January 15, 2004
Concerns over slowing US consumer spending.
Casting more doubts over the so-called economic "recovery" is
this other article from the FT which expresses "concern" over consumer spending.
Concerns about the strength of consumer spending in the US grew on Thursday after the latest government figures showed spending in the lead-up to the key Christmas period grew at a slower rate than expected.
Retail sales rose by 0.5 per cent in December, according to the US Commerce Department, which was well below expectations. The disappointment was relieved slightly by an upward revision in November’s sales growth from 0.9 to 1.2 per cent. Excluding the volatile auto sector, sales climbed by an even more modest 0.1 per cent.
Economists said the modest rise in December sales may have been affected by weak employment trends.
“Overall, these numbers suggest that the holiday season was poor, and may have been hampered by the lack of hiring in that month,” said Ian Morris, US economist at HSBC in New York.
The figures coincided with the release of data on inflation, which showed consumer prices rising by 0.2 per cent during December, in line with market consensus, after a fall of 0.2 per cent in the previous month. The rate of inflation remained at a 41-year low of 1.1 per cent on an annualised basis. Core retail prices, which strip out volatile food and energy prices, rose by 1.1 per cent over the year.
Wow, people "may" be spending less because they're not working. I guess you'd need a degree in economics to figure that out. And why do they strip out "volatile food and energy prices" from the inflation figures? Those are the two biggest expenses of your average family. How convenient. That's a blatant lie, the worst kind of spin. They should at least report what the inflation figures are when you include those. And notice that they strip out auto sales, also "volatile", whatever that means, from the retail sales figures.
Of course, including auto sales figures may itself make the figures even more inaccurate. GM, for instance, recently gave away 1,000 cars as part of a sales promotion. But they include those in their sales figures. See this NY Times article on the American auto industry,
Big Three Hope Rising Economy Will Lift All Vehicle Sales. It certainly doesn't indicate that the US economy is improving.
That could make this year's economic climate crucial in meeting profit goals, but automakers may have to continue to rely heavily on incentives to bring customers into showrooms.
"The Big Three expect an improving economy to support better pricing in 2004; we don't," Gary Lapidus, an analyst at Goldman Sachs, wrote in a report. He says that weaker household spending will pressure sales and prices and that it will be difficult to maintain sales levels in the robust range of 17 million cars and trucks nationwide, as the industry expects.
"If the industry wants to sell 17 million vehicles, it can, if it lowers the price enough," he said.
Incentives have already been at record highs and show few signs of abating. Through November 2003, incentives by the domestic automakers averaged $3,310 for each vehicle, compared with $2,440 in the period a year earlier, according to Edmunds.com. That compared with $941 a vehicle from the Japanese brands in 2003, which have lower incentives for a variety of reasons, including better quality reputations and favorable exchange rates.
General Motors, which includes brands like Chevrolet, Pontiac, Cadillac and Hummer, dug itself into a hole in 2003 when sales lagged in the first quarter after a big sales push in December 2002. With no interest in repeating an early slump, G.M. has rolled out aggressive incentives already, extending to five-year interest-free loans on most of its sport utility vehicles and pickup trucks.
That is on top of GM HotButton, a new promotional campaign that will give away 1,000 G.M. vehicles to customers who visit showrooms. At $50 million, the campaign is double what G.M. typically spends on a summer drive or year-end push and considerably more than at the beginning of the year. Technically speaking, it is not a sales incentive because the $50 million comes out of the advertising budget.
Then again, the company will count these 1,000 vehicle giveaways as sales.
... Ford expects its automotive business to start generating profits again this year. Over all, the company is expecting a slight profit for 2003 after losing $6.4 billion over the previous two years.
"Expecting a slight profit for 2003..." More spin. They said the same thing last year, and the year before. And if they do show a "profit" it will be by manipulating the accounting, especially by conveniently writing the $6.4 billion losses off their taxes (and onto yours.) Read between the lines of the NY Times article to see what bad shape American business is really in. And note that they continue to refer to Chrysler as one of the American "Big Three" automakers, when in fact it is now owned by the Germans. Don't be surprised if you wake up soon and read that GM and Ford have also been taken over by the Japanese and the Europeans.
[I also note that the NY Times includes Financial Times headlines on its business page. Which leads me to think that their (FT's) figures and reporting can't be trusted that much either. Are they part of the same media conglomerate now?]
For another viewpoint, the LA Times reports that
Assorted Signs Paint Rosy Economic Picture. I notice that they _do_ include auto sales in their retail sales figures, which is interesting.
In a preliminary report, the U.S. Commerce Department said that retail sales rose 0.5% from the previous month on a seasonally adjusted basis to $325 billion. Much of the gain came from a 1.6% increase in automobiles and auto parts in addition to increases in furniture and sporting goods sales.
That's the great thing about the web. It allows you to compare the various reports. It's amazing what that shows up too.
