GDP And The iPhone Problem

Via Forbes

As originally reported by Robin Harding, the BEA is going to take its first official stab at what I nickname, the iPhone problem

Brent Moulton, who manages the national accounts at the Bureau of Economic Analysis, told the Financial Times that the update was the biggest since computer software was added to the accounts in 1999.

. . .

“We’re capitalising research and development and also this category referred to as entertainment, literary and artistic originals, which would be things like motion picture originals, long-lasting television programmes, books and sound recordings,” said Mr Moulton.

As is often the case, its easier to understand what’s going on here through the lense of Gross Domestic Income rather than Gross Domestic Product. Our readers well know, that the two in theory should be the same. The amount a nation earns, excluding income payments from abroad is equal to the amount a nation buys, excluding exports from abroad. The economy is simply a big wheel, spinning around and around.

On the income side the economy can be split into wages and profits. Recently, profits outside of the financial sector, have been behaving strangely. For one thing, they are really volatile.

[Full article here]

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Bullish retail sales bolster economic outlook

Retail sales expanded at their fastest clip in five months in February, the latest sign of momentum for an economy facing headwinds from higher taxes and pricier gasoline.

The solid sales came on the heels of strong gains in employment and manufacturing. But the improvement in the economic picture is likely insufficient to compel the Federal Reserve to reduce its monetary policy support.

“Consumers have been less fazed by the increase in taxes than we expected,” said Gus Faucher, a senior economist at PNC Financial Services in Pittsburgh. “Because the labor market has been doing a bit better than we were expecting, people are feeling a bit confident and not cutting back their spending.”

Retail sales increased 1.1 percent, the largest rise since September, after a revised 0.2 percent gain in January, the Commerce Department said on Wednesday. That was well above economists’ forecasts for a 0.5 percent advance.

So-called core sales, which strip out automobiles, gasoline and building materials and correspond most closely with the consumer spending component of the government’s measure of gross domestic product, rose a stronger-than-expected 0.4 percent.

The upbeat report helped extend a stocks rally on Wall Street, with the Dow Jones industrial average .DJI rising for a ninth straight session for the first time since 1996.

[Source: Reuters]

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Boehner says hopes to avert scheduled spending cuts

Via Reuters

House of Representatives Speaker John Boehner, the top Republican in Congress, expressed hope on Wednesday that automatic spending cuts could be averted if President Barack Obama quickly comes up with an alternative.

Boehner made the comments a day after Senate Republican leader Mitch McConnell said he expects the across-the-board cuts, known as sequester, to begin on schedule on March 1.

Boehner, standing before a blinking sign reading “Countdown to Obamaquester,” said it is up to the president and his fellow Democrats in the Senate to move quickly.

“Sequester is bad policy. It takes a meat axe approach to government spending,” Boehner, flanked by fellow House Republican leaders, said at a news conference.

[Full article here]

Stocks Erase Gains as Investors Weight Retail Data

Via NASDAQ.com

U.S. stocks erased earlier gains, weighed by health care and telecommunications shares, as investors weighed muted retail sales and other economic data.

The Dow Jones Industrial Average fell 45 points, or 0.3%, to 13974 in midday trading, paring its Tuesday advance to an all-time high. The price-weighted Dow was hurt by pullbacks in some of its higher-priced components, such as McDonald’s, which fell 1.4%, and Caterpillar, which eased 0.9%.

The Standard & Poor’s 500-stock index added less than one point, or less than 0.1%, to 1520, after rising as much as five points earlier in the session. The Nasdaq Composite Index gained four points, or 0.1%, to 3191.

“We’re reaching a little bit of a stalemate between bulls and bears at this point,” said John Manley, chief equity strategist at Wells Fargo’s funds unit, which manages about $200 billion. “The bears are saying, “We’re just rising on hot air.” Some of the bulls are saying, “The market has gone up so much, I’ll wait until it goes down so I have a better chance to buy it.’”

Comcast rose 4.5% after the cable operator said it was buying the remaining 49% of NBCUniversal that it doesn’t own from General Electric for $16.7 billion. GE notched a 3.1% increase, the biggest among blue chips.

[Full article here]

Deere sees modest rise in farm equipment sales this year

Via Reuters

Deere & Co (DE.N), the world’s largest farm equipment maker, forecast a modest increase in sales this year despite the prospect of the biggest corn crop in U.S. history, falling short of analysts’ expectations and sending its shares down 3 percent.

Shares of the company, which also makes excavators, dump trucks and log harvesters, fell to $91.25 on the New York Stock Exchange as the lower-than-expected increase in its outlook for 2013 overshadowed strong first-quarter results.

Moline, Illinois-based Deere raised its forecast for net income in the year ending October 2013 to $3.3 billion from $3.2 billion, catching up with Wall Street’s expectations.

The company’s sales of agricultural equipment in the United States and Canada would grow by no more than 5 percent this year, it said in a statement.

[Full article here]

Pound Tumbles on Bank of England Inflation Report

Via Businessweek

The pound fell for a third day against the euro, dropping toward a 15-month low, after Bank of England Governor Mervyn King said U.K. growth is likely to be weak and the economy faces “big challenges.”

Sterling tumbled at least 0.5 percent versus all of its 16 major counterparts as King said at a press conference in London that there were “limits” to what policy makers could achieve. U.K. government bonds fell, with 10-year yields rising by the most in six weeks, as the central bank said inflation will remain above its 2 percent target for the next two years even with weak growth.

“King is saying it’s going to be a rocky road and policy makers will do more if necessary,” said Lee McDarby, head of dealing on the corporate and institutional treasury desk at Investec Bank Plc in London. “People are looking at the gloomy side. So far this year the market has taken any opportunity it can get to sell the pound. There are still a lot of sellers.”

[Full article here]

Currencies volatile as investors eye G20

Via Reuters

Currency trading was volatile on Wednesday as concerns about currency wars and the fallout from mixed messages from the G7 put added focus on a meeting of world leaders in Moscow later in the week.

The euro turned lower against the dollar and Japanese yen. The euro had earlier traded higher against the yen after Russian Deputy Finance Minister Sergei Storchak said the yen had definitely been over-valued and that “there are no signs” Japan’s monetary authorities were intervening.

Currencies have been volatile after a G7 statement earlier this week on exchange rates, designed to calm talk of a currency war, instead triggered fresh concerns.

The G7 on Tuesday reaffirmed its commitment to market-determined exchange rates and said fiscal and monetary policies must not be directed at devaluing currencies – comments which at first were seen as supporting the recent weakness in the yen.

[Full article here]

Wall Street flat, S&P 500 touches November 2007 high

Via Reuters

Stocks were little changed on Wednesday after the S&P 500 index hit a November 2007 intraday high, but volume was low and investors stayed cautious with indexes near multi-year closing highs.

The benchmark index got a boost from Comcast Corp (CMCSA.O) when the cable company said it will buy the rest of NBC Universal for $16.7 billion from General Electric Co (GE.N).

Equities have been strong performers until recently, buoyed largely by healthy growth in corporate earnings, which helped the S&P 500 to rise 6.5 percent so far this year. The Dow industrials are about 1 percent away from an all-time intraday high, reached in October 2007.

Those gains could leave the market vulnerable to a pullback as investors take profits amid a dearth of new catalysts. While analysts see an upward bias in stocks, recent daily moves have been small and trading volumes light with indexes at multi-year highs.

[Full article here]

Retail Sales in U.S. Increase for Third Straight Month

Via Bloomberg

Retail sales in the U.S. rose in January for a third consecutive month, showing household spending is holding up even as an increase in the payroll tax takes a bigger bite from paychecks.

Purchases climbed 0.1 percent, matching the median forecast of economists surveyed by Bloomberg, according to Commerce Department figures issued today in Washington. The gain was smaller than the 0.5 percent increases in December and November.

Department stores and online merchants were among those showing growing demand as improving job prospects and a strengthening housing market helped companies such as Gap Inc. and Target Corp. Some economists boosted estimates for the start of the year as the figures eased concern consumer purchases would retrench after a fourth-quarter pickup.

“The first quarter is looking better than we were expecting,” said Conrad DeQuadros, a senior economist at RDQ Economics in New York. “Payrolls are still growing and wage growth, while moderate, is still rising. We’re seeing increases in home prices and equity prices. Those are all positives for the household sector.”

[Full article here]

Apple Reduces Price on MacBook Pro With Retina Display

Via ABC News

President Obama mentioned Apple’s plans to make some Mac computers in America during the State of the Union last night, and today Apple’s following up that Mac momentum with an announcement that it’s lowering prices on some of its MacBooks.

The MacBook Pro with Retina Display, which was first introduced last June, is being refreshed with new processor options and the smaller, 13-inch version is now $200 cheaper.

You may recall that we bemoaned the $1,699 starting price of the 13-inch MacBook Pro with Retina when we reviewed it in November. Now the 128GB version will start at $1,499, and $1,699 will buy you the version with a faster 2.6GHz processor and 256GB of storage. Apple’s also dropping the price of the 256GB 13-inch MacBook Air to $1,399 from $1,499.

The larger 15-inch MacBook Pro Retina display doesn’t get a price drop — it still starts at $2,199 — but is getting some new internal organs. It will be available with a faster 2.4GHz and 2.7GHz quad-core processors and up to 16GB of memory.

[Full article here]