US manufacturing stumbles in January

Updated 16 February 2013
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US manufacturing stumbles in January

WASHINGTON: US manufacturing got off to a weak start this year as motor vehicle production tumbled, but a rebound in factory activity in New York state this month suggested the decline would be temporary.
Consumers were a bit more upbeat early this month even as they paid more for gasoline and saw higher taxes reduce their paychecks, other data yesterday showed. Households drew comfort
from steady job gains, which together with rising house and share prices should help to underpin consumer spending.
Manufacturing output fell 0.4 percent in January after rising 1.1 percent in December, the Federal Reserve said. That followed two months of solid gains and largely reflected a 3.2 percent drop in auto production.
“Given that most of the weakness was due to the give-back in motor vehicle production after the 11 percent surge in activity during the last two months of last year, we expect this retreat in industrial output to be temporary,” said Millan Mulraine, senior economist at TD Securities in New York.
In a separate report, the New York Fed said its “Empire State” general business conditions index rose to 10.0 from -7.8 the month before. February’s index showed the first growth in the sector since July and the best performance since May 2012.
The rebound was driven by new orders, where the index was at its highest since May 2011. Economists said the pick-up in activity likely reflected recovery from Superstorm Sandy, which struck the East Coast in late October.
“Growth in the current quarter could get a boost from rebuilding efforts in the region,” said Joseph LaVorgna, chief US economist at Deutsche Bank Securities in New York.
A third report showed the Thomson Reuters/University of Michigan’s index of consumer sentiment rose to 76.3 in early February from 73.8 in January. Its gauge of current economic conditions rose to 88 from 85 the prior month, while a measure of consumer expectations rose to 68.7 from 66.6.
“Consumers are getting over the fact that their paychecks are a little smaller since the beginning of the year due to the sunset of the payroll tax holiday,” said Thomas Simons, an economist at Jefferies & Co. in New York.
“This offers some encouragement that consumption will recover following a weak month in January.”
The expiration of a 2 percent payroll tax cut and increases in tax rates for wealthy Americans on Jan. 1 were blamed for a sharp slowdown in retail sales last month.
The pick-up in consumer sentiment is welcome given the cooling in factory activity. Manufacturing carried the economy’s recovery from the 2007-09 recession.
Last month’s weakness in manufacturing helped push overall industrial production down 0.1 percent. Output had increased 0.4 percent in December.
Production at the nation’s mines fell 1.0 percent, but cold weather boosted utilities production by 3.5 percent — a positive development for consumer spending this quarter.
With industrial output weak, the amount of capacity in use fell to 79.1 percent from 79.3 percent in December.
Industrial capacity utilization — a measure of how fully firms are using their resources — was 1.1 percentage points below its long-run average.
Officials at the Fed tend to look at utilization measures as a signal of how much “slack” remains in the economy, and how much room growth has to run before it becomes inflationary.


Britain’s M&S says must accelerate change or die

Updated 23 May 2018
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Britain’s M&S says must accelerate change or die

LONDON: Britain’s Marks & Spencer said on Wednesday it urgently had to modernize or risk fading away as it reported a second straight decline in annual profit and booked a 321 million pounds ($430 million) charge for a store closure program.
The 134-year-old M&S faces unrelenting competition from supermarkets, fashion chains like Zara, H&M and Primark, as well as online giant Amazon, while efforts to revitalize its business are being hampered by ongoing pressure on UK consumers’ spending power.
M&S reset its strategy in November, two months after retail veteran Archie Norman joined as chairman, detailing a five-year program of store closures and relocations, and moves to make its misfiring food business more competitive.
On Tuesday M&S said it would close 100 UK stores by 2022, further accelerating the plan as it strives to make at least a third of sales online.
M&S, one of the best known names in British retail, said it made a pretax profit before one-off items of 580.9 million pounds ($778.6 million) in the year to March 31.
That was ahead of analysts’ average forecast of 573 million pounds but down from 613.8 million pounds made in 2016-17.
After taking account of adjusted items of 514.1 million pounds, including the charge relating to store closures, pretax profit was 66.8 million pounds, a 62 percent fall.
Turnover was broadly flat at 10.7 billion pounds.
“We have to modernize our business to ensure we are competitive and reignite our culture. Accelerated change is the only option,” said M&S.
Shares in M&S have fallen 26 percent over the last year and the firm is in danger of being booted out of the prestigious FTSE 100 index.
The stock closed Tuesday at 292 pence, valuing the business at 4.7 billion pounds.