Growth Stall Obscures U.S. Consumer, Business Gains: Economy

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The economy in the U.S. unexpectedly came to a standstill in the fourth quarter as the biggest plunge in defense spending in 40 years swamped gains for consumers and businesses.1:51Jan. 30 (Bloomberg) -- The economy in the U.S. unexpectedly shrank in the fourth quarter, restrained by the biggest plunge in defense spending in four decades and dwindling inventories as household purchases picked up. Gross domestic product, the volume of all goods and services produced, dropped at a 0.1 percent annual rate, Commerce Department figures showed today in Washington. Betty Liu and Michael McKee report on Bloomberg Television's "In the Loop." (Source: Bloomberg)5:19Jan. 30 (Bloomberg) -- Brian Wesbury, chief economist at First Trust Advisors, talks about the performance of the U.S. economy and growth outlook. Gross domestic product, the volume of all goods and services produced, dropped at a 0.1 percent annual rate in the fourth quarter, the Commerce Department reported today. Wesbury speaks with Betty Liu and Michael McKee on Bloomberg Television's "In the Loop." (Source: Bloomberg)4:14Jan. 30 (Bloomberg) -- Former Federal Reserve Bank of Minneapolis President Gary Stern talks about the outlook for the central bank's policy. He speaks with Tom Keene, Sara Eisen and Michael McKee on Bloomberg Television's "Surveillance." (Source: Bloomberg)5:36Jan. 29 (Bloomberg) -- Jan Hatzius, chief economist at Goldman Sachs Group Inc., talks about the drop in U.S. consumer confidence in January, the outlook for Federal Reserve monetary policy and the global economy. He speaks with Erik Schatzker and Stephanie Ruhle on Bloomberg Television's "Market Makers." (Source: Bloomberg)5:28Jan. 30 (Bloomberg) -- Thomas Fanning, chief executive officer of Southern Co., talks about the outlook for the U.S. economy and the company's sales. Fanning speaks with Betty Liu and Adam Johnson on Bloomberg Television's "In the Loop." (Source: Bloomberg)2:52Jan. 30 (Bloomberg) -- Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ, discusses fourth-quarter U.S. gross domestic product. U.S. GDP unexpectedly dropped at a 0.1 percent annual rate, Commerce Department data showed today in Washington. (Source: Bloomberg)Enlarge imageA U.S. flag is displayed on top of a Ford Motor Co. vehicle displayed for sale on the lot at Golf Mill Ford car dealership in Niles, Illinois. Photographer: Tim Boyle/BloombergGross domestic product dropped at a 0.1 percent annual rate, weaker than any economist forecast in a Bloomberg survey and the worst performance since the second quarter of 2009, when the world’s largest economy was still in the recession, Commerce Department figures showed today in Washington. A decline in government outlays and a smaller gain in stockpiles subtracted a combined 2.6 percentage points from growth.Rising auto sales led the advance in consumer spending last quarter as a drop in fuel prices and the largest income gain in four years enabled the biggest part of the economy to overcome superstorm Sandy and Washington budget battles. Little inflation and a stop-and-go expansion are why Federal Reserve policy makers, who wrapped up a two-day meeting today, pressed on with plans to pump more money into financial markets.“I’m not going to say growth is particularly strong, but this is not a recessionary signal by any means,” said Paul Edelstein, director of financial economics at IHS Global Insight in Lexington, Massachusetts, whose team projected a 0.3 percent gain, the lowest in the Bloomberg survey. “This really was a story about a payback in national defense spending. Consumer- spending growth picked up, fixed investment was fairly strong.”Stocks fell, dragging benchmark indexes from five-year highs. The Standard & Poor’s 500 Index declined 0.4 percent to 1,501.96 at the close in New York.

Europe Improves

The European economy, meantime, showed more signs of emerging from recession. A measure of executive and consumer sentiment in the euro area climbed in January to the highest level in seven months, figures from the European Commission in Brussels showed today.The U.S. slowdown followed a 3.1 percent increase at an annual rate in GDP, the volume of all goods and services produced, in the third quarter when inventories jumped, government spending advanced and trade improved, providing almost mirror images of last quarter’s results.The “statistical noise in the defense and inventory components” means it’s best to look at the average pace of growth over the second half of the year to get a better understanding, economists David Greenlaw and Ted Wieseman at Morgan Stanley in New York, said in a note. The resulting 1.5 percent “is right in line with the growth pace seen in recent years.”

Survey Results

The median forecast of 83 economists surveyed by Bloomberg called for a 1.1 percent gain in growth. Projections ranged from 0.3 percent to 2.1 percent. Today’s estimate is the first of three for the quarter, with the other releases scheduled for February and March when more information becomes available.For all of 2012, the world’s largest economy expanded 2.2 percent after a 1.8 percent increase a year earlier.Consumer spending, which accounts for about 70 percent of the economy, expanded at a 2.2 percent annual rate last quarter, up from 1.6 percent in the previous three months, today’s report showed. Purchases of durable goods, including automobiles, climbed at a 13.9 percent rate, the most in two years.Cars and light trucks sold at a 15.3 million annual rate in December after a 15.5 million pace the prior month, the bestback-to-back showing since early 2008, data from Ward’s Automotive Group showed earlier this month.

Incomes Jump

A jump in pay may have helped consumers. After-tax income rose at a 6.8 percent annual rate from October through December, the biggest increase since the second quarter of 2008, today’s report showed.In addition to improving wages and salaries, some companies also paid dividends and employee bonuses earlier than usual before tax rates went up this year. The Commerce Department estimated that about $26.4 billion of the increase in incomes was attributable to early dividend payments and another $15 billion reflected bonuses and other types of irregular pay.The gain in consumer spending may be difficult to sustain this quarter as a tax increase takes a bigger chunk from earnings. Congress on Jan. 1 let the payroll tax revert to 6.2 percent from 4.2 percent while avoiding broad-based income tax increases. Lawmakers are now wrangling over spending reductions scheduled for March 1 that threaten to further slow the economy.Another report today showed companies took on more workers than projected in January, showing the labor market kept making progress at the start of the year. The 192,000 increase in employment, the most since February 2012, followed a revised 185,000 gain in December, according to figures from the Roseland, New Jersey-based ADP Research Institute.

Fed Action

http://www.bloomberg.com/news/2013-01-30/economy-in-u-s-unexpectedly-shrinks-as-defense-spending-plunges.html

Chrysler earnings soar

New York TimesPosted:   01/30/2013 05:21:20 PM PSTUpdated:   01/30/2013 05:21:21 PM PST
DETROIT -- Chrysler, the smallest of the American automakers, said Wednesday that its profit in 2012 soared to $1.66 billion -- about nine times as much as the $183 million it earned previous year.The dramatic increase underscored the company's comeback from its government bailout and bankruptcy in 2009, when it was taken over by the Italian automaker Fiat.In the fourth quarter alone, Chrysler said it earned $378 million, a 68 percent increase from $225 million in the same period in 2011. Revenue in the quarter was $17.1 billion, a 13 percent gain from $15.1 billion a year earlier."Chrysler concluded a very successful 2012 with a robust fourth-quarter performance," said Jesse Toprak, an analyst with the auto research site TrueCar.com. "The company was the only domestic automaker to gain market share last year."Chrysler also benefited from having little exposure to the deepening economic crisis in Europe, where vehicle sales have fallen to the lowest levels in about 20 years.The European problems, however, took a heavy toll on profits at Fiat, Chrysler's parent company.Without Chrysler, Fiat said it would have lost 1.04 billion euros in 2012. But Chrysler's results helped Fiat earn a profit for 2012 of 1.41 billion euros, a 26 percent improvement over the 1.33 billion euros that Fiat earned the previous year.In the fourth quarter, Fiat reported a profit of 388 millioneuros. Without Chrysler's contributions, it would have lost 241 million euros.Fiat owns a 58.5 percent stake in Chrysler. As of the middle of last year, Fiat consolidated Chrysler's results into the parent company's overall performance.Chrysler, meanwhile, said its revenue for the year was $65.7 billion, a 19 percent improvement from $54.9 billion in 2011.http://www.mercurynews.com/cars/ci_22484451/chrysler-earnings-soar

Almaden Minerals Up 57% Since I Highlighted It And There's Room To Run

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)I have previously laid out my thesis for gold and precious metal appreciation as a result of the United States' addiction to debt and the endless easy money policies of the central banks, and thus the recent selloff in gold and silver stocks presents a buying opportunity. The most popular gold and silver ETFs, the SPDR Gold Trust (GLD) and the iShares Silver Trust (SLV) are down 4.2% and 5.5% in the last three months, respectively. The ETFs that track the miners of these metals such as the Market Vectors Gold Miners ETF (GDX) and the Market Vectors Junior Gold Miners ETF (GDXJ), are down even further in the last three months compared to the metals they produce, losing 14.3% and 15.7%, respectively, while the Global X Silver Miners ETF (SIL) is down slightly less, losing 10.7% in the last three months. Given this selloff and the long term-tailwinds that gold and silver prices have due to central bank stimulus, I have opined that a buying opportunity has arisen for the long-term investor in silver and silver companies, as well as the best of breed gold stocks.In the present article I follow-up on a speculative gold exploration company that I first got behind back on August 8th, 2012, Almaden Minerals (AAU). When I first highlighted the stock, it traded at $1.94. The stock has had a major run to $3.04, appreciating 56.7% since my recommendation to buy. After reviewing its 2012 summary and presentation, I think the stock has more room to run.Quick review of the companyhttp://seekingalpha.com/article/1134281-almaden-minerals-up-57-since-i-highlighted-it-and-there-s-room-to-run