US economy: Consumer spending bolsters second-quarter growth

WASHINGTON -  U.S. economic growth accelerated in the second quarter as solid consumer spending offset the drag from weak business spending on equipment, suggesting a steady momentum that could bring the Federal Reserve closer to hiking interest rates this year.

Gross domestic product expanded at a 2.3 percent annual rate, the Commerce Department said on Thursday. First-quarter GDP, previously reported to have shrunk at a 0.2 percent pace, was revised up to show it rising at a 0.6 percent rate.

The revision to first-quarter growth reflected steps taken by the government to refine the seasonal adjustment for some components of GDP, which economists said left residual seasonality in the data, as well as new source data.

The Fed on Wednesday described the economy as expanding "moderately" while upgrading its view of the labor market and saying housing had shown "additional" improvement. The Fed's assessment left the door open for a possible hike in interest rates in September, which would be the first rise since 2006.

A separate report showed first-time applications for state unemployment benefits increased 12,000 last week to a seasonally adjusted 267,000. However, claims remained not too far from their cycle lows.

The dollar extended gains against a basket of currencies, while prices for U.S. Treasury debt fell slightly.

Though second-quarter GDP growth was a bit below economists' expectations for a 2.6 percent rate, the growth composition pointed to firming domestic fundamentals.

A measure of private domestic demand, which excludes trade, inventories and government expenditures, increased at a 2.5 percent rate after rising at a 2.0 percent pace at the start of the year.

Growth in the second quarter was boosted by consumer spending as households used some of the windfall from cheaper gasoline in late 2014 and early this year to go shopping. The strengthening labor market also encouraged consumers to loosen their purse strings.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a 2.9 percent rate from a downwardly revised 1.8 percent pace in the first quarter. Consumer spending was previously reported to have increased at a 2.1 percent rate at the start of the year.

The saving rate fell to 4.8 percent from 5.2 percent.

ENERGY DRAG PERSISTS

Housing also supported the economy in the second quarter, as did exports, and state and local government spending.

However, the energy sector continued to weigh on growth as it struggles with the lingering effects of deep spending cuts by oil-field companies like Schlumberger (SLB.N) and Halliburton (HAL.N) in the aftermath of a more than 60 percent plunge in crude oil prices last year.

Business spending on structures fell at a 1.6 percent rate after stumbling 7.4 percent at the start of the year. Investment on equipment fell at a 4.1 percent rate.

Spending on mining exploration, wells and shafts plunged at a 68.2 percent rate, the largest decline since the second quarter of 1986. This category dropped at a 44.5 percent pace in the first quarter.

But there are signs that the energy spending rout might be nearing an end. Data last Friday showed U.S. energy firms added 21 oil rigs last week, marking the third increase over the past 33 weeks.

Schlumberger said last week it believed the North American rig count may be bottoming and that a slow rise in both land drilling and completion activity could occur in the second half of the year.

Exports rebounded in the second quarter, despite a strong dollar, while imports rose moderately. That left a smaller trade deficit that added 0.13 percentage point to GDP growth.

Inventory investment slowed after the first quarter's brisk pace. Businesses accumulated $110.0 billion worth of merchandise, down from $112.8 billion in the first quarter, good news for the remainder of the year.

With oil prices rising during the second quarter and consumer spending picking up, inflation accelerated sharply.

The personal consumption expenditures price index rebounded at a 2.2 percent rate, the fastest since the first quarter of 2012, after falling at a 1.9 percent rate at the start of the year. Excluding food and energy, prices increased at a 1.8 percent pace.  — Reuters

Obama administration overturns ban on some iPad, iPhones

WASHINGTON - The Obama administration has overturned a U.S. trade panel's ban on the sale of some older iPhones and iPads, reversing a ruling that had favored Samsung Electronics Co Ltd over Apple Inc in their long-running patent battles.

The U.S. International Trade Commission in June banned the import or sale of the iPhone 4, iPhone 3GS, iPad 3G and iPad 2 3G distributed by AT&T Inc, saying the devices infringed a patent owned by the South Korean electronics giant.

U.S. Trade Representative Michael Froman on Saturday vetoed the ban, saying his decision was in part based on its "effect on competitive conditions in the U.S. economy and the effect on U.S. consumers." He said Samsung could continue to pursue its case through the courts.

Samsung said it was "disappointed" at the lifting of the ban. "The ITC's decision correctly recognized that Samsung has been negotiating in good faith and that Apple remains unwilling to take a license," it said in a statement.

Apple welcomed the news and applauded the administration "for standing up for innovation." It added, "Samsung was wrong to abuse the patent system in this way."

The Apple products targeted by the ITC ban are more than a year old, though some models such as the iPhone 4 remain solid sellers. Apple sells more than 100 million iPhones annually, but it does not break down sales by models.

Apple and Samsung have been waging a global patent war since 2010, filing multiple lawsuits against each other over the design and functionality of their devices.

This ITC ban is specific to a Samsung patent on technology that allows devices to transmit multiple services simultaneously and correctly through 3G wireless technology.

Such patents are called "standard essential patents" and they cover technology that must be used to comply with standards set by industry organizations.

The Obama administration has been pressing for most infringements of standard essential patents to be punished by monetary fines instead of sales injunctions.

Froman on Saturday said the ITC should thoroughly examine the public interest ramifications of its rulings in disputes over standard essential patents.

Designed to be a trade panel, the ITC has become a popular venue for patent lawsuits because it acts relatively quickly and can order import bans, which are more difficult to get from district courts.

While the ITC was created to ensure that U.S. companies can compete fairly against imports, a number of foreign companies with U.S. manufacturing plants have filed patent complaints with the agency. Samsung has a plant in Austin, Texas.

ITC cases can be appealed to the U.S. Court of Appeals for the Federal Circuit, and from there to the Supreme Court.

Apple has a parallel complaint filed against Samsung at the ITC, accusing the South Korean company of copying the iPhone and iPad. An ITC judge in that case found that Samsung had violated four out of six patents listed in the complaint. A final decision is due in August.

Samsung makes phones that run on Google Inc's Android operating software, the market leader. Apple has also sued other Android phone makers including HTC Corp for patent infringement.

The case at the International Trade Commission was No. 337-794.  — Reuters

source: gmanetwork.com

U.S. consumer inflation stabilizing, industrial output up

WASHINGTON - U.S. consumer prices accelerated in June and underlying inflation pressures showed signs of stabilizing, keeping on track expectations the Federal Reserve will start tapering its bond purchases later this year.
   
Other data on Tuesday showed industrial production pushed higher in June as manufacturing output found some momentum, raising hope a recent slowdown in factory activity was either over or close to running its course.
   
The Labor Department said its Consumer Price Index increased 0.5 percent, the largest rise since February, after nudging up 0.1 percent in May. Gasoline prices accounted for about two thirds of the increase in the CPI.
   
Economists polled by Reuters had expected consumer inflation to increase 0.3 percent last month.
   
In the 12 months through June, consumer prices advanced 1.8 percent after rising 1.4 percent in May. It was also the largest increase since February.
   
Stripping out volatile energy and food, consumer prices increased 0.2 percent for a second straight month. That took the increase over the 12 months to June to 1.6 percent, the smallest increase since June 2011. The so-called core CPI had increased 1.7 percent in May.
   
While both inflation measures remain below the Federal Reserve's 2 percent target, details of the report suggested the recent disinflation trend was fading, with medical care costs rising. Prices for new motor vehicles, apparel and household furnishings also increased.
   
Fed Chairman Ben Bernanke, who last month said the central bank would start cutting back the $85 billion in bonds it is purchasing each month to keep borrowing costs low, has viewed the low inflation as temporary and expects prices to push higher.
   
Alan Ruskin, an analyst at Deutsche Bank in New York, said the report should "counter arguments that there is a material deflation risk."
   
In a separate report, the Fed said output at the nation's factories, mines and utilities rose 0.3 percent last month after a flat reading in May. The increase reflected a 0.3 percent rise in manufacturing output.
  
Economists said it suggested some pickup in economic activity at the end of the second-quarter.
  
"If manufacturing growth is on the verge of accelerating into the second half of the year, this, along with solid gains in housing, should support growth in the second half of 2013," said John Ryding, chief economist at RDQ Economics in New York.
   
Prices creeping up
   
Tepid economic growth has been keeping a lid on inflation pressures. While some pockets of pricing power are starting to gradually emerge, there is no consensus on whether this trend will hold, given still-high unemployment.
   
Last month, gasoline prices soared 6.3 percent after being flat in May. June's increase in the cost of gasoline was the largest since February. When unadjusted for seasonal fluctuations, gasoline prices rose only 0.6 percent.
   
Food prices increased 0.2 percent after slipping 0.1 percent the prior month.
   
Overall housing costs maintained their steady rise, with owners' equivalent rent - which accounts for about a third of the core CPI - increasing 0.2 percent after a similar gain in  May.
   
Medical care services rose 0.4 percent after being flat in May, while medical care commodities rebounded 0.5 percent as the cost of prescription drugs increased. Medical care commodities had dropped 0.5 percent the previous month.
   
Weak medical care costs have been the one of the key contributors to the low inflation rate.
   
Economists cite a host of reasons for the downward pressure on health costs, ranging from the expiration of patents on a number of popular prescription drugs to government spending cuts that are reducing payments to doctors and hospitals for Medicare.
   
"It's unclear we have seen all the medical care softness or we might see softness later this year from the effect of sequester," said Laura Rosner, an economist at BNP Paribas in New York.
   
Apparel prices pushed up 0.9 percent, the largest increase since August 2011, after edging up 0.2 percent in May.

New motor vehicle prices increased 0.3 percent. They had been flat in May. Prices for used cars and trucks fell for a second straight month. — Reuters

source: gmanetwork.com

PayPal Says Study Shows Support For Mobile Wallets

PayPal says a study it commissioned last month refutes those who say mobile wallet adoption is lagging.

In a survey of consumers in the U.S., Britain, Canada, Germany and Australia, 83% of respondents said they wished they didn't have to carry physical wallets.

Anuj Nayar, PayPal's senior director of communications, says the point of the study is not about replacing cash or credit cards with a "mobile wallet" payment method.


"It's about eliminating (payment) friction points that stop you from getting what you want," Nayar said. "Consumers aren't looking for new ways to pay in stores. But they are looking to have technology solve real world problems such as standing in line to order, tracking receipts and managing things like loyalty and gift cards."

The study from eBay -owned PayPal found 29% of U.S. respondents said they'd elect to carry a payments-enabled smartphone, or mobile wallet, over a physical wallet if they had to choose just one.

Nayar points to many pluses with a mobile wallet. For one, "you can pre-order your lunch from a meeting and not have to wait in line."

Many Stores Not Ready
But some obstacles to mobile wallet adoption surfaced in the PayPal study. Two-thirds of U.S. consumers said they had been unable to pay for a purchase at a store at least once because they forgot their wallets, with 30% saying this has happened to them often. PayPal says this shows many businesses still don't offer customers a mobile wallet payment alternative.

But the study found mobile wallets becoming more attractive because of changing lifestyles, such as greater use of smartphones.

Gyms and health clubs were at the top of the list of places that respondents wished were wallet-free. Canadians were most interested in going wallet-less at bars. Germans and Americans were most keen on attending concerts and sports events sans wallets.

Laundromats, grocery stores and restaurants also were high on mobile-wallet-option wish lists.

Mobile-wallet technology has a ways to go, however.

Mobile wallets, for now, can't do in an "easily accessible way" all the things that regular wallets do for consumers, says Ginger Schmeltzer, senior vice president of emerging payments for financial services and tech provider Fiserv.

Besides carrying credit cards, debit cards and cash, physical wallets also hold important personal identification and other items that digital wallets generally don't.

Schmeltzer says the day may come when most personal items can be loaded on smartphones and people don't carry any physical wallet, just their phone.

"People are ready to try something that will dematerialize the size of their physical wallet," said Sylvain Maquet, a partner in the New York office of Greenwich Consulting, who follows this field.

PayPal's Nayar notes that mobile wallet use tends to be identified with smartphones, but he stresses that any Internet-enabled device can serve as a digital wallet. This could include smartwatches and other wearable computers, or even cars that can pay for gas by passing through a gas station reader.

PayPal is pushing hard for mobile wallet payment services, as a way to boost its revenue.

Many PayPal Programs

The company launched Cash for Registers in May. The program, which it will phase in gradually, gives merchants an electronic point-of-sale service option, which lets them accept credit, debit cards, checks and PayPal payments.

Participating retailers can use PayPal Here or another checkout payment system offered by one of PayPal's partners such as Leaf, ShopKeep and VeriFone.

PayPal Here uses a dongle or swipe reader that lets merchants accept credit cards, checks and PayPal payments on the merchant's iPhone, iPad or Android device, so merchants can process payments anywhere, not just at the checkout counter.

PayPal says it will waive fees for merchants for the remainder of 2013 as an inducement to joining Cash for Registers.

PayPal also offers a cashless alternative called Check In, in which consumers can pay with just a few clicks and a picture of their face rather than a wallet.

Launched in May 2012, Check In is available at some stores. When users walk into a participating store, a mobile app on their smartphone alerts the store's PayPal Check In system that they're there. You buy what you want and when you go to the checkout register, the store's Check In system shows the register clerk a photo of your face that's been called up by the system. Once the clerk sees your face matches the photo, the funds to pay for your purchases are automatically deducted from your PayPal account and you take your goods home, never having to take out your wallet.

Consumers also will be able to use PayPal's Order Ahead service with their PayPal app in certain areas of the U.S. to pre-order and have their item waiting for them at a store, already paid for. Launched in January, Order Ahead is being tested at some Jamba Juice outlets. For quick service, users can touch an app on their smartphones to order ahead and say when they'll pick up the order, then have the transaction processed via PayPal before they get to the Jamba Juice outlet.

source: news.investors.com