WEEK OF JULY 21 - 27
Data Expected to Show Signs of Improvement
Though the nation’s jobless rate remains stubbornly high, economists are expecting a crop of indicators this week that suggest signs of economic improvement in June, including a rise in spending by cautious corporations and continued strength in home sales.
In addition, many economists anticipate reports indicating whether the economic momentum will head into the second half of the year.
Meanwhile, consumer spending showed few signs of abating -- retail sales rose more than expected last month and are projected to post healthy gains again Tuesday when stores report weekly sales data.
Business spending, however, has been slower to rise. But economists see indications that corporations are starting to loosen their purse strings.
“You are starting to get some traction in overall” business spending, said Cary Leahey, a senior economist at Deutsche Bank Securities in New York. “That and jobs are the only two missing linchpins for sustainability” in economic growth.
With inventories low, rising demand is prompting increases in production that may lead to more corporate spending on new equipment, an element that has been missing during this recovery.
“We are already getting some orders through the September quarter, which is unheard of through the last two years,” said Thurman Rodgers, chief executive of San Jose-based Cypress Semiconductor Inc., which makes chips used in Sony Corp.’s PlayStation 2 consoles and in wireless devices and computers. “We are seeing customer inventories being very low.”
Housing continues to benefit from low mortgage rates. The average rate on a 30-year fixed mortgage fell to 5.21% in June, the lowest since Freddie Mac, the No. 2 buyer of U.S. mortgages, started keeping records in 1971. The rate was 6.54% a year ago.
Sales of houses are leading to related spending on such items as furniture and appliances, contributing to economic growth.
Here’s a summary of key business reports due out this week:
Today:
* The Conference Board, a New York-based research group, reports its gauge of leading indicators, which projects how the economy is likely to perform in the next six months.
Thursday:
* The Labor Department releases initial claims for jobless benefits. Last week represented the 22nd straight week for claims that exceeded 400,000, a level economists say suggests a weak labor market.
Friday:
* Two reports will be released on the nation’s housing industry for June. The National Assn. of Realtors will post sales of existing homes, while the Commerce Department will report sales of new homes.
* Commerce releases June durable goods orders.
From Bloomberg News
*
Retirement Account Laws to Be Weighed
Congress could take up legislation this week that would let Americans put more tax-deferred income into personal retirement accounts and allow corporations to set aside less to cover their defined benefit pension obligations to retirees.
The legislation, sponsored by Reps. Rob Portman (R-Ohio) and Benjamin L. Cardin (D-Md.), also would change a rule under which individuals must start withdrawing money from their retirement accounts at age 70 1/2. Reflecting that Americans now live longer, the new age would be 75.
It would speed up already planned increases in retirement account contribution limits. Individuals would be allowed to put up to $5,000 each year in individual retirement accounts and up to $15,000 in 401(k) accounts beginning in 2004.
The argument that companies are forced to pay too much into plans comes as the Pension Benefit Guaranty Corp. warns that more than half of the nation’s 32,000 traditional defined benefit plans are underfunded by a total of $300 billion.
From Associated Press
*
WTC Leaseholder Suit Goes to Appeals Court
The biggest corporate dispute to emerge from the Sept. 11 attacks reaches a critical stage Tuesday as World Trade Center leaseholder Larry Silverstein takes his battle with insurers to a federal appeals court.
Lawyers for Silverstein say he is entitled to about $7 billion in insurance payouts, double the value of his policy, because the destruction of the Twin Towers by two airplanes represents two separate events under terms of the coverage.
Silverstein’s 20 or so insurers, led by Swiss Reinsurace Co., counter that the attacks formed a single coordinated event, worth only one claim of about $3.5 billion. That amount would be insufficient to both rebuild the complex and recoup lost rent.
A three-judge panel at the U.S. Circuit Court of Appeals for the 2nd Circuit is to listen to arguments from both sides Tuesday morning in New York.
The suit has been complicated because details of the insurance coverage were not completed on Sept. 11, 2001, when two hijacked jets crashed into the two towers, killing more than 2,800 people. Silverstein had signed a lease on the property only six weeks before.
From Reuters
*
Trade Ministers May Urge Yuan Be Revalued
China may face new calls to let its currency rise when 25 trade ministers from Europe and Asia meet in its eastern port city of Dalian for a three-day gathering on economic cooperation that starts today.
With millions of people seeking work as the economy shifts from state control to private enterprise, China needs a weak currency to keep exports flowing, raise household incomes and avoid political unrest, analysts say.
That means it is likely to resist any early move to revalue the yuan’s 8-year-old fixed exchange rate of 8.3 yuan to the U.S. dollar. Thanks to the peg, the yuan has tracked this year’s 7.3% decline of the dollar against major currencies, making China’s goods more competitive.
But Japanese Finance Minister Masajuro Shiokawa has called for the yuan to rise, and U.S. Federal Reserve Chairman Alan Greenspan told Congress a week ago it is undervalued.
From Bloomberg News
