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German producer prices fell at the fastest pace in 60 years in July as energy costs dipped.
Prices fell 7.8% from a year earlier after falling 4.6% in June, the Destatis, the German statistics office said today. That was the biggest drop since 1949 .
The price of crude oil fell more than 50% a record in July 2008.
Compared with the preceding month, the index fell by 1.5% in July 2009 (–0.1% in June 2009).
Davy economist Rossa White comments today: Detail of yesterday's ZEW survey shows banks leading sentiment turnaround - - "The ZEW index is not the most reliable indicator of future euro area activity. It is useful, but the IFO survey has a much tighter relationship with German GDP for example. Yet it cannot be ignored when the index hits its highest point since 2006. It was more interesting to note the industry sectors that investors and analysts are becoming positive about. Banks led us into this severe global recession, and investors are clear that they will lead us out.
The respondents to the ZEW survey were more positive on balance about banks than any other industry. The reading was +40.5 on the balance of respondents versus -64.9 nine months ago. At that time in November, only insurance, steel and construction were viewed as being in a worse position. All other sectors are showing a positive balance (although insurance at +19.8 is some way behind banks) except for mechanical engineering, retail/consumer goods and autos.
Responses reflect the huge efforts of central banks and the consequent improvement in financial markets over the last five months. But there is also genuine improvement at the micro level. The latest euro area bank lending survey showed that credit standards are tentatively beginning to loosen. That easing was even more obvious in the US Fed's loan officer earlier this week. We reckon that ZEW respondents have made the right call on banks. But the read-through for other sectors is perhaps a little too conservative."
American poor got poorer in 2007
The concentration of income among the highest-earning Americans increased in 2007 as the economy headed toward recession, an analysis of US tax data shows.
The wealthiest 15,000 American households, those making more than $11.5 million a year, accounted for a record 6.04% of the nation's $8.7 trillion in income, according to the study by University of California-Berkeley economics professor Emmanuel Saez. The previous year those households amassed 5.46% of the total, the tax data shows.
In Saez's study shows the richest Americans represent the top 0.01% of all households.
In 1928, the year before the Great Depression began, the share of the nation's income for this slice of households was 5.04%.
A analysis by the weekly journal Tax Notes found that the poor got poorer in 2007. The share of all US income made by the 66 million Americans who earn less than $30,000 a year shrank by 2.3 from 2006, a decline of $149 per taxpayer.
US retail
The Wall Street Journal reports that major retailers reported that American consumers are continuing to hunker down, casting a cloud over the durability of the U.S. recovery and underscoring the importance of overseas demand in restoring the world economy to health.
Retailers across the spectrum provided foreboding reports. Discounter Target Corp. reported that sales at stores open at least a year were down 6.2% from a year earlier in the quarter ended Aug. 1, while luxury purveyor Saks Inc. reported a 15.5% drop in same-store sales over the past quarter as shoppers stuck to buying basics. Building-supply chain Home Depot Inc. saw total sales drop 9.1% in the quarter ending Aug. 2, and it reaffirmed expectations of a 9% sales drop this year.
US markets
The Dow Jones Industrial Average rose 82.60 points, or 0.9%, to 9217.94.
Home Deport gained 3.1% after reporting a better-than-expected decline in earnings.
Hewlett-Packard reported after the closing bell - - see link in Box below.
The S&P rose 1$ and the Nasdaq added 1.3%.
Asia
The MSCI Asia Pacific Index fell 0.6% Wednesday and has risen 56% from a more than five-year low on March 9th.
The Nikkei 225 fell 0.8%; the Shanghai composite fell 4.3% and Australia's S&P/ASX 200 dipped 0.2%.
Australian airline Qantas today reported a net profit after tax of A$117m for the year to June 30th, compared to A$969m a year earlier. It recorded a loss of A$93m in the six months to June.
The airline's profit before tax fell 87% to $181m from $1.41 billion a year earlier, but the airline said said it was one of few in the world to produce a full-year profit.
"There has never been a more volatile and challenging time for the world's aviation industry,"Qantas chief executive Alan Joyce said.
The Dubliner whose father Val Joyce, was an RTÉ radio presenter, took charge of the airline last year.
Gold is trading at $934.30 down $3.80 from Tuesday's spot price close in New York.
Goodbody economist Dermot O’Leary comments: Another successful Irish bond auction - - "Concern was rife at the beginning of the year that a bond auction failure would occur in a small European sovereign. Many put Ireland as the prime candidate for such a fate. It did not happen of course and looks increasingly unlikely to happen, given the combination of improved risk sentiment and a clear willingness by the Irish Government to take the necessary fiscal actions to reduce the budget deficit that the market is looking for. After the successful auction of a further €1bn in bonds yesterday, roughly 90% of the funding for 2009 is complete.
Moreover, the bid/cover ratios were 3.7 and 2.7 for the 5-year and 10-year issue, respectively, relative to 3.1 and 1.8 in the previous auctions of similar maturity. The spread over equivalent maturity German bunds fell by 40bps and 50bps, respectively, also, to 0.96% and 1.26%. The job is far from done of course, as large budget deficits, and thus funding requirements, will be par for the course for the next few years, even allowing for the implementation of further fiscal consolidation measures. Pricing and interest, though, are going in the right direction for Ireland to be able to fulfill these debt requirements."
Goodbody analyst Eamonn Hughes comments: Airlines; Worst of yoy declines may be behind us, but focus on costs to remain as yields pressured - - "The IATA produced its June air travel statistics yesterday showing some stabilisation in air travel demand trends. The data trails the passenger stats from the airlines themselves, so essentially doesn’t tell us a whole amount we don’t already know, but its interesting nonetheless to get the top down view of the sector. Total passengers were down 7.1% in the month following a 9.2% decline in May, with the decline moderating both in the front and back cabin. Premium travel numbers were down 21.3% in June from 23.6% in May, while the decline in economy slowed from 7.6% in May to 5.5% in June. While the volume outlook is becoming “less worse”, this is coming partly at the expense of lower average fares and yields. For instance, premium revenues are estimated to have been declining at a rate close 40% in June. The tally for Q2 shows that revenue from premium seats was down 41% in the quarter compared with a 33% drop in Q1, though we note it was modestly worse in Europe in June, down 31.3%, from the 30.6% in May.
The pressure on revenues was highlighted overnight with results from Qantas which has embarked on a A$1.5bn cost cutting plan. The stock (+7%) appears to have responded well to the announcement of the cost cutting programme, but also to the conference call commentary that yields have stabilised at H2 levels and signs of improvement in passenger volumes. So, maybe, a more timely indicator of trends than the IATA data. Nevertheless, Qantas has indicated that high levels of volatility continue and it is not possible to give profit guidance. The latter comments means Qantas joins a growing list of airlines in the same boat (the same plane doesn’t quite have the same ring to it!) and one wonders whether Aer Lingus which is due to report interims next week adds to that list.
For Ryanair, evidence of passenger declines starting to abate is a double-edged sword. While longer term, its clearly helpful and will allow them to start raising fares - as we anticipate from H2’11 - we suspect they would prefer the tougher environment to play out to the end of the year to add to the pressures on mid-tier competitors. So having guided yields down 20% for Q2 (July to September), expect them to keep pressure on yields into the winter to squeeze competitors. We are forecasting an 18.4% decline in Q3 yields and we look to the September 24 AGM as a reference date for an update.
The 24% yield decline in Q4 last year implies easier comps in Q4 this year, so expect the pace of decline to ease in Q4 this year. However, the stock is unlikely to anything until the market sees evidence of the pace of yield declines easing. However, the airline will have been comforted by the comments from the IATA of a structural change occurring in airlines, particularly in Europe, noting that passengers who had previously paid premium fares on short-to-medium haul European routes “and have moved to the back of the aircraft, or onto low fares airlines, may not return”."
