NEW$ & VIEW$ (14 JANUARY 2014)

SMALL BIZ OPTIMISM BETTER

The December NFIB report just came out today. You will read about the overall results elsewhere. I am more interested in the details.

image

NFIB’s December survey did provide some positive signals, with the best
job creation figure since 2007 and a large increase in the percent of owners reporting actual capital outlays in recent months. The jump of 9
percentage points in December over November suggests that most of the
increase in spending came very late in the year. Expectations for real sales growth and for business conditions over the next six months improved substantially over November readings as well.

NFIB owners increased employment by an average of 0.24 workers per
firm in December (seasonally adjusted), the best reading since February 2006. Forty-eight (48) percent of the owners hired or tried to hire in the last three months and 38 percent reported few or no qualified applicants for open positions. This is not just a “skills” issue, but one of poor attitudes, work habits, timeliness, appearance and expectations, especially among the applicants for lower skill jobs.

image

Twenty-three (23) percent of all owners reported job openings they could not fill in the current period (unchanged), a positive signal for the unemployment rate and the highest reading since January 2008. Fourteen (14) percent reported using temporary workers, up 1 point from November. Job creation plans fell 1 point, falling to a net 8 percent, but maintaining the improved level of plans recorded last month. Overall, it appears that owners hired more workers on balance in December than their hiring plans indicated in November, a favorable development.

Last Friday’s NFP report showed no signs of that.

  • Wages are on the rise:

Two percent reported reduced worker compensation and 17 percent
reported raising compensation, yielding seasonally adjusted net 19 percent reporting higher worker compensation (up 5 points), the best reading since 2007. A net seasonally adjusted 13 percent plan to raise compensation in the coming months, down 1 point from November. Overall, the compensation picture remained at the better end of experience in this recovery, but historically weak for periods of economic growth and recovery.

image

image

Boy “Daddy, is this a margin squeeze above?”

  • While inventories are too high:

image

January retail sales are off to a slow start. Weekly chain store sales have dropped significantly in the past 2 weeks even though the 4-week m.a. remains at its recent peak levels. Weather or not, the goods are still on the shelves.

image

image

  • SMALL BIZ CAPITAL SPENDING

The frequency of reported capital outlays over the past 6 months
surprisingly gained 9 percentage points in December, a remarkable increase. Sixty-four (64) percent reported outlays, the highest level since early 2005. The percent of owners planning capital outlays in the next 3 to 6 months rose 2 points to 26 percent. Ten (10) percent characterized the current period as a good time to expand facilities. Of those who said it was a bad time to expand (61 percent), 31 percent still blamed the political environment, suggesting that at least for these owners, Washington is preventing their spending on expansion. The net percent of owners expecting better business conditions in six months was a net negative 11 percent, 9 points better than November but still dismal.

Euro-Zone Factory Output Jumps Industrial production rose at the fastest pace in 3½ years, an indication that the euro-zone economy likely grew for the third straight quarter.

The European Union’s statistics agency said industrial output in November was 1.8% higher than in October, and 3% higher than the year-earlier month.

Figures for October were revised higher, and Eurostat now estimates that output fell 0.8% during the month, having previously calculated they fell 1.1%.

The rise in output compared with the month earlier was the largest since May 2010, when output jumped 2%. When compared with the year-earlier period, the increase was the largest since August 2011, when output surged 5.5%.

image

The increase in industrial production was spread across much of the euro zone, with Germany recording a 2.4% rise, France a 1.4% increase, Spain a 1% rise and Italy a more modest 0.3% increase.

The rise was also spread across a number of different industries, led by manufacturers of capital goods, and including makers of intermediate and nondurable consumer goods. Manufacture of durable consumer goods fell 0.8%, however, an indication that households haven’t yet become confident enough about their prospects to make large purchases, such as of household appliances and cars.

For the 3 months ended in November, IP is up 0.8%, the same as for the three previous months. Capital Goods are notably strong: +1.2% last 3 months after +2.4% the previous 3 months.

image

Spain GDP growth fastest in six years
Caution urged as economy starts to emerge from gloom

Luis de Guindos, the economy minister, told parliament on Monday that gross domestic product rose 0.3 per cent in the three months to December, a marked increase from the 0.1 per rise in output in the third quarter. (…)


There was more good news from Spain’s long-suffering services sector, which in December grew at its fastest pace in more than six years. Surveys of business and consumer confidence also showed striking leaps at the end of last year, suggesting that companies and households alike are starting to sense that a turnround is at hand.

Taken in conjunction, the data lend strength to the argument that Spain is experiencing the early stages of a classic recovery cycle, with falling wages leading to a rise in competitiveness, followed by a surge in exports that allows companies to invest in new plant and machinery, new hiring and – eventually – a rise in domestic demand and government tax revenue. Spanish exports have been on a tear for the past two years, and business investment started rising in early 2013. (…)

The consumer side of the Spanish ledger remains weak, however.

image

Despite Slowdown, Employers in China Gave Bigger Raises Employers in China gave more-and bigger- raises last year on average than those elsewhere in Asia, a fresh sign that the country’s job market remains resilient despite slowing economic growth.

According to a survey by recruitment firm Hays, two-thirds of employers in China said they gave their workers raises during the last round of reviews of 6% or more—more than any other country surveyed. A majority, or 54%, of said they gave raises of between 6% and 10%, while 12% said they gave raises of more than 10%. Only 5% of employers in China said they gave no raises at all.

In contrast, in Asia as a whole, just 22% of employers said they gave raises between 6% and 10%, while only 7% said they doled out more than 10%. Across the region, paltry raises were common. In Hong Kong and Singapore, the survey notes, the majority of employers gave raises between 3% and 6%. And in Japan, despite the economic stimulus measures dubbed the Abenomics in 2013, 80% of employees received raises of 3% or less.

The survey featured 2,600 companies in China, Hong Kong, Japan, Singapore and Malaysia in professional sectors like  sales, marketing, engineering, human resources and accountancy & finance.

Chinese workers can also take heart in the fact that employers in China said they also plan to continue their generosity. For the next review, 58% of employers in China said they intend to give their staff a raise between 6%-10%, compared with less than a quarter of employers across Asia, the survey showed. (…) 

M&AAnimal spirits
Has the dealmaking cycle started to turn?

The burst of M&A activity announced on Monday – almost $100bn in total, including Suntory’s $16bn takeover of Beam Inc, Google’s $3.2bn purchase of Nest Labs and Charter’s $61bn move on Time Warner Cable – is enough for many bankers to declare that corporate animal spirits are back and the dealmaking cycle has finally started to turn, with activity taking place across all sectors and all regions.

“This is not just ‘animal spirits’, this is good, old-fashioned competition. If my competitor is growing, I need to grow. Yes, 2014 is different,” said Frank Aquila of law firm Sullivan & Cromwell. “Unlike the past three years when we have had a few big deals early in the year followed by disappointing levels of M&A activity, this year there is a high level of confidence that the global economy is growing and business confidence is the key ingredient to getting deals done.” (…)

 

Leave a Reply

Your email address will not be published. Required fields are marked *