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Saras
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Vilnius, Lithuania
Apr 1999
time: 06:15
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And now for something completely different:
quote:
"Washington, Nov. 30 (Bloomberg) -- The U.S. economy contracted at a 1.1 percent annual rate in the third quarter, weaker than estimated a month ago, suggesting a more difficult climb out of the first recession since 1991.
Deeper cuts in inventories, a larger trade deficit and a slower pace of government spending caused most of the revision from a previously reported 0.4 percent decline for the July- September period, the Commerce Department said. The terrorist attacks Sept. 11 aggravated the contraction by disrupting travel and production while eroding consumer and business confidence.
``All the normal business processes came to a halt'' in the third quarter, Tom Siebel, chief executive of Siebel Systems Inc., told investors yesterday at a conference. The company makes business software.
Consumer spending, which accounts for two-thirds of gross domestic product, grew in the third quarter at the slowest pace in more than eight years. The economy's performance for the quarter was the weakest since the first quarter of 1991, during the previous recession.
The Treasury's 5 percent note that matures in August 2011 pared losses after the report. The note, which had fallen as much as 1/4 point, was down 1/8 point, pushing up its yield a basis point to 4.77 percent. GDP is likely to shrink again this quarter as General Motors Corp., Ford Motor Co. and other manufacturers further pare stockpiles.
Corporate Profits Slump
Third-quarter after-tax corporate profits, reported by Commerce for the first time today, fell 7.1 percent at an annual rate after declining at a 1.7 percent pace between April and June. Profits had fallen at a 7.8 percent pace in the first quarter. The recession began in March, according to the National Bureau of Economic Research, a private group of economists.
Analysts surveyed by Bloomberg News had expected the revised numbers would show the economy contracted at a 1 percent pace between July and September, based on the median of 56 forecasts in a Bloomberg News survey.
Federal Reserve policy makers have lowered their target for the overnight bank lending rate by 4 1/2 percentage points since the start of the year to prevent the economy from sinking deeper into recession. At 2 percent, the rate is the lowest in 40 years.
Fed officials, in speeches and interviews this week, have indicated there is still room to cut rates, while signs of growth are scarce. The Fed's regional survey of economic conditions, the beige book, found few signs of economic improvement during late October and the first half of November.
Fourth-Quarter Expectations
Economists forecast the economy is probably contracting at a faster pace in the last quarter of the year before rebounding. GDP is probably shrinking at a 1.9 percent pace, according to the consensus of 51 estimates in the Blue Chip Economic Indicators survey for November. The economy will probably grow at a 0.5 percent rate in the first three months of 2002, the survey showed.
Businesses were more successful in trimming inventories in the third quarter than previously thought. Stockpiles fell by a record $60.1 billion at an pace in the third quarter, compared with a decrease of $50.4 billion initially reported.
Inventories have continued to drop. While automakers typically aim for a 60-day supply of cars, inventories fell as of Nov. 1 to 45 days' worth at General Motors, 42 at Ford and 57 at DaimlerChrysler AG's Chrysler unit, said Wendy Beale Needham, an analyst at Credit Suisse First Boston. No-interest financing pushed sales to a record pace last month and supplies to their lowest levels since October 1986.
Production Increases
Those may lead to production increases next year, and Ford has said it may build more cars and trucks in the first quarter of next year than previously expected.
Exports fell more than initially estimated, while imports fell less. The net trade deficit of $408.1 billion compares with a previously reported $395 billion. In the second quarter, the trade deficit was $406.7 billion.
Business investment in equipment and software decreased at a 9.3 percent rate in the third quarter, compared with a previously reported drop of 11.8 percent. The decline has lasted for a year.
Agilent Technologies Inc., a maker of electronics-testing equipment, said this month it will double the number of planned job cuts to 8,000 after a drop in demand caused income to drop in the quarter ended Oct. 31.
Agilent said new orders were halved and cancellations totaled about $250 million, more than twice what the company expected.
Hints of a Bottom
There are hints that even demand for computers, chips and software may be bottoming. Intel Corp., the biggest chipmaker, said this week it may be unable to meet demand for certain models of the Pentium 4 processor as sales of personal computers show signs of rebounding from the worst slump since 1985. The company slashed the price of its most advanced PC chip by about 84 percent in its first year to try to spur demand.
Computer retailers Gateway Inc. and Hewlett-Packard Co. both have said they're optimistic about holiday sales.
Siebel, based in San Mateo, California, reported last month that its sales fell 14 percent in the third quarter, the first decline since the company made its first public stock sale in 1996. Siebel, the chief executive, said yesterday he's seen a ``return to normalcy.''
Consumer spending grew at a 1.1 percent rate in the third quarter, down from the 1.2 percent rate previously reported. The third-quarter pace was the slowest since the first quarter of 1993, when spending rose at a 0.8 percent pace.
Final Sales
Real final sales, which exclude inventories, fell 0.3 percent at an rate compared with no change in the initial estimate.
Figures on holiday spending are mixed so far. While U.S. retailers' same-store sales rose 2.2 percent last week, the gain was the smallest in five years, as chains used discounts of as much as 70 percent on electronics, toys and clothing to draw holiday shoppers, according to figures from the Bank of Tokyo- Mitsubishi Ltd. and UBS-Warburg.
Today's figures showed inflation remained tame. The GDP deflator, a broad measure of inflation tied to the report, rose at a 2.2 percent pace, compared with a 2.1 rate previously reported. In the second quarter, the deflator rose at a 2.1 percent pace.
Government Spending Slows
Government spending increased at a 0.8 percent pace in the third quarter, previously reported as rising at a 1.8 percent rate. In the second quarter, government expenditures rose at a 5 percent rate.
Construction spending on homes rose at a 2.5 percent rate, revised from the 1.9 percent pace previously reported.
The pace of homebuying and of inventory reduction at automakers has made some Fed officials more optimistic about the speed of a recovery.
William Poole, president of the Fed Bank of St. Louis, said in an interview last week with Bloomberg News that the recession would be ``atypical'' and brief.
``There has been so very little impact on housing and on consumer durables,'' he said.
Non-residential fixed investment, which includes commercial construction as well as business equipment and software, fell at a 9.3 percent pace in the third quarter, previously reported as dropping at an 11.9 percent rate. That compares with a 14.6 percent rate of decrease in the second quarter.
Adjusted for inflation, GDP totaled $9.317 trillion in the third quarter when measured at an annual rate, compared with a previous estimate of $9.333 trillion. In the second quarter, GDP totaled $9.342 trillion at an annual rate." |
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30-11-2001 01:17
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