U.S. Economic Activity Continued To Expand

U.S. economic activity continued to expand in October; index of leading economic indicators rose 0.9% last month, significantly faster than the revised 0.1% rise in September and the 0.3% increase in August. The economy, after growing at an anemic pace of just 0.9% in the first six months of the year, grew at a 2.5% rate in the July-September quarter. Some analysts are looking for even stronger growth in the current October-December quarter. But even the most optimistic forecasters are not predicting growth will rebound to levels that would make a significant dent in the unemployment rate, which has been stuck around 9% for the past two years. The October rebound in the leading index reflected positive contributions from building permits, the spread between short-term and long-term interest rates, a rising stock market and a slightly better employment reading. Economists said the strong October gain in the leading index and other positive reports recently had at least eased fears that the economy would be in danger of slipping into a recession.

Periodic Tests To Ensure A Stable Of U.S. Economy

Federal Reserve announced that a central bank will conduct a fourth round of stress tests in the coming weeks to determine if U.S. banks can withstand a recession. These tests are necessary to ensure a stable of U.S. economy. Federal Reserve also mentioned an increased downside risks that Europe’s debt crisis poses to financial markets and the global economy. Federal Reserve are monitoring European developments very closely, and will continue to do all that can to mitigate the consequence of any adverse developments abroad on the U.S. financial system. The central bank announced the stress tests are a key part in its ongoing efforts to make sure that banks, and the entire financial system, are stable. Banks that don’t pass the stress tests are asked to take steps to raise new capital in case of big losses. The Fed also oversees Wall Street’s biggest banks, including Citigroup, Bank of America, JPMorgan Chase & Co., and Wells Fargo. The Fed has performed periodic stress tests on the 19 banks it watches since 2009.

Fed Has Expressed Optimism About The U.S. Economy

Fed has expressed cautious optimism about the US economy, but also warned of significant downside risks. At the end of their two-day meeting, Fed officials said the economic recovery has strengthened since the summer in part thanks to a reversal of the temporary factors that had weighed on growth earlier in the year when the US was feeling the impact of higher oil prices and Japan’s nuclear disaster. The Fed report comes after the US’s latest gross domestic product survey showed signs of strengthening recovery in the economy. The committee said household spending had increased at a faster pace in recent months and investment in equipment and software continued to expand. But the jobs market remains a worry and the slow pace of growth means the unemployment rate will decline only gradually. The news comes as the latest jobs survey by Automatic Data Processing said the US added 110,000 new private-sector jobs in October, 10,000 more than had been expected. On Friday the US will release the latest monthly non-farm payrolls report. The US economic recovery is still being held back by construction and the housing sector remains depressed. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable.

October Revenue At Retail Stores Rose 3.7 Percent

October revenue at retail stores rose 3.7 percent, according to the International Council of Shopping Centers’ tally of 25 retailers. Retailers hope they’ll continue to do so heading into the holiday shopping season, a period when merchants can make up to 40 percent of their annual revenue. But so far, consumers aren’t giving them a clear sign. The National Retail Federation, the nation’s largest retail trade group, predicts winter holiday sales in November and December to rise 2.8 percent to $465.6 billion this year. That would be a smaller than the 5.2 percent increase last year, but higher than the average over the last 10 years. Many retailers already are beginning to offer holiday discounts to draw shoppers in early. Some also are offering layaway. And others have announced expanding hours for the Black Friday, the day after Thanksgiving and the official kickoff to the holiday shopping season. Although October results weren’t as promising as retailers had hoped, revenue was impacted by unseasonably warm weather during beginning of the month and then a snowstorm at the end of the month. And most merchants reported revenue that was only slightly off from Wall Street estimates. Costco Wholesale Corp.’s revenue at stores open at least a year climbed 9 percent in October, for instance, slightly lower than the 9.2 percent increase analysts surveyed by Thomson Reuters had predicted. And Limited Brands said revenue at stores open at least a year rose 6 percent in October, down from analysts’ estimates of 6.2 percent. A few merchants reported much more disappointing results. Macy’s Inc. posted a 2.2 percent increase in revenue at stores opened at least a year, which was below the 3.6 percent increase that Wall Street analysts had expected. The department store chain said revenue was hurt in part by the snowstorm at the end of the month that kept shoppers at home and warm weather during the rest of the month that kept them from buying winter clothes.

The U.S. Economy Expanded At 2.5 Annual Rate

A report Thursday showed that the U.S. economy expanded at a solid 2.5 annual rate in the July-September quarter. That helped ease concerns that another recession might be nearing. Yet the news may have also raised unrealistic expectations about the economy. This week, investors will shift their focus from Europe to U.S. economic data, which might temper their exuberance. So, investors could end up disappointed. Last week, investors were cheered by the deal European leaders reached Thursday. European banks agreed to take a 50 percent loss on their holdings of Greek government bonds. They will also set aside more money to cushion against future losses. Economists caution that European officials must still fill in the details of their plan and implement it. Even then, it might not work. When world leaders meet in France on Thursday and Friday, investors will want to see signs that China and other nations are prepared to help bolster Europe’s bailout fund. For all that, some stock analysts remain bullish. The U.S. economy appears more resilient than it did in August, when worries had grown that the United States would fall back into recession. Consumers’ sentiment tumbled that month after Congress fought over raising the nation’s borrowing limit and Standard & Poor’s downgraded long-term U.S. debt. Yet the economy managed to expand in the July-September quarter at the healthiest pace in a year. Despite their gloomy outlook, consumers spent more. Companies increased their investment in software and equipment. On Wednesday, the central bank will update its economic forecasts, which Bernanke will discuss at his news conference. The Fed is expected to revise down its estimates for hiring and growth from its last forecast in June. Investors will scrutinize how Bernanke explains any such revisions. The Fed’s meeting will be followed by the most closely watched economic indicator the government releases: the monthly jobs report. The economy is growing, but not enough to generate many jobs for the 14 million people unemployed. Employers added 103,000 net jobs in September. That wasn’t enough to lower the unemployment rate, which has been stuck 9.1 percent for three months. Analysts expect roughly 100,000 jobs to be added in October. Anything less could raise concerns that the economy may slow. Stocks might stumble. A gain of 100,000 jobs is scarcely enough to keep up with population growth. More than double that total would be needed consistently to reduce unemployment significantly. This week will bring other economic reports, too. The Institute for Supply Management, a trade group of purchasing executives, will issue its surveys of purchasing managers for manufacturing and service-sector companies. Those will provide early reads of whether growth will accelerate in the final three months of the year or drop back.

Germany Expects Little Economic Problems Next Year

Germany expects little economic problems, slow economic growth next year will grow by one percent only. The German economy next year will grow less, the government assumes. Confirmed by the government from Thursday, the economy showed significantly more pessimistic on the future. In 2012, German GDP growth is only about one percent originally expected growth rate of 1.8 percent. This year has a gross domestic product grow by 2.9 percent instead of previously reported three percent. The German economy is the largest in Europe. The pace of expansion has slowed, as Germany expected. But the economy is still holding growth trajectory. The main reason for the economic problems and slowdown in economic growth to be weaker exports. However, the leading German economic institutes on economic problems this week predicted that economic growth next year will slow sharply to 0.8 percent from 2.9 percent this year. In April while waiting institutes next year increase in gross domestic product by two percent. Click To See More Economy Info

Abbott Laboratories To Split Into Two Separate Companies

Abbott Laboratories, known as a global, broad-based health care company to split into two separate companies. The split-up frees this company from the risks and obligations of developing innovative pharmaceutical drugs, leaving the company with a more predictable business built around nutritional formula, generic drugs and heart stents. In recent years Abbott Labs. has relied on a single blockbuster drug, the anti-inflammatory drug Humira, to help drive double-digit sales growth. The injectable drug posted sales of $6.5 billion last year, nearly a fifth of the company’s total sales. The split makes sense given that the company has evolved into two separate businesses, each with different strategies and outlooks. The other large pharmaceutical companies will likely follow Abbott’s lead and pare down to focus on their primary business of developing new drugs. Investors have been calling for the breakup of health care conglomerate Johnson & Johnson for years, and Pfizer announced over the summer it is considering the sale of its animal health and nutritional businesses.