China's PMI came in at 50.4 in April

Beijing's official measure of manufacturing activity (PMI) came in at 50.4 in April, up a tick from March but under forecasts of 50.5. The middling outcome was not enough to lessen concerns about the economy, but neither did it point to a deepening slowdown.

There was also better news from South Korea as its exports grew at their strongest annual pace in over a year, suggesting the recovery in global demand was gathering pace after a soft start to the year.

The conflicted mood was clear in the Australian dollar, often a bellwether for market thinking on China given the country is a major exporter of resources to the Asian giant.

After an initial dip to $0.9279 on the PMI, the currency quickly rebounded to $0.9300 to be a shade firmer on the day. The reaction in share markets was modest given most in the region were off on holiday.

Japan's Nikkei .N225 was up 0.4 percent, while Australian shares .AXJO eased 0.4 percent. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS barely budged.

Sentiment had been supported somewhat by Wall Street where the Dow notched up its first record high of the year. The Dow .DJI ended up 0.27 percent, while the S&P 500 .SPX gained 0.3 percent and the Nasdaq .IXIC 0.27 percent.

Source: Reuters

WSJ: Fed Cuts Bond Buys, Sees Growth Pickup

       The Wall Street Journal reports,"the Federal Reserve said Wednesday it would reduce its bond purchases to $45 billion a month and it was starting to see a growth pickup in recent weeks after a harsh winter that hit the U.S. economy".

The Fed is effectively in watch, wait and plan mode. The $10 billion cut in monthly bond purchases, the fourth this year, was widely expected by investors and represents a continuation of the policy strategy laid out in the past few months by Fed ChairwomanJanet Yellen, who took over in February, and former Chairman Ben Bernanke.

The central bank also stuck to its guidance on short-term interest rates, saying they would remain near zero for a "considerable time" after the bond-buying program ends later this year. Many investors don't expect the Fed to start raising interest rates until well into next year.

U.S. stocks rose after the report, with the Dow Jones Industrial Average closing up 0.3% at a record 16580.84. The yield on benchmark 10-year Treasurys fell to 2.647% as the price rose.

The Fed's move came after a government report Wednesday showed the U.S. economy barely grew in the first quarter. The central bank's policy-making committee acknowledged the first-quarter slowdown was worse than expected, saying in a statement that activity "slowed sharply." Previously, the group had just said activity slowed.

Still, officials nodded to signs of economic improvement in March and April, suggesting they aren't too worried about the winter slowdown.

"[G]rowth in economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions," the statement said.

Household spending "appears to be rising more quickly," Fed officials said. Recent reports on retail sales and auto sales have been stronger than expected. But they said business fixed investment had "edged down" and repeated their view from March that the "recovery in the housing sector remained slow."

With reductions in the bond-buying program on course, Fed officials are focusing on longer-run issues. That includes emerging discussions about which short-term interest rates to target once a credit-tightening campaign kicks off.

More broadly, Fed officials need to update their formal exit strategy from easy-money policies. Three years ago, they agreed on a plan to someday sell off the central bank's large portfolio of mortgage-backed securities. Many officials believe this strategy is out of date. For instance, the Fed might choose instead to let the mortgage portfolio wind down gradually without aggressive sales.

Alibaba in Talks to Reclaim Stake in Alipay Payments Unit

      The Wall Street Journal reports,"Alibaba Group Holding Ltd. is in discussions with its major shareholders to reclaim a formal stake in its strategically important online-payment affiliate, said people familiar with the matter".

"A stake in the affiliate, called Alipay, could significantly raise the future value of Alibaba, now preparing an initial public offering already expected to be one of the largest in U.S. history. Even if an agreement over Alipay is reached, it isn't expected to take effect before the IPO, the people said, and would face regulatory review in China.

Alipay is central to Alibaba's operations, processing its e-commerce payments similar to the way PayPal handles transactions for eBay Inc".

"One scenario being discussed with a major shareholder would have Alibaba taking a one-third stake in Alipay, said one of the people familiar with the talks.

The Alipay ownership discussions come as Alibaba is gearing up for an IPO late this summer that could raise more than $20 billion. With such a huge supply of shares potentially coming to market, the company must drum up significant interest among investors if it wants to sell those shares at a high price.

The possibility of direct ownership in Alipay could add to investor excitement, enabling Alibaba's future shareholders to benefit from Alipay's growth, especially in its payment services for non-Alibaba clients and in its financial services. Alipay doesn't disclose its profit or revenue.

The Alibaba-Alipay relationship has nonetheless been controversial, and demonstrates an often interconnected web of Chinese corporate ownership.

Alibaba founder Jack Ma separated Alipay from the group in 2011, saying the spinoff was necessary for Alipay to obtain a license to continue its business under then-new Chinese government regulations.

The move prompted large Alibaba investor Yahoo Inc.  to complain it wasn't made aware of the transfer of Alipay until after it was enacted. Some investors were angry that the shift devalued their holdings.

Alibaba said at the time that its board, on which Yahoo co-founder Jerry Yang held a seat, had previously discussed the possibility of such a spinoff. The two firms, and another major investor SoftBank Corp., later reached an agreement over terms of the separation.

Today, Alipay is controlled by a parent company in which Mr. Ma holds a 46% stake. Other Alibaba co-founders also hold stakes in Alipay's parent company. That parent company also owns the unit that operates Alipay's money-market fund, Yu'E Bao.

SoftBank, a Japanese Internet and mobile service company, has an about 37% stake in Alibaba Group. Yahoo, its second-largest shareholder, owns 24% and Mr. Ma owns roughly 7%.

Following the 2011 spinoff, Alipay and Alibaba agreed that Alibaba would be paid between $2 billion and $6 billion if Alipay were to go public. Their agreement also sought to ensure that Alipay didn't try to overcharge Alibaba for its payment services. The direct ownership structure under discussion would replace that framework agreement".

Alibaba on patent-buying spree ahead of US listing

 Alibaba Group Holding Ltd is beefing up its patent holdings in the United States, a move that may help avoid the pitfalls that bedevilled Google Inc, Facebook Inc and Twitter Inc ahead of their initial public offerings (IPOs).

China's largest e-commerce company has so far obtained 102 US patents, including 20 purchased from International Business Machines Corp (IBM) last year, according to researcher Envision IP.

Alibaba has applications on more than 300 others for technology such as payment processing, product recommendations and picture searches, the US Patent and Trademark Office's database shows.

"It's a smart move," said Maulin Shah, managing director of New York-based Envision. "When a company announces IPO plans, they instantly become a target from competitors already in the market who want to hamper the IPO or those who see it as an opportunity to exploit the company at a vulnerable time."

Source: BTPremium

WSJ: Understanding Alibaba

      The WSJ reports,"perhaps the best way to understand Alibaba is as a mix of Amazon, eBay and PayPal, with a dash of Google  thrown in, all with some uniquely Chinese characteristics.

"Unlike Amazon.com Inc., which buys goods from suppliers and sells them to customers, Alibaba has always acted as a middleman, connecting buyers and sellers and facilitating transactions between them. While it isn't an auction company, its middleman role is similar to the one played by eBay Inc.

Taobao, Alibaba's biggest website, is like a gigantic Chinese bazaar, with about 760 million product listings from seven million sellers. Merchants don't pay to sell products on Taobao. Instead, they pay Alibaba for advertising and other services to allow them to stand out from the crowd.

hat no-fee model is part of Taobao's appeal in China. Much as with Google Inc., the ads from merchants appear with Taobao's product-search results.

While Taobao is mostly for small merchants, Tmall, another shopping site run by Alibaba, is designed for bigger merchants, including well-known brands such as Nike Inc.  and GapInc.  Apple Inc this year opened a store on Tmall. Unlike Taobao, Tmall, which has about 70,000 merchants, charges each seller a deposit and an annual fee, as well as a commission on each transaction.

"What sets Alibaba apart is size. The company has said that Taobao and Tmall account for more than half of all parcel deliveries in China. In 2012, the combined transaction volume of Taobao and Tmall topped one trillion yuan ($163 billion), more than Amazon and eBay combined".

"Alibaba's revenue is about one-tenth of Amazon's because the Chinese company doesn't sell products on its site. But Alibaba is far more profitable. Alibaba's third-quarter revenue rose 51% from a year earlier to $1.78 billion. Net profit was $792 million, giving the company a profit margin of 44.6%, according to shareholder Yahoo Inc.,  which owns a 24% stake in Alibaba. Amazon posted revenue of $17.09 billion and a loss of $41 million in the same quarter".

Bloomberg: Alibaba, China's E-Commerce Giant

"Just how dominant is Alibaba in China’s booming e-commerce market? In 2012, the homegrown Amazon/EBay mashup accounted for 70 percent of the country’s package deliveries. On one day last year, itlogged $5.75 billion in transactions, and the business done over its sites accounted for the equivalent of almost 2 percent of China’s GDP in 2012. (Wal-Mart‘s sales in 2013, by contrast, are equal to about 0.03 percent of the U.S. GDP.) There are lots of  attention-grabbing Internet companies that hope to make money off of trend-hopping teens; Alibaba is  building an  empire on the spending power ofChinese farmers, laborers and white-collar workers. That could add up: By next year, more than 850 million Chinese are expected to be online — more than the population of any other country except India.
In March, Alibaba announced plans to go public, and settled on New York as the venue for its IPO after Hong Kong regulators refused to approve its proposed governance structure, which would allow its partners to nominate a majority of its board. The company generated $3.06 billion in revenue in the three months ended in December — a 66 percent increase from a year earlier — and profit more than doubled to $1.35 billion.  Figures like that have led to estimates of its worth that have run as high as $245 billion. Alibaba, which faces competition from other Chinese companies like Tencent and Baidu, is investing heavily in reaching customers through smartphones and tablets. It owns stakes in messaging application TangoMe and ride-sharing program Lyft (now expanding to serve 60 U.S. cities), has its own mobile operating system and is leasing spectrum from state-owned phone companies to offer mobile voice and data packages. However fast Alibaba’s sales grow, e-commerce transactions in China are growing faster — the government projects that they will reach 18 trillion yuan ($2.9 trillion) next year — an 80 percent increase from 2013.
The gigantic values analysts place on Alibaba speak for the bullish view of its growth potential. Yet some investors may be wary that Alibaba will suffer as China’s economic growth cools. The economy is forecast to expand 7.4 percent this year, which would be the slowest pace since 1990. Some investors have reservations about Alibaba’s management in light of its proposed board structure. Listing in the U.S. may bring more scrutiny for potential infringements of intellectual property, although Alibaba has made an effort to crack down on sellers of counterfeit goods.   And increasing competition on Taobao and Tmall is squeezing profit margins for merchants like yarn-seller Liu. If newcomers find it harder to make money on Alibaba’s platforms, the giant might start to grow more slowly".

Sinopec, Petronas agree deal on LNG project

Sinopec and its partner China Huadian Corporation have reached a deal to buy liquified natural gas (LNG) from a Canada-based LNG project operated by Petronas of Malaysia, Sinopec announced on Wednesday.

Sinopec and its Chinese partner will acquire a 15-percent stake in the Pacific Northwest LNG Project (PNW LNG), which will allow them 1.8 million cubic meters of LNG annually for 20 years, the company said.

Sinopec will have a 10-percent stake and China Huaidan Corporation will have 5 percent, the company said.

In addition, Sinopec, through its affiliate, has signed a binding Heads of Agreement with Petronas for the purchase of 3 million cubic meters of LNG for 20 years, Sinopec said.

The transactions are yet to be approved by authorities, the firm said.

These deals are expected to secure 4.2 million cubic meters of LNG per year for Sinopec, which will help the company boost its gas market share in China as well as its clean energy supply capacity, the company said.

PNW LNG is located on Canada's West Coast near Prince Rupert, British Columbia, with natural gas sourced from Progress Energy Canada Ltd's North Montney assets. Petronas of Malaysia is the project operator and majority owner of Progress Energy and PNW LNG projects.

Source: Xinhua

China Merchants wins historic bid for Australia's Newcastle port

China Merchants Group (CMG) Wednesday secured a critical foothold in Australia's key export port-city of Newcastle with State Premier Mike Baird and Treasurer Andrew Constance announcing the winning China Merchants Group bid - partnered with Hastings Fund Management - will secure the lease for 98 years.

While investment bank Morgan Stanley tackled an intense bidding process on behalf of the New South Wales (NSW) state government - five separate groups were competing for the port including industry leaders ATEC, Cheung Kong Infrastructure and Macquarie Infrastructure.

The NSW government has agreed to lease the port for 98 years to Port of Newcastle Investments, a consortium which comprises Hastings Funds Management and CMG.

It is a landmark acquisition with the asset in its entirely - the world's largest coal export port, servicing more than 2,200 vessels carrying about 150 million tonnes of cargo in the past year - at the crest of an infrastructure wave that will reshape the city of Newcastle as well.

The state government came to terms over 98 years with the consortium comprising Hastings Funds Management and China Merchants, acting as Port of Newcastle Investments.

According to Treasurer Constance, the long-term lease will deliver gross proceeds of 1.75 billion Australian dollars.

Premier Baird confirmed 340 million dollars from the proceeds will be used for the revitalization of the Newcastle CBD, in addition to the 120 million dollars the government has already allocated to the project, which includes a new light rail service.

Baird described the deal as "momentous" and one that "exceeds all expectations."

He said the scale of this transaction means the people of Newcastle and the Hunter Region of NSW should enjoy a cascade of further initiatives in the region.

"Transactions such as this bring enduring benefits to communities and the economy, and build on the NSW government's successful track record in recycling mature state-owned assets to deliver major infrastructure projects that will unlock opportunities for growth, jobs and economic development," the premier told journalists in Newcastle.

The state government reached an agreement with Port of Newcastle Investments for the lease following a competitive five- month bidding process.

Treasurer Constance said the Port of Newcastle lease is the latest in a series of successful asset recycling projects, including the sale of Eraring Energy and Delta Electricity's western power stations, the long-term lease of Port Botany and Port Kembla, and the refinancing of the Sydney Desalination Plant.

"The strong level of interest from a highly-qualified and experienced bidding field - resulting in five final bids - is a powerful endorsement of Newcastle and the Hunter and the NSW government's ability to run a robust and transparent process."

Constance said the two members of Port of Newcastle Investments are well-known, long-term global infrastructure investors, with an attractive track record in asset ownership, operations and developments. Having built terminals in China's major seaports, the CMG has been looking overseas for growth.

The CMG has a 50 percent share in a deepwater container port in Togo and is building a new 500 million U.S. dollars terminal in Colombo, a trans-shipment hub in the Indian Ocean.

"They have the infrastructure management experience and the resources needed to secure the ongoing development and professional management of the port," Constance said.

The CMG has consistently reported growing gross assets, five years ago at 201.2 billion yuan (29.5 billion U.S. dollars) and 1, 732 billion yuan (253.4 billion U.S. dollars) under management.

With a 140-year history as an owner and operator of ports and transport businesses, the CMG has been operating in the trading and retail sector in Australia for more than 20 years. In 2010, it acquired leading Australian-based container pallet logistics provider Loscam.

The looking-out policy has secured the company a massive global footprint with a proven track record across Asia and Africa and a renewed focus on the potential of the Asia-Pacific.

Hastings Funds Management and China Merchants Group are equal partners in Port of Newcastle Investments. Hastings has been involved in many successful government asset transactions, including the Sydney Desalination Plant and Cairns and Mackay Airports.

"I congratulate Port of Newcastle Investments on their successful bid and the NSW government looks forward to long and productive working relationship."

The NSW government will continue to retain regulatory oversight of the Port of Newcastle as well as responsibility for a range of maritime safety and security functions, including emergency response, harbor master, port safety operating license and pilotage functions.

Source: Xinhua

US Federal Reserve trimmed the size of its bond buying by US 10 billion to US 45 billion monthly

Looking past surprisingly grim growth in the first three months of the year, the Federal Reserve on Wednesday decided to keep moving slowly toward the exit of its bond-buying stimulus plan.

As expected, the U.S. central bank trimmed the size of its bond-buying strategy by $10 billion to $45 billion. This is the fourth straight meeting with an identical, gradual, reduction.

The decision was announced hours after a report showed the economy barely grew in the first three months of the year. The Commerce Department said the economy expanded at a 0.1% rate in January, February and March, an abrupt deceleration from 2.6% growth in the last quarter of 2013.

In a statement, the Fed said data shows “that growth in economic activity has picked up recently.”

The central bank also said the labor market “showed further improvement” and consumer spending “appears to be rising more quickly.”

At its meeting, the Fed decided once again to hold its benchmark federal funds rate at zero, where it has been since December 2008.

Source: Marketwatch

WSJ: Likely Wall Street's reaction to the new policy statement

Yawn.

That is likely to be Wall Street’s collective reaction to the Federal Reserve’s latest policy meeting. The two-day confab, which ends with a policy statement but no press conference Wednesday afternoon, isn’t expected to contain any major changes. The Fed is expected to keep dialing back, or tapering, its bond-buying program by $10 billion. Economists also see the central bank maintaining a cautious stance on the economy.

Investors spent the better part of five years fixated on central-bank policy, thanks to the Fed pinning interest rates near zero and three rounds of quantitative easing. That has changed now.

At the beginning of the year the attention shifted to newly minted Fed chairman Janet Yellen. Investors wondered how she would handle the spotlight at these policy meetings, and whether she would continue the tapering trajectory that her predecessor, Ben Bernanke, had set.

Many of those questions have since been addressed.

“The excitement over Yellen’s first couple of meetings has worn off,” said Cameron Hinds, regional chief investment officer for Wells FargoWFC +0.36% Private Bank, which has $170 billion under management. “It’s clear they are tapering at a $10 billion pace barring some unforeseen development. The economy would really have to go off trend to stop the tapering process.”

That means this week’s meeting isn’t expected to be a market-moving event. There could be some immediate volatility once the Fed statement is released at 2:00 p.m. Eastern Time. Otherwise, the market’s recent grind is expected to continue.

WSJ: Highlights From the First-Quarter GDP Report

The Wall Street Journal reports, "consumer spending accounts for more than two-thirds of U.S. economic output, and it rose at a seasonally adjusted annual rate of 3.3% in the fourth quarter. It slowed in the first quarter, but not much, growing at a 3% pace. Spending on goods slowed to a 0.4% pace, but spending on services – like health care and energy – rose to a 4.4% pace. Personal consumption expenditures were the single biggest boost to economic output in the first three months of the year, and helped offset big drags on growth like trade.

Spending by businesses was another story. Fixed nonresidential investment fell at a 2.1% rate in the first quarter after surging 7.3% in 2012 and rising a more modest 2.7% in 2013. Spending on equipment fell at an annual pace of 5.5% in the first quarter of 2014, the worst drop since the second quarter of 2009, after rising at a 10.9% pace in the fourth quarter of 2013.

Net trade subtracted 0.83 percentage point from GDP growth in the first quarter as exports lagged and the trade gap widened. Exports fell at a 7.6% pace, the most since the recession ended in 2009. Trade had been a big boost to economic output in the second half of 2013, contributing 0.14 percentage point in the third quarter and 0.99 percentage point in the fourth quarter. Stay tuned, though: Trade data from March will be released by the Commerce Department next Tuesday, which could lead to significant revisions in GDP.

The U.S. housing recovery’s slowdown was a drag on GDP in the first quarter. Residential fixed investment — spending on home building and improvements — pulled down GDP growth to the tune of 0.18 percentage point in the first quarter after contributing 0.33 percentage point to GDP growth for all of last year.

A big buildup in private inventories helped boost economic output in the third quarter last year to a 4.1% annual rate. In the first quarter of 2014, by contrast, slowing inventories subtracted 0.57 percentage point from GDP growth. A measure of GDP that strips out inventory changes, final sales of domestic product, grew at a 0.7% pace in the first quarter, down from its 2.7% pace in the fourth quarter.

WSJ: Bill Gross: Expect Lower ‘Neutral’ Rates in the New Normal

     The Wall Street Journal reports"in the new normal, a world of excessive leverage and slower growth, a “neutral” interest-rate policy will by necessity produce lower rates than in previous business cycles, Pimco’s Bill Gross wrote in his monthly commentary, and understanding that is the key for investors of all asset classes".

“The old saying goes that when the U.S. economy sneezes, the world catches cold. That still seems to be true enough, although Chinese influenza is gaining in importance,” he wrote. The world saw what happened when the U.S. got a really, really bad cold in 2008. How to thread the needle today, keeping rates more or less neutral, but not too high to make debt servicing onerous, is a real trick. In a global economy with as much debt as the one we have today, “it’s important to realize that the price of money and the servicing cost of that leverage are critical for a healthy economy.”

"What this likely means, he concludes, is a lower “neutral” rate than we’ve seen in the past. At Pimco, we believe that this focus on the future “neutral” policy rate is the critical key to unlocking value in all asset markets,” he wrote. In a nutshell, he thinks a neutral fed funds rate may be closer to 2% than 4%. Understanding this would give a bond investor “the key to the kingdom,” he writes, but even holding that key comes at price, the price being lower returns across assets classes".

“So you say you need more? Join the club.” "Most pensions funds, he notes, assume total returns somewhere around 7-8%. “That won’t happen with a 2% neutral policy rate.” This will push investors into riskier assets".

“Bring a handkerchief in any case.”

Bureau of Economic Analysis U.S. Department of Commerce US GDP Increased 0.1% in Q1

GROSS DOMESTIC PRODUCT: FIRST QUARTER 2014 (ADVANCE ESTIMATE)

Real gross domestic product -- the output of goods and services produced by labor and property
located in the United States -- increased at an annual rate of 0.1 percent in the first quarter (that is, from
the fourth quarter of 2013 to the first quarter of 2014), according to the "advance" estimate released by
the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.6 percent.

The increase in real GDP in the first quarter primarily reflected a positive contribution from 

personal consumption expenditures (PCE) that was partly offset by negative contributions from exports, 

private inventory investment, nonresidential fixed investment, residential fixed investment, and state and 

local government spending. Imports, which are a subtraction in the calculation of GDP, decreased. 

NOTE. Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise 

specified. Quarter-to-quarter dollar changes are differences between these published estimates. Percent 

changes are calculated from unrounded data and are annualized. "Real" estimates are in chained (2009) 

dollars. Price indexes are chain-type measures. 

The deceleration in real GDP growth in the first quarter primarily reflected downturns in exports 

and in nonresidential fixed investment, a larger decrease in private inventory investment, a deceleration 

in PCE, and a downturn in state and local government spending that were partly offset by an upturn in 

federal government spending and a downturn in imports. 

 

The price index for gross domestic purchases, which measures prices paid by U.S. residents, 

increased 1.4 percent in the first quarter, compared with an increase of 1.5 percent in the fourth. 

Excluding food and energy prices, the price index for gross domestic purchases increased 1.4 percent in 

the first quarter, compared with an increase of 1.8 percent in the fourth. 

 

Real personal consumption expenditures increased 3.0 percent in the first quarter, compared with 

an increase of 3.3 percent in the fourth. Durable goods increased 0.8 percent, compared with an increase 

of 2.8 percent. Nondurable goods increased 0.1 percent, compared with an increase of 2.9 percent. 

Services increased 4.4 percent, compared with an increase of 3.5 percent. 

 

Real nonresidential fixed investment decreased 2.1 percent in the first quarter, in contrast to an 

increase of 5.7 percent in the fourth. Nonresidential structures increased 0.2 percent, in contrast to a 

decrease of 1.8 percent. Equipment decreased 5.5 percent, in contrast to an increase of 10.9 percent. 

Intellectual property products increased 1.5 percent, compared with an increase of 4.0 percent. Real 

residential fixed investment decreased 5.7 percent, compared with a decrease of 7.9 percent. 

 

Real exports of goods and services decreased 7.6 percent in the first quarter, in contrast to an 

increase of 9.5 percent in the fourth. Real imports of goods and services decreased 1.4 percent, in 

contrast to an increase of 1.5 percent. 

 

Real federal government consumption expenditures and gross investment increased 0.7 percent 

in the first quarter, in contrast to a decrease of 12.8 percent in the fourth. National defense decreased 2.4 

percent, compared with a decrease of 14.4 percent. Nondefense increased 5.9 percent, in contrast to a 

decrease of 10.0 percent. Real state and local government consumption expenditures and gross 

investment decreased 1.3 percent; it was unchanged in the fourth quarter. 

 

The change in real private inventories subtracted 0.57 percentage point from the first-quarter 

change in real GDP after subtracting 0.02 percentage point from the fourth-quarter change. Private 

businesses increased inventories $87.4 billion in the first quarter, following increases of $111.7 billion 

in the fourth quarter and $115.7 billion in the third. 

 

Real final sales of domestic product -- GDP less change in private inventories -- increased 0.7 

percent in the first quarter, compared with an increase of 2.7 percent in the fourth.

Gross domestic purchases 

 

Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever 

produced -- increased 0.9 percent in the first quarter, compared with an increase of 1.6 percent in the 

fourth.

Disposition of personal income 

 

Current-dollar personal income increased $122.0 billion, or 3.5 percent, in the first quarter, 

compared with an increase of $78.5 billion, or 2.2 percent, in the fourth. The acceleration in personal 

income primarily reflected an acceleration in government social benefits to persons. 

 

Personal current taxes increased $18.9 billion in the first quarter, compared with an increase of 

$21.4 billion in the fourth. 

 

Disposable personal income increased $103.1 billion, or 3.3 percent, in the first quarter, 

compared with an increase of $57.1 billion, or 1.8 percent, in the fourth. Real disposable personal 

income increased 1.9 percent in the first quarter, compared with an increase of 0.8 percent in the fourth. 

 

Personal outlays increased $131.8 billion, or 4.4 percent, in the first quarter, compared with an 

increase of $127.0 billion, or 4.3 percent, in the fourth. 

 

Personal saving -- disposable personal income less personal outlays -- was $518.7 billion in the 

first quarter, compared with $547.4 billion in the fourth. 

 

The personal saving rate -- personal saving as a percentage of disposable personal income -- was 

4.1 percent in the first quarter, compared with 4.3 percent in the fourth. For a comparison of personal 

saving in BEA’s national income and product accounts with personal saving in the Federal Reserve 

Board’s financial accounts of the United States and data on changes in net worth, go to 

Euro zone inflation edges up, swift ECB action seen less likely

 Euro zone inflation rose in April, reducing chances the European Central Bank will act soon to ward off deflation, but the pace of price rises was below forecast and still within the ECB's "danger zone" of under 1 percent.

Annual consumer inflation in the 18 countries sharing the euro nudged higher to 0.7 percent in April from March's 0.5 percent, which was the lowest since late 2009, the European Union's statistics office Eurostat said on Wednesday.

The reading was lower than the 0.8 percent predicted in a Reuters poll despite higher spending over the Easter period, reflecting the poor state of the euro zone economy after a long recession and with unemployment at near-record levels.

The euro briefly fell to a two-month low versus sterling on the data but then recovered, with some traders saying they expect markets to gain because the immediate chances of radical steps by the ECB are now lower. [ID:nL6N0NM34E]

Faced with inflation rates running far below target, the ECB has opened the door to money printing with so-called

"quantitative easing" (QE) to boost the euro zone economy, which is growing at a slower rate than much of the rest of the world.

Some economists expect the ECB to follow other major central banks like the U.S. Federal Reserve and embark on some form of QE later this year, but others say it is a long way off because the euro zone is nowhere near the most serious kind of deflation such as that which took hold in Japan in the 1990s.

April's reading takes inflation back to where it was in February but it is below the 1.2 percent of April 2013.

Still, the lack of a clear up-tick in consumer prices will keep pressure on the ECB to act to stimulate the economy, possibly by lowering rates again, although it is not expected to do so at its next policy meeting on May 8.

Source: Reuters