between the two- and 10-year yields narrowed to just 0.11 percentage point on Friday -- the lowest it has been since Jan. 2, 2001
But in the U.K., as the Financial Times "Lex" column points out, the yield curve is already inverted.
Why is the UK yield curve inverted? Despite clear indications from the Bank of England that base rates are unlikely to move much lower than 4.5 per cent, yields on gilts out to five years remain at about 4.15 per cent. The level of short-term rates is not the only factor driving UK yields across the curve in a global bond market, but the correlation at the shorter end should be close. This suggests that investors know what policymakers think, but believe they are wrong and are taking a more deflationary view of the impact of high oil prices.
Posted by dan at 11:01 AM
It would be nice if an agent with human intelligence edited the articles that appeared on the Wall Street Journal editorial page. If one did, we wouldn't have lines like this.
Stephen Moore, a member of the Journal's editorial board, writes in today's paper:
The explosion of benefits paid to workers is in large part an artifact of the federal tax code, which allows employers to deduct from taxes pensions, health care, child care, and the like, but not wages.
Read it twice. Stephen Moore apparently thinks companies can't deduct wages paid to their workers from their taxable income the way they can deduct pension, health care, and child care costs. And apparently nobody at the Journal's op-ed page knew enough, or thought enough, to correct him.
Posted by dan at 09:46 AM