Forget the continuing good news on the American economy overnight and, instead, focus on the plight of America’s remaining 8195 banks (that’s before tonight’s collection of failures), and the French wine industry.
Life is rough and for America’s banks, most of them small- to medium-sized and in the US heartland, times are horrible and in fact worsened in the second quarter, while the economy was doing better. France has a growing champagne lake. Swimming lessons anyone?
Property remains the millstone, especially commercial, and better quality housing loans that are replacing subprime loans as the big losers.
But the news from the economy was good: the second quarter contraction was unchanged at 1% in the second estimate released overnight. For the 400-plus American banks on the watchlist at the key regulator, the Federal Deposit Insurance Corporation, the improving economy is providing faint comfort or none at all.
Sign up for a FREE 21-day trial and get Crikey straight to your inbox
The news on the economy was much better than the market estimate of a fall of 1.5%. It didn’t happen because the Obama Administration’s cash splash doused the economy, staving off a sharper contraction.
11% was the increase in Federal Government spending in the quarter, which more than offset a 1% fall in consumer spending (consumers account for about 69% of US economic activity). Falling inventories knocked 1.39 percentage points from GDP as companies shed a huge $US159 billion, following a decline of $US113 billion. This pace of inventory liquidation might have cut output, but economists see it as the source of the upsurge in growth as soon as business starts ordering, which will happen, well, soon, we hope.
4 quarters is now the record number of quarters that the American economy has shrunk in this slump, the first time it has happened since the US Commerce Department began tracking that measure in 1947.
0.20% was the contribution to second quarter growth by the US car industry as it recovered fitfully. The contribution this quarter will be much higher, thanks to the Government financed cash for clunkers program, which finished on Monday night, US time. More than 690,000 vehicles were sold through the tax bonus for about $US2.87 billion. But did it help Detroit? Nope.
38.6% was the share of the 690,114 cars sold through the scheme by Ford, GM and Chrysler, far below the 45.1% the trio had in July’s ordinary sales for the month. Foreigners had the rest, with Toyota tops with 19.4%, GM with 19.4%, Ford with 14.4%, Honda with 13%, Nissan with 6.6%, Hyundai with 7.2% , then Chrysler with 6.6%.
2000 was the number of people employed by the Federal Government to process and oversee the scheme, so it was a mini-employment stimulus of its own. The current quarter will see positive contributions to production, car sales, finance, employment, stocks and growth that will continue into the December quarter as well.
570,000 was the number of US workers filing new unemployment claims fell last week, while those remaining on jobless benefits dropped to 6.13 million, the lowest level since April. Just wait until the last figure drops below six million, economists will be dancing in the streets, but not bankers.
111 US banks were added to that watchlist at the FDIC, to take the number of wobblers to 416, or 5% of the total number remaining in the country. In fact since 1990, America has lost 7943 banks through failure, takeover or just going out of business. Those 416 banks had combined assets of $US299.8 billion.
28.2% of all banks in the US in the second quarter reported a net loss for the three months, according to the FDIC report. Almost two out of every three institutions (64.4%) reported lower quarterly earnings than a year ago, and more than a year ago, the industry reported a quarterly profit of $US4.7 billion, and fewer than one in five institutions (18%) were unprofitable.
$US3.7 billion was the net loss in the second quarter for operating US banks, compared with a $US5.5 billion gain in the first quarter. The quarterly loss, the second the industry has reported in 18 years, was driven by rising expenses for bad loans.
$US127.8 billion has been set aside by US banks in the first two quarters of 2009 to cover loan losses, made up of $US66.9 billion in the second quarter and $US60.9 billion in the first quarter. Oh, a rising trend, that’s bad. How do you spell basket case again?
1991 was when the Europeans began keeping continent-wide figures for bank loans and lending to households and companies in Europe has never been as low as in July. The European Central Bank in fact said loans to the private sector rose 0.6% from July 2008, down from a annual growth rate of 1.5% in June.
10.4% was the fall in business investment in the UK in the second quarter (ours was up 3.3%), the biggest fall since 1985 and much worse than the 3.6% forecast from the market. But compared with the second quarter of 2008, investments was down 18.4%, the worst ever recorded (records started in 1966). Our investment was up 16.9%. Boom!
11.3% less cargo and 2.9% fewer passengers were carried on international flights in July than in July 2008, according to the International Air Transport Association. The figures represented an improvement from June, when the year-on-year declines were 16.5% for cargo and 7.2% for passengers.
$US212 billion will be the value of global semiconductor sales in 2009, according to Gartner Group, a sign that the worldwide slump in the electronics industry continues, but now seems to be relaxing. That’s down 17% from the $US255 billion in 2008, but better than the 22.4% fall forecast in May.
45% was the fall in exports of champers and cognac shipments were down 27% in the first six months of this year and were the major contributors to the overall 25% plunge in all French wine exports in the same period. Exports of table wines were only down 1%. How sober.
17% was the volume rise in sales of Bundy Rum. 12% was the rise in volume sales of Smirnoff, which saw net sales rise 38%. That’s a lot of headaches. Diageo said Bundy sales “benefited from consumers trading out of the ready-to-drink segment but remaining loyal to the brand” So instead of drinking RTDs with a 5% alcohol content, they upgraded to rum with a 40% content. Hmmmmm, was that supposed to happen?