banking and finance

Thursday, 14 August 2014

Ferguson's economy: Tough times, but with signs of progress

By Chris Isidore @CNNMoney August 14, 2014: 3:54 PM ET

Economic conditions in Ferguson, Missouri, are far more complex than the scenes of violence over the killing of a black teenager might imply.

Things are tough for many residents of the city just outside St. Louis' Lambert International Airport. But it's also home to the bucolic campus headquarters of a Fortune 500 company:Emerson Electric (EMR).

Despite the economic problems, Ferguson's housing stock is in relatively good shape. The vacancy rate is modest, in line with the rest of Missouri and far lower than many troubled inner cities.

There has been recent investment and renovation in the business district, with new restaurants, retail and other buildings developed in recent years, according to Rebecca Zoll, CEO of North County Inc., the regional economic development association.

"Ferguson's downtown area has actually become a model for redevelopment in older downtowns," she said.

"I think the entire community leadership is concerned. Our hearts are broken," Zoll added. "But I think that once the community begins to heal, we have confidence that the customer base will return."

Many Ferguson residents live in poverty -- about one in five, according to the most recent government estimates from two years ago. The median household income of $37,000 was about $10,000 less than Missouri as a whole.

African-Americans make up two-thirds of the population. And, on average, they're much worse off economically, with a 25% poverty rate that's more than twice that of whites. Their median income is only about 60% of their white counterparts.

The mayor, James Knowles, lives in a home he bought out of foreclosure and is renovating. But the foreclosure rate has plunged even faster than the rest of the nation since the worst of the housing crisis six years ago.

In 2008, the rate was about 1 in every 118 homes in Ferguson, according to RealtyTrac, which follows foreclosures. That was about four times the national rate. Today, one in every 1,283 homes is in foreclosure, close to the national average.

Why Anonymous released Ferguson police name

Emerson, with more than 1,000 employees at its headquarters in the south part of town, is one of the two largest employers in the city, The other is a campus of St. Louis Community College.

But there are also many growing employers nearby due to the close proximity to the airport. Drug benefits provider Express Scripts' (ESRX) headquarters and fulfillment center are just outside of town, and the company is adding another building to its complex. Boeing(BA) also does some manufacturing near the airport

Singapore GDP Unexpectedly Expands as Outlook Improves: Economy By Sharon chen

Singapore’s economy unexpectedly expanded last quarter as manufacturing declined less than initially estimated amid recoveries in advanced countries.

Gross domestic product rose an annualized 0.1 percent in the three months through June from the previous quarter, when it climbed a revised 1.8 percent, the trade ministry said in a statement today. That compares with a July estimate of a 0.8 percent contraction and the median forecast in a Bloomberg News survey of 14 economists for a 0.3 percent drop.

“While global growth in the first quarter of the year turned out weaker than expected, recent incoming data suggest that global economic activities are recovering modestly,” the trade ministry said. Externally-oriented sectors such as finance, insurance and wholesale trade are likely to support expansion in the second half, it said.

The export-dependent Southeast Asian nation is set to benefit from a recovery in global growth, which is helping to offset higher business costs as the government pursues a plan to slow the inflow of foreign workers, boost productivity and attract new industries. The U.S. economy is improving, the euro area will benefit from an accommodative monetary policy and China has taken steps to support expansion, Singapore’s trade ministry said.

“Given the slowly improving external demand for both goods and services, led by developed economies, Singapore should be on track to achieve GDP growth of about 3 percent this year,” saidSong Seng Wun, a regional economist at CIMB Research in Singapore. Even so, “the still uneven labor productivity performance suggests much work needs to be done.”

Manufacturing Decline

The Singapore dollar gained as much as 0.1 percent after the report. It traded little changed at 1.2502 against the U.S. currency as of 10:51 a.m. local time.

The economy expanded 2.4 percent in the second quarter from a year earlier, after growing a revised 4.8 percent in the previous three months, the trade ministry said today. The median estimate in a Bloomberg survey was for a 2.3 percent gain.

Manufacturing declined 15.2 percent in the second quarter from the previous three months, compared with a July estimate of a 19.4 percent contraction. Services rose 4.5 percent in the same period, while construction gained 0.3 percent.

The ministry reiterated Prime Minister Lee Hsien Loong’s Aug. 8 forecast for 2014 growth of 2.5 percent to 3.5 percent. Separately, the estimate for non-oil domestic exports was cut to a contraction of between 1 percent and 2 percent, from an increase of 1 percent to 3 percent previously.

Labor Constraints

The GDP forecast, which is narrower than an earlier prediction of 2 percent to 4 percent, factors in downside risks from the global economy, Ow Foong Pheng, permanent secretary at the trade ministry, told reporters today. Singapore will monitor geopolitical risks, she said.

The central bank’s policy stance remains appropriate and unchanged, said Jacqueline Loh, deputy managing director at the Monetary Authority of Singapore. The city state, which uses the island’s dollar to manage price pressure, said in April it will maintain a modest and gradual appreciation of the currency.

While domestically-oriented sectors such as business services and information and communications are expected to remain resilient in the second half of the year, growth in some labor-intensive segments such as retail and food services may be weighed down by labor constraints, the trade ministry said.

“Growth momentum going forward will be tepid,” Irvin Seah, an economist at DBS Group Holdings Ltd. in Singapore, said in a note. “The economy continues to be weighed down by the domestic restructuring and external uncertainties. Manufacturing has bottomed but the services sector remains a risk.”

Antarctica May Lift Sea Level Faster in Threat to Megacities

Photographer: Michel Setboun/Getty Images

Antarctica glaciers melting because of global warming may push up sea levels faster than previously believed, potentially threatening megacities including New York and Shanghai, researchers in Germany said.

Antarctica’s ice discharge may raise sea levels as much as 37 centimeters (14.6 inches) this century if the output of greenhouse gases continues to grow, according to a study led by the Potsdam Institute for Climate Impact Research. The increase may be as little as 1 centimeter, they said.

“This is a big range, which is exactly why we call it a risk,” Anders Levermann, the study’s lead author, said in a statement. “Science needs to be clear about the uncertainty so that decision-makers at the coast and in coastal megacities can consider the implications in their planning processes.”

The Antarctic ice sheet contains enough water to raise sea levels by over 58 meters (190 feet) though even at the current rate of warming it would take thousands of years to melt, according to the United Nations.

The southern continent contributed on average about 0.3 millimeters per year to sea-level rise from 1993 through 2010 -- or about 10 percent of the yearly total, the UN says. NASA said in May that the glacier melt in the Amundsen Sea region of Western Antarctica may have become “unstoppable.”

Photographer: Vanderlei Almeida/AFP/Getty Images

‘Significantly Higher’

In the U.S., climate change has moved up the political agenda after President Barack Obama made cutting climate-warming emissions a central goal of his second term.

The Potsdam institute’s projections for this century’s sea level contribution are “significantly higher” than the latest upper-end projections from the Intergovernmental Panel on Climate Change, it said.

A Global Push to Save the Planet

Even a scenario with ambitious climate policies to cap warming to 2 degrees Celsius (3.6 degrees Fahrenheit) since industrialization, the contribution of Antarctica to global sea level rise covers a range of 0 to 23 centimeters, it said. The 2-degree threshold has been agreed on as a target by 194 nations involved in climate treaty talks and compares with the current trajectory that theUnited Nations predicts will lead to warming of at least 3.7 degrees Celsius.

“Earlier research indicated that Antarctica would become important in the long term,” Levermann said. “But pulling together all the evidence, it seems that Antarctica could become the dominant cause of sea level rise much sooner.”

Brazil’s Real Falls on Speculation Fed Will Lift Interest Rates

Brazil’s real fell a day after the central bank extended an intervention program to support the currency as signs the U.S. economy is improving bolstered wagers the Federal Reserve will begin raising interest rates.

The real declined 0.1 percent to 2.2770 per dollar in Sao Paulo. Swap rates, a gauge of expectations for interest-rate moves, dropped five basis points, or 0.05 percentage point, to 11.69 percent on contracts maturing in January 2018.

The dollar rose against most developing-nation currencies before data scheduled for release tomorrow that economists predict will show U.S. retail sales grew for a sixth month. There’s about a 79 percent chance the Fed will raise its benchmark rate to at least 0.5 percent by October next year, futures trading shows. Yesterday, Brazil’s central bank started to extend the maturity of 10,000 currency swap contracts to support to the currency, up from 8,000 available in prior auctions.

“Recent numbers regarding the American economy have been showing an improvement, which makes the dollar strengthen relative to its global counterparts,” Cristiano Oliveira, the chief economist at Banco Fibra SA, said in a telephone interview.

The program of currency swaps to support the real and limit import price increases has helped push the currency up 3.7 percent this year after tumbling 13 percent in 2013. Today, the central bank sold swaps worth $198.8 million under the intervention due to expire in December.

The daily intervention program has been crucial to avoid an abrupt devaluation of the real, according to Oliveira. Brazil’s currency dropped 1.1 percent last week as turmoil in Iraq sank demand for emerging-market assets.

Lowest Forecast

Latin America’s biggest economy will expand 1.2 percent in 2015, according to the median forecast in a central bank survey of about 100 analysts published yesterday. That’s the lowest estimate since the start of data collection in January.

The national statistics agency reported last week that the annual increase in consumer prices slowed to 6.5 percent in July from 6.52 percent in the prior month. The official target range is 4.5 percent plus or minus 2 percentage points.

Policy makers held the target lending rate last month at 11 percent for a second straight meeting after nine consecutive increases to curb inflation.

Capital Spending Signals Sluggish U.S. Economy

Capital spending by U.S. companies has been hampered by “a traumatized economy” and will require more time to rebound, according to Milton Ezrati, a partner at Lord Abbett & Co.

The CHART OF THE DAY illustrates how Ezrati drew his conclusion, presented in a note two days ago. He tracked the percentage gap between outlays and depreciation expenses among domestic businesses, as compiled by the Commerce Department.

Last quarter’s spread, 27.7 percent, was the widest since the current economic expansion started five years ago. Even so, it was only 0.2 percentage point higher than the average during the previous period of growth, from 2002 to 2007.

“This is a very different and much less robust picture than in the economy’s past,” Ezrati wrote. The shift reflects the legacy of the 2007-2009 recession and financial crisis and the federal government’s policy response, the note said.

“These retarding forces will change only slowly at best,” the Jersey City, New Jersey-based senior economist and market strategist wrote. In the meantime, capital spending may expand no faster than it has in recent years, he wrote.

Spending on buildings, equipment and other capital items during the second quarter totaled $2.24 trillion at an annual rate. Depreciation, an accounting charge taken to reflect the wear and tear on assets, amounted to $1.75 trillion.

Gold Futures Advances as Jobless Claims Top Estimates

Gold futures advanced for the third straight session as U.S. jobless claims rose more than forecast, tempering optimism on the labor market and spurring speculation that interest rates will remain low.

Jobless claims climbed by 21,000 to 311,000 in the week ended Aug. 9, the highest in six weeks, government data showed today. The median forecast of 48 economists surveyed by Bloomberg called for 295,000.

This year, gold has gained 9.4 this year as conflicts in the Middle East and Ukraine boosted demand for the metal as a haven. The price also advanced amid signs of an uneven recovery in the U.S economy.

“Concerns about the labor market are back,” Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago, said in a telephone interview. “Also, safe-haven bids continue to come in because of the geopolitical developments.”

Gold futures for December delivery rose 0.1 percent to settle at $1,315.70 an ounce at 1:33 p.m. on the Comex in New York. Earlier, the price climbed as much as 0.6 percent. On Aug. 8, the metal reached $1,324.30, the highest since July 18.

Last year, gold tumbled 28 percent, the most in three decades, as U.S. equities rallied to a record and inflation remained muted amid speculation that the Federal Reserve would taper the pace of monetary stimulus.

Silver futures for September delivery rose 0.3 percent to close at $19.906 an ounce on the Comex.

On the New York Mercantile Exchange, palladium futures for September delivery added 0.5 percent to $886.15 an ounce. The price climbed for the seventh straight session, the longest rally since July 8.

Platinum futures for October delivery fell less than 0.1 percent to $1,469.20 an ounce.

Russia Truce Plan at Odds With Reports on APC Movements

Russia proposed a cease-fire for humanitarian aid deliveries to war-torn parts of southeastern Ukraine as a convoy of aid trucks from Moscow waited near the border with rebel-held areas.

Even as Russia struck a conciliatory note, news outlets including Novoye Vremya and Hromadske TV reported seeing armored personnel vehicles crossing into Ukraine. The government in Kiev has been saying for months that the separatist rebels are receiving reinforcements from Russian territory. The government in Moscow has repeatedly denied any involvement in the unrest.

The dispute over the Russian convoy, which the leadership in Moscow says is carrying emergency supplies, has stoked tensions between the two countries and has prompted the U.S. and the European Union to warn Russia against using aid as a pretext for a military intervention. Russia says the supplies are needed to help citizens of Luhansk and Donetsk, where fighting has cut off water and power connections.

“The extremely difficult situation in southeastern Ukraine demands a cease-fire,” the Russian Foreign Ministry said on its website yesterday in its proposal to separatists and the Ukrainian government. The ministry said such a suspension was “necessary to guarantee the safety of the humanitarian operation.”

Russian President Vladimir Putin, whose country has been under increasing international pressure for supporting separatists in Ukraine, pledged during a visit to Crimea that he would work to halt the conflict.

Border Crossing

Even so, a column of a “few dozen” APCs and other military vehicles crossed into Ukraine’s rebel-held territory from Russia last night, according to a correspondent with Novoye Vremya, or New Times, in the border region.

A call to Russian Defense Ministry spokesman Vladimir Anikin outside office hours went unanswered. Major General Igor Konashenkov, another spokesman for the ministry, declined to comment. Ukrainian authorities are checking the information, Vladyslav Seleznyov, a spokesman for the country’s military, told Interfax-Ukraine.

Crimea Peninsula

Putin, visiting the Crimea peninsula he annexed from Ukraine in March, said that Russia shouldn’t isolate itself and that he would try to stop the fighting that’s flared for months between pro-Russian separatists and government forces, killing more than 1,500 people, according to United Nations estimates. The U.S and the EU have slapped sanctions on Russian businesses and individuals, and Ukraine’s parliament passed a bill yesterday allowing similar measures.

“We will do all we can so this conflict comes to an end as soon as possible and the bloodshed in Ukraine comes to an end,” Putin said in a meeting with political leaders in the city of Yalta. “The situation is becoming more dramatic by the day. The country has immersed itself in bloody chaos, a fratricidal conflict.”

Putin and European Commission President Jose Barroso agreed by telephone yesterday to meet in person to discuss relations between Russia and the EU, the Kremlin said in an e-mailed statement. The time and place of the meeting have yet to be set.

Russia sent the convoy of about 280 trucks earlier this week. The government in Kiev says the aid distribution must be under the auspices of the International Committee of the Red Cross.

The Russian convoy turned west toward Ukraine at Kamensk-Shakhtinsky, about 40 kilometers (25 miles) by road from the border, the Associated Press reported. The trucks parked in a field, according to a BBC reporter following them.

Rostov Region

The international Red Cross said in a Twitter posting that the Russian convoy was in that country’s Rostov region and that “many practical details are still to be clarified.” Russian news media said the fleet of trucks was preparing to camp there.

Russian Foreign Minister Sergei Lavrov spoke with his Ukrainian counterpart, Pavlo Klimkin, by telephone yesterday, the ministry in Moscow said in a statement on its website. The two discussed the need to deliver humanitarian aid safely to affected areas, the ministry said.

Meanwhile, the government in Kiev sent its own convoys with supplies.

Three Ukrainian convoys left government-controlled areas yesterday for the Luhansk region, one of two where the army is encircling the rebels and where the fighting has cut water and power supplies.

Ruble Strengthened

The Micex Index increased 0.6 percent in Moscow yesterday, taking its five-day advance to 5.6 percent. The ruble strengthened to 35.9365 per dollar and the yield on 10-year Russiangovernment bonds declined seven basis points to 9.3 percent.

Ukraine’s currency, the hryvnia, gained 1.5 percent to 12.9500 per dollar.

Anders Fogh Rasmussen, the secretary general of the North Atlantic Treaty Organization, on a trip to Norway said what is needed from Russia is action.

“We have seen a strong Russian hand in destabilizing eastern Ukraine,” Rasmussen said at a press conference in the southern town of Arendal. “We urge Russia to pull back its troops, to stop the flow of weapons and fighters across the border, to stop the support of the separatists, to engage a constructive political dialogue.”

Damaged Buildings

Laurent Corbaz, the international Red Cross head of operations for Europe, will travel to Kiev and Moscow “soon,” with the Russian convoy on the agenda for discussions, the Geneva-based organization said by e-mail yesterday. “He will hold meetings with senior officials to reinforce the ICRC’s strictly humanitarian role and stress that the delivery of aid into eastern Ukraine should not be politicized.”

Two buildings in Donetsk containing shopping malls were damaged by shelling early yesterday, a city council spokeswoman, Yuliya Babenko, said by phone. Emergency workers were on the scene and public transport was halted in the city center. Shelling also damaged buildings in the Kuybyshev district, killing at least two civilians, she said.

The military has urged people to leave Donetsk and Luhansk as it seeks to complete the encirclement that would shut routes to the Russian border and sever separatist supply lines. About half of the cities’ 1.5 million residents have fled, while most shops are closed.