New Zealand companies say sales and trading will decline in the third quarter, pushing profit expectations to a 25-year low, as economic growth slumps.
A net 23 percent of firms expect domestic trading will decline over the next three months compared with 10 percent in the previous poll, the New Zealand Institute of Economic Research said today in Wellington. A net 40 percent of 923 businesses surveyed last month said profits will fall, the most since December 1982.
Weak profit expectations and spending plans suggest the economy may have slumped into a recession after it contracted in the first quarter. Reserve Bank Governor Alan Bollard last month said it is “likely'' he will cut interest rates from a record- high 8.25 percent this year as economic growth slows.
“Indicators of domestic trading suggest economic activity declined further in the second quarter and is likely to decline again in the third quarter,'' Brent Layton, chief executive at the institute, told reporters. “Companies are saying the slowing economy has affected us and will continue to do so.''
New Zealand's dollar bought 75.34 U.S. cents at 10:07 a.m. in Wellington from 75.31 cents immediately before the report.
The Treasury department yesterday cut its forecast for economic growth in the year to March 31, 2009, to about 1 percent from 1.5 percent. That would be the slowest annual growth since 1998. Gross domestic product shrank 0.3 percent in the three months ended March 31.
Economic Outlook
Twelve of 13 economists surveyed by Bloomberg say Bollard will lower borrowing costs before Sept. 30 http://paydayloans-on.com. One expects a rate cut in October.
Pessimism about the overall economy was unchanged at a 33- year low, today's report showed. A net 64 percent of companies say the economy will deteriorate in the next six months, matching the previous survey.
The net figure is calculated by subtracting the pessimists from optimists.
Companies are less likely to invest and more likely to fire workers in the next three months, the institute said. A net 71 percent expect their costs will increase.
A net 49 percent of companies surveyed said they are likely to raise prices in the next three months from 45 percent in the March survey. That's the highest since March 1987 and suggests annual inflation may exceed 4 percent, the institute said.
Skilled Workers
Economists closely watch the business survey, monitoring the rate of capacity utilization, which measures how much plant, equipment and labor is employed, and the difficulty in finding workers, to gauge inflation pressures in the economy.
Capacity utilization fell to 92.4 percent from 92.6 percent in the first quarter, the institute said.
A net 19 percent of companies surveyed said it was harder to find skilled workers than three months earlier. That's down from 36 percent in the previous survey and is the lowest since June 1999.
While indicators of labor shortages have eased, other gauges of inflation pressures “suggest strong inflationary pressures will persist,'' the institute said.
Japan's accelerating inflation may prompt households to cut spending rather than buy more to beat further price increases, a central bank survey showed.
A record 88.9 percent of consumers expect prices to climb this year and an unprecedented 58.7 percent said they will cut spending, the Bank of Japan said in a quarterly report today. Both levels are the highest since the bank started asking the questions about inflation and purchasing in 1997.
“Japan's consumers are used to deflation, not inflation,'' said Kyohei Morita, chief economist at Barclays Capital in Tokyo. “Consumers are suffering because of rising prices and household spending is going to stall.''
Household spending fell at the fastest pace since September 2006 in May, when inflation surged to a decade high. Prices of most frequently purchased goods from milk to eggs climbed 2.4 percent in May, outpacing 0.2 percent wage growth, which was the slowest in five months.
“We are highly skeptical as to whether food price inflation can trigger frontloaded consumption behavior, as food is generally not an area where consumers hoard,'' said Takehiro Sato, chief economist at Morgan Stanley in Tokyo.
Consumers expect prices to rise 7 percent in the next 12 months and households felt prices climbed 10 percent from a year ago, according to median estimates in today's survey. Both numbers are a record high.
Consumer Prices
Core consumer prices, which exclude fresh fruit, fish and vegetables, rose 1.5 percent in May, the fastest pace since 1998, as companies passed on higher energy and commodity costs payday loans online.
“The impact on consumer spending should not be too dramatic,'' Richard Jerram, chief Japan economist at Macquarie Securities Ltd. in Tokyo, wrote in a note. “Consumers will find that their monthly wages (which have also picked up) will go further than they expect.''
Respondents expect land prices to fall 7.4 percent. That's the first time they have anticipated a drop since March 2004.
Gains in Japan's land prices will probably slow in the next few years as investors become more cautious after the subprime mortgage market collapsed, CB Richard Ellis, the world's biggest commercial property brokerage, said this week.
“This negative sentiment on land prices helps to explain the poor housing starts data in recent months,'' Jerram wrote. “People do not want to buy an asset they expect to depreciate in value.''
A recovery in housing starts, which slumped last year because of stricter building-permit rules, has lost steam since January as developers raised prices to meet higher costs of steel and cement, sapping demand.
Today's Bank of Japan survey took place from May 15 to June 10. The bank asked 4,000 people and received 2,378 responses.
The former Pope & Talbot Inc. pulp mill in Halsey has been reopened.
Cascade Pacific Pulp LLC, the mill's new owners, said in a news release Tuesday the mill's operations have resumed after seven weeks of laying dormant.
"It is great to have the employees back and the mill in operation again," Wayne Henneck, Cascade Pacific's president, said in a news release.
The mill shut down on May 9 when Pope & Talbot, the bankrupt Portland-based paper products company, transitioned from Chapter 11 reorganization to Chapter 7 liquidation proceedings.
On June 20, Minnesota-based Wayzata Investment Partners made a winning $31.15 million cash bid for the mill in the second of two bankruptcy auctions.
Wayzata, an investment firm with $5 billion under management, created Cascade Pacific Pulp as a wholly owned subsidiary to run the mill fast cash advance. It appointed Henneck, who was general manager of the site under Pope & Talbot, as president.
Operations resumed June 27 with Cascade hiring most of the mill's former employees, the company said in the news release.
The mill employs about 150 people and has the capacity to produce 180,000 tons of bleached and unbleached pulp per year for use in various paper products and building materials. The pulp is shipped to customers across the United States and in Asia and Europe.
U.S. business purchases unexpectedly shrank at a slower pace in June, indicating a prolonged economic slowdown that isn't getting any worse.
The National Association of Purchasing Management-Chicago said today its business index increased to 49.6 this month from 49.1 in May. Fifty is the dividing line between growth and contraction.
“Although it's slightly higher than last month, it's still lower than we would like to see and suggests that we will be in a period of weakness for a while,'' said Jeffrey Roach, chief economist at Horizon Investments in Charlotte, North Carolina, who forecast the index would rise to 49.5.
The figures reflect an increase in consumer spending this quarter spurred by federal tax rebates, and record exports aided by a weaker dollar. At the same time, the report showed a fifth straight month of contracting activity, indicating no sign of a sustained acceleration in growth.
Treasuries were little changed after the report, and stocks recovered earlier losses. Yields on benchmark 10-year notes were at 3.97 percent at 4:16 p.m. in New York, the same as last week's close. The Standard & Poor's 500 Stock Index advanced 0.1 percent to close at 1,280.
Economists surveyed by Bloomberg News had projected the index would fall to 48, according to the median of 60 forecasts in a Bloomberg News survey. Estimates ranged from 46 to 51.
2007 Comparison
June showed the slowest pace of contraction since Chicago- area activity started shrinking in February. The index averaged 54.4 last year.
Consumer spending rose in May as households spent some of the more than $100 billion of tax rebates the government is distributing this year. Record gasoline costs, rising food prices and declining payrolls mean the boost may prove temporary, economists said.
“The fiscal stimulus is supporting the economy to some extent,'' said Ryan Sweet, an economist at Moody's Economy.com in West Chester, Pennsylvania. “Beyond the rebates, spending is going to be very weak. Along with the other headwinds, the consumer faces potentially stronger inflation. That will sap household spending power.''
Foreign demand has helped manufacturing perform better than in previous economic downturns. Gross domestic product rose at a 1 percent annual pace in the first quarter, the Commerce Department said last week. The trade gap was $480.2 billion, the lowest since the third quarter of 2002, and contributed 0.8 percentage point to growth.
Harley-Davidson
Harley-Davidson Inc., the biggest U.S. motorcycle maker, this month said it expects to see an increase in foreign demand for the remainder of 2008.
“Given the strength we are seeing, we're going to continue to increase investment in international markets, and we're going to continue to increase shipments'' overseas, Chief Financial Officer Thomas Bergmann said in a June 19 interview with Bloomberg Television payday loan low fee.
Consumer spending and personal income surged in May, a sign the biggest part of the economy is benefiting from the government tax-rebate checks.
The 0.8 percent rise in spending followed a 0.4 percent increase in April, the Commerce Department said last week. Incomes grew 1.9 percent, the most since September 2005.
The Chicago report's measure of new orders fell to 52, signaling smaller gains, from 56.1 in May. Order backlogs dropped to 42.3 from 46.8.
The Chicago group's employment index increased to 46.7 from 41.2 a month ago.
June Payrolls
The Labor Department is scheduled to release the June payrolls report on July 3. Manufacturers have lost jobs every month since July 2006.
Brunswick Corp., the maker of Sea Ray yachts and Boston Whaler fishing boats, last week said it will close four more North American plants and cut as much as 10 percent of staff to trim costs. The Lake Forest, Illinois-based company will have 17 or fewer plants at the end of 2009, compared with 29 in 2007.
The production gauge in today's Chicago report decreased to 45.1, the lowest reading since August 2001, from 51.5 in May. The group's inventories index rose to 50.5 from 42.2.
The purchasing managers' measure of prices paid for raw materials decreased to 85.5 from 87.5 the previous month.
Some companies are trying to pass on higher costs to customers. Dow Chemical Co., the biggest U.S. chemical maker, last week said it will raise prices as much as 25 percent in July to offset higher input costs. The increase is the largest in company history and the second in two months.
The Chicago purchasers' group surveys companies with U.S. and worldwide operations. Any group member, even those not located in the Midwest, can respond to the survey.
National Index
Economists monitor the Chicago index for an early reading on the outlook for U.S. manufacturing, which makes up about 12 percent of the economy. The Institute for Supply Management is scheduled to release its June manufacturing survey tomorrow.
Regional reports earlier this month showed manufacturing shrinking. The Federal Reserve Bank of Philadelphia's general economic index dropped to minus 17.1, a seventh month of contraction, from minus 15.6 in May. The New York Fed's measure fell to minus 8.7 from minus 3.2 a month earlier.
Other releases indicate the slowdown in manufacturing. Excluding orders for cars and planes, which tend to be volatile, bookings for durable goods declined 0.9 percent in May, the first drop in three months, the Commerce Department said last week.
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