That could be a sign that true inflation is rising much faster than the government statistics indicate.

Consumers increase their borrowing in March at the fastest pace in 4 months

WASHINGTON (AP) -- Consumer borrowing rose in March at the fastest pace in four months, more than double the increase of the previous month, in what was seen as a sign of rising economic stress.

The Federal Reserve reported Wednesday that consumers increased their borrowing at an annual rate of 7.2 percent, compared with a 3.1 percent rate of increase in February.

The gain was much larger than economists had been expecting and reflected strong borrowing on credit cards and also in the category that includes auto loans. The increase in consumer debt totaled $15.3 billion at an annual rate in March, much bigger than the $6 billion increase that economists had been expecting.

Economists said consumers were being forced to make greater use of their credit cards during hard economic times when they are being battered by job losses, soaring gasoline prices and higher food costs.

"This represents distressed borrowing. Consumers need cash and they have turned back to their credit cards to fill the void left by lost jobs and weaker incomes," said Mark Zandi, chief economist at Moody's Economy.com.

Borrowing on credit cards was up at an annual rate of 7.9 percent, compared to a 5 percent gain in February, while borrowing in the category that includes auto loans jumped by 6.8 percent, compared to a 2 percent increase in February.

The overall growth in debt of 7.2 percent at an annual rate was the biggest gain since an increase of 8.25 percent last November.

Consumers have been moving to put more of their purchases on their credit cards as banks have tightened lending standards for home equity loans in response to the deepening credit crisis.

The Fed's measure of consumer borrowing, which does not include any debt secured by real estate such as mortgages or home equity loans, stood at a record $2.558 trillion in March.

Posted by Muhammed El-Hasan at 9:26 PM | Permalink | Comments (0)

But why don't we feel richer?

Worker productivity up at 2.2 percent rate in first quarter

WASHINGTON (AP) -- Worker productivity rose by a better-than-expected amount in the first three months of the year while labor cost pressures eased.
The Labor Department reported Wednesday that productivity, the amount of output per hour of work, increased at an annual rate of 2.2 percent in the first quarter. That was slightly higher than the 1.5 percent increase that had been expected.

In a sign that inflation could be easing, labor cost pressures slowed a bit. Unit labor costs rose at an annual rate of 2.2 percent, down from a 2.8 percent rise in the final three months of last year.

While rising wages and benefits are good for employees, those increases can lead to higher inflation if businesses are forced to boost the cost of their products to cover the higher payroll costs.

However, if productivity is increasing, it allows businesses to finance higher wages out of the increased output.

The Federal Reserve, always on guard about the threat of inflation, closely monitors developments in productivity since wage pressures are often the main way inflation gets out of control.

The Fed last week boosted a key interest rate for the seventh time since September, but the increase was a smaller quarter-point move and the Fed signaled that it may pause its rate cutting campaign in part because of concerns about inflation.

Analysts read the bigger-than-expected rise in productivity and the smaller increase in unit labor costs as a good sign that inflation pressures, at least on the labor front, are remaining under control and the country is not facing the danger of a wage-price spiral.

"There is certainly nothing to worry about here from a cost-push inflation perspective," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

On Wall Street, stocks tumbled Wednesday as investors grew concerned about what the relentless rise in oil prices may do to economic growth. Oil climbed to a record near $124 per barrel. The Dow Jones industrial average fell 206.48 points to close at 12,814.35.

Many analysts think the country has already toppled into a recession. But overall economic growth, as measured by the gross domestic product, eked out a tiny 0.6 percent rate of increase in the first three months of the year, the same anemic pace as the final three months of last year.

Treasury Secretary Henry Paulson, in an interview with The Associated Press, said the rise in gasoline prices would blunt to some extent the boost the administration is hoping the economy will receive from the 130 million economic stimulus payments that are being sent out currently.

"Obviously, the high price of gasoline is unwelcome and is a challenge and is a headwind," Paulson said, while still predicting that the stimulus payments will help economic growth to pick up in the second half of this year.

In other economic news, the Federal Reserve said consumer borrowing shot up at an annual rate of 7.2 percent in March, the fastest gain in four months and about double what had been expected. However, the big increase was seen as a sign that consumers are being forced to borrow more because of the weak economy.

"This represents distressed borrowing. Consumers need cash and they have turned back to their credit cards to fill the void left by lost jobs and weaker incomes," said Mark Zandi, chief economist at Moody's Economy.com.

The rise in productivity in the year's first three months occurred as the number of hours worked declined at an annual rate of 1.8 percent.

That reflected layoffs that have occurred as businesses cut back on their payrolls in the face of an economic slowdown triggered by a steep slump in housing and a severe credit crunch that has resulted in billions of dollars of losses from financial firms.

The 2.2 percent rate of productivity growth in the first quarter was up slightly from a 1.8 percent increase in the fourth quarter of last year.

Productivity for all of 2007 rose by 1.8 percent, up a bit from the 1 percent gain in 2006. However, both of those increases were far below growth levels of the past decade as productivity experienced a healthy rebound, reflecting all the investments made in productivity-enhancing equipment such as computers.

Posted by Muhammed El-Hasan at 2:49 PM | Permalink | Comments (0)

Scottrade, the online investment firm that also serves customers at its branch offices, said it will open a location in El Segundo.

The branch, located at 831 N. Douglas St. at the Edge at Campus El Segundo, opens on Monday, May 12.

The branch will be managed by Richard Chun, who has 24 years of financial services experience.

Scottrade's other nearby offices are in Torrance and Santa Monica.

Posted by Muhammed El-Hasan at 11:30 AM | Permalink | Comments (0)

DirecTV share rose 93 cents, or 3.6%, in morning trading.

DirecTV profit rises 10 pct on demand for high-def service

(AP) El Segundo-based satellite television company DirecTV said Wednesday its first-quarter earnings rose 10.4%, as it acquired more subscribers in the U.S. and Latin America and customers spent more on high-definition and video recording services.

DirecTV Group Inc. also said media mogul John Malone's Liberty Media Corp. had agreed to restrict its voting interest to 48 percent in exchange for DirecTV's decision to increase its share repurchase program to $3 billion, funded by up to $2.4 billion in new debt.

Its shares rose $1, or 3.9 percent, to $26.80 in morning trading. They are nearer the high end of their 52-week range of $18.20 to $27.73.

The company said net income climbed to $371 million, or 32 cents per share, in the three months ended March 31 from $336 million, or 27 cents per share, a year ago.

Revenue rose 17 percent to $4.59 billion from $3.91 billion.

Analysts surveyed by Thomson Financial expected a net profit of 31 cents per share on revenue of $4.47 billion.

DirecTV said it added 275,000 net U.S. subscribers, increasing its domestic subscriber base by 5.2 percent to 17.1 million.

Average monthly revenue per subscriber rose 8.6 percent from a year ago to $79.70, driven by price increases for programming, higher fees for HD and DVR equipment and services and better pay-per-view sales.

It added 200,000 net subscribers in Latin America, boosting the subscriber base 24 percent to 3.5 million. Monthly revenue per subscriber rose 20 percent to $53.52, thanks to a weak U.S. currency and growth in Venezuela and Argentina.

In late February, Liberty Media acquired a 41 percent stake in DirecTV by swapping a 16 percent stake in News Corp. plus $625 million in cash.

In April, Liberty increased its stake in the satellite television provider to 48 percent, and analysts had expected Liberty to attempt to buy the whole company.

Posted by Muhammed El-Hasan at 10:38 AM | Permalink | Comments (0)

How will the American consumer, who is trying to cut costs amid a sour economy, react to this?

Toyota raising prices on some models in US this month

TOKYO (AP) -- Toyota Motor Corp., the world's second-biggest automaker by annual vehicle sales, is raising its prices on some U.S. models later this month amid increased worries about its profit growth in the American market.

The price increases, which will start in the middle of May, include a hike of $200 on the 2008 Yaris sedan, which will cost $12,425. The 2009 Camry will go up $200 to $18,920, the automaker's U.S. unit said in a statement released Friday.

The hybrid Camry, introduced as a 2007 model in late 2006, will cost $300 more, at $25,650, Toyota said.

Like other Japanese automakers, Toyota is enjoying sales growth while American automakers are struggling. Soaring gas prices have increased demand for smaller, fuel-efficient cars that Japanese automakers are reputed for.

Toyota, whose US marketing headquarters is in Torrance, faces a challenge in maintaining profits partly because of the recent decline in the dollar, which erodes the value of overseas earnings of Japanese exporters. Worries are also rising about how a U.S. economic slowdown may hurt sales.

Toyota is set to release financial results Thursday, when it could report its first profit drop in nearly a decade.

But it's still faring better than its U.S. rivals. GM lost $3.3 billion in the first quarter. Ford had a surprise profit of $100 million for the same period but expects to lose money this year as the U.S. auto market deteriorates.

Atsushi Kawai, auto analyst with Mizuho Investors Securities in Tokyo, said the price increases of about 1 percent won't make up for the damage Toyota's bottom line is expected to suffer from the weak dollar. The dollar, trading at about 114 yen last year, fell below 100 yen in March and is now trading at around 105 yen.

But he noted Toyota raises prices about this time every year, and the hike was routine.

"Outside people are the ones giving special meaning to the decision" because of the concerns about the U.S. market, he said in a telephone interview. "It is a fact that Toyota is losing some of its momentum."

General Motors Corp., Ford Motor Co. and Chrysler LLC saw double-digit U.S. sales declines last month compared with April 2007. Toyota's U.S. April sales, meanwhile, edged up 3 percent. But during the same period, Honda Motor Co.'s and Nissan Motor Co.'s U.S. sales were up about twice that much.

Nissan already raised U.S. prices in April by $170 to $480 on models including the Versa Hatchback, Altima sedan, 350Z Roadster and the Pathfinder sport utility vehicle. Honda said it has no plans so far to raise its U.S. prices.

Kawai said more time was needed to assess whether Toyota sales will continue to lag even after new models, including the remodeled Corolla, come out.

Toyota is also raising the U.S. prices of some Lexus luxury models. For example, the price of the Lexus IS 350 entry sports sedan will rise $300 to $36,305. The pricing of the 2008 Lexus IS F high-performance sports sedan won't change, Toyota said.

Posted by Muhammed El-Hasan at 7:11 AM | Permalink | Comments (0)