Posts Tagged ‘Tiffany & Co.’

Increased Consumer Spending Lifts U.S. 2010 GDP

Monday, February 7th, 2011

road-sign-blogThe United States’ 2010 GDP soared at an annualized rate of 3.2 percent, as consumer spending rose by the greatest levels in four years.   “The consumer really drove the economy in the 4th quarter,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia.  “The economy has moved beyond recovery to a stable state of growth.”  For all of 2010, the economy expanded 2.9 percent — the biggest one-year jump in five years — after contracting 2.6 percent in 2009.  The volume of all goods and services produced climbed to $13.38 trillion, for the first time surpassing the pre-recession peak reached in the 4th quarter of 2007.  Tiffany & Co. saw a significant increase in the sale of fine jewelry.  Apple reported record 4th quarter sales as consumers bought 7.73 million iPads as holiday gifts.  Ford Motor Company’s sales have been so good that the automaker plans to add an additional 7,000 manufacturing jobs over the next two years.  The automaker, which did not undergo bankruptcy, did lay off some salaried employees in 2008 as part of a restructuring in the face of slumping sales.

Exports also helped boost the American economy which should boost job creation over the next several years.  “The U.S. is expected to be one of the fastest growing developed countries in 2011, largely reflecting the contrast of the ongoing stimulus with other countries, such as the U.K. and other heavily indebted European nations, where austerity measures designed to reduce deficits are stifling domestic demand,” said Chris Williamson, chief economist at Markit, a London-based research firm.  “The acceleration of the U.S. GDP in the 4th quarter, and the changing composition of growth, raises hope that the economic recovery will move into a more self-sustaining phase in 2011 and generate sufficient jobs to reduce unemployment.”

Even the Federal Reserve, which renewed its commitment earlier this week to buying $600 billion in government bonds, agrees that the report shows the economy ended 2010 with moderate strength and breadth, but not enough to bring down the 9.4 percent unemployment rate anytime soon.  Personal consumption spending contributed slightly more than three percent to 4th quarter growth.  That is in line with retailers’ reports showing a respectable holiday shopping season.   Whether that level of spending holds up remains to be seen.  Many retailers remain cautious in their forecasts and report that consumers are still bargain-hunting.  As gasoline prices rise, disposable income may be limited.

Alter Now does see it as important to note the correlation with an overall increase in consumer credit debt in December, the first spike since 2008.  According to the Fed, overall consumer credit debt rose by 6.1 billion, or 3.0%, to $2.41 trillion while revolving credit debt (primarily from credit cards) rose by $2.3 billion (3.5%) to $800.5 billion. No revolving credit rose by $3.8 billion, or 2.8%, to $1.61 trillion.  While the spike in GDP is good news, let us remember that it is still being driven by deficit spending.

Compare the U.S. GDP with that of other nations last year and it’s clear who is winning.  China, for example, is expected to report an 8.5 percent jump in its GDP, not unexpected in the world’s fastest growing economy.  Japan’s real GDP was 3.9 percent higher in annualized terms for the 3rd quarter, beating estimates for a 2.5 percent rise for the year.

In the U.K., the economy shrank by 0.5 percent in the 4th quarter, compared with a 0.7 percent increase in the 3rd quarter.   By contrast, the nation with Europe’s largest economy – Germany - recorded a 3.6 percent growth rate in its GDP in 2010. 

Latest CPI Numbers Show a Still-Shaky Economy

Monday, January 31st, 2011

Latest CPI Numbers Show a Still-Shaky EconomyRising gas prices and the dearth of jobs are negatively impacting consumer confidence and bringing the first hint of inflation in a long time.   The Consumer Price Index (CPI) showed an increase of 0.5 percent in December, primarily a result of skyrocketing gas costs, according to the Department of Labor.  The AAA reports that the average price of a gallon of gas has soared to $3.10 nationally, the highest since October of 2008.  According to a Thomson Reuters/University of Michigan study, the preliminary index of consumer sentiment for January fell to 72.7, the lowest reading since November.  The number had risen to 74.5 in December and was expected to rise to 75.5 for January, according to Bloomberg News.

Quicker job growth likely will be required to accelerate improved consumer spending, even as Americans are experiencing sticker shock every time they buy gas.  Unfortunately, hiring has been anemic at best, spurring Federal Reserve policymakers to expand their efforts to jump start the economy.  The lack of optimism “reflects a frustration with the lack of labor market progress,” said David Semmens, an economist with Standard Chartered Bank.  “Until employers start hiring aggressively enough to bring down unemployment, improvements in consumer sentiment will be slow.”  According to the Federal Reserve, industrial production rose in December, advanced by gains in business equipment and home electronics.  Factory, mine and utility output also rose 0.8 percent during the same timeframe, the most significant increase in five months.

Other data from the Department of Commerce showed a 6.7 percent increase in retail sales in December of 2010, the largest jump since the same month of 1999.  The big winner in the retail arena was tony Tiffany & Co., which reported that November-December sales rose by an impressive 11 percent.