News Analysis for the Investor on April 20, 2012

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Springtime fears of falling economy

Rising layoffs, falling home sales and slowing manufacturing activity are setting off a round of fears that the recovery is stalling, according to the Wall Street Journal.  Unemployment claims ticked down from 388,000 to 386,000 but in recent weeks those figures have been adjusted upwards after their release.  Sales of previously owned homes fell 2.6 percent in March but were still 5.2 percent above last year.  Factory output slipped in March after rising in February and surveys from the Federal Reserve Banks in Philadelphia and New York showed that manufacturing slipped in April.  The fear is that, similar to the past two years, the economy could pick up in the spring only to cool as the year progresses.  Experts argue that fundamentals of the economy are better this year than in the past two years with oil prices moderating and no large natural disaster impacting the economy.  Time will tell the fate of 2012.  The Dow fell 68 points on Thursday, closing at 12,964.  The Nasdaq fell 23 points ending at 3,007.  Asian markets were mixed on Friday and European markets are mostly up.

IMF Faces Challenges in Raising Additional Funds

The International Monetary Fund meets this weekend and one of the goals will be to raise additional cash for its backup fund to support the European nations.  The Associated Press reports that IMF’s managing director, Christine Lagarde, has lowered the goal of the fund in the last few weeks to raising another $500 billion.  The IMF already has $385 billion in reserves and she claims she has received pledges for an additional $320 billion.  The US has said it will not participate because it is looking to Europe to fund the gap.  One of the challenges is that the European nations need to return to growth, but in order to receive funds from the IMF and others, austerity packages are being put into place, many of which will deter growth.  The European conundrum seems to have a very long time frame before a solution will be in place.

Spain to approve more cuts to education and health

Spain’s government is meeting to approve a $13 billion package of spending cuts as part of an austerity drive to cut its deficit.  The cuts will require students to pay for university entry fees and to pay for over the counter medicines, according to the Associated Press.  Despite these cuts, Spanish bond yields hit 6.03 percent, up 11 basis points from a day earlier. Italian and French bonds also rose which will potentially cause more volatility.

Large Manufacturers may move from China to US

CNBC is reporting that a survey by Boston Consulting Group indicates that 37 percent of all US based manufacturing executives either plan to or are actively considering moving production from China. That number increases to 48 percent for companies with more than $10 billion in revenues.  Factors causing the change include increasing wages in China, proximity to customers, and the ease of doing business. Makers of rubber and plastic products are the most likely to consider these changes unlike companies that make computer equipment, metal products or transportation goods.

State Tax Collection Efforts Increasing

States brought in more quarterly tax revenue in the fourth quarter of 2011, up 3.6 percent from a year earlier, but still down 3.4 percent from the fourth quarter of 2007, when adjusted for inflation.  Because the recovery has been slow to come, the ability of states to catch up on their own deficits persists.  According to the Wall Street Journal,  the fastest growth came from personal income taxes which increased 4.2 percent.  Sales taxes were up 2.4 percent and corporate income taxes fell 9 percent. Property taxes, which account for 85 percent of local government revenues, continue to be battered due to the falling housing market.  Property tax revenues grew 0.6 percent at the end of 2011.

Companies stop blogging; start Tweeting

According to a survey released by the University of Massachusetts Dartmouth, the percentage of companies that maintain blogs fell to 37 percent in 2011, down from 50 percent in 2010.  This was based on a review of 500 fast growing companies listed by Inc. magazine.  USA Today reports that blogging also fell among adults.  The reasons?  Twitter and Facebook are less time consuming and most businesses feel that social networking is where they will find the customers.  Additionally, the reports founds that sometimes the blogs were “dull