Business spending plans gauge hits one-year high in January

WASHINGTON, Wed Feb 27, 2013 — A gauge of planned U.S. business spending increased by the most in just over a year in January and new orders for long-lasting manufactured goods excluding transportation rose solidly, pointing to underlying strength in factory activity.

The Commerce Department said on Wednesday non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, jumped 6.3 percent, the biggest gain since December 2011, after slipping 0.3 percent in December.

Economists had expected this category to only rise 0.2 percent.

Durable goods orders excluding transportation increased 1.9 percent, the largest gain since December 2011, after increasing 1 percent in December. That was well above economists’ expectations for a 0.2 percent gain.

However, overall orders for durable goods – items from toasters to aircraft that are meant to last at least three years — tumbled 5.2 percent as demand for civilian and defense aircraft fell sharply. Last month’s drop was the first since August.

Retail sales point to firmer consumer spending

WASHINGTON, Tue Jan 15, 2013 — Retail sales rose more than expected in December as Americans shrugged off the threat of higher taxes and bought automobiles and a range of other goods, suggesting momentum in consumer spending as the year ended.

The Commerce Department said on Tuesday retail sales increased 0.5 percent after an upwardly revised 0.4 percent rise in November. Sales in November were previously reported to have gained 0.3 percent.

Economists polled by Reuters had expected sales to rise only 0.2 percent. Sales were up 4.7 percent from December 2011 and rose 5.2 percent for the whole of 2012.

So-called core sales, which strip out automobiles, gasoline and building materials and correspond most closely with the consumer spending component of gross domestic product, increased 0.6 percent after advancing 0.5 percent in November.

The second straight month of gains in core sales suggested consumer spending picked up in the fourth quarter after rising at a annual pace of 1.6 percent in the July through September period.

Consumers lift spending to pay for pricier gasoline

WASHINGTON, Fri Sep 28, 2012 – Consumer spending rose in August by the most in six months as households stretched to pay for higher gasoline prices, according to a government report on Friday that pointed to lackluster economic growth in the third quarter.

The Commerce Department said consumer spending increased 0.5 percent after an unrevised 0.4 percent gain in July. When adjusted for inflation, spending edged up 0.1 percent after increasing 0.4 percent in July.

Consumer spending accounts for about 70 percent of U.S. economic activity and the second straight monthly increase mostly reflected higher gasoline prices, which rose 28.2 cents per gallon last month, though automobile purchases also helped.

“With other sectors of the economy slowing down, relying on consumers is not the exact position we want to be in right now when incomes are slowing sharply,” said Jacob Oubina, senior U.S. economist at RBC Capital Markets in New York.

The U.S. dollar fell slightly against the euro and the yen after the data. Major U.S. stock index futures edged lower in early trading, while the 30-year Treasury bond price rose.

Spending on nondurable goods jumped 1.7 percent in August after increasing 0.8 percent the previous month. Household spending on services rose a modest 0.2 percent compared to 0.3 percent in July.

With the inflation adjusted spending barely rising last month, growth in real consumer spending is unlikely to improve much this quarter from the tepid 1.5 percent annual pace recorded in the April-June period.

Slower consumer spending and a drop in farm inventories due to a severe drought in the Midwest held gross domestic product growth to a 1.3 percent pace in the second quarter, a step down from 2 percent in the first three months of the year.

Inflation-adjusted consumer spending falls in June

WASHINGTON, Tue Jul 31, 2012 – Spending by American consumers fell in June for the first time in nearly a year when accounting for inflation, suggesting the economy lost momentum as it ended the second quarter.
Consumer spending, which makes up about 70 percent of economic activity, fell 0.1 percent when adjusted for rising prices, the Commerce Department said on Tuesday.
Before making price adjustments, spending was flat. That was just below the median forecast in a Reuters poll of 0.1 percent increase.
Pressure is rising on policymakers at the Federal Reserve to do more to help the sputtering economy. The faltering recovery also weighs on President Barack Obama’s hopes of reelection in November.
The Commerce Department had already reported that economic growth slowed over the entire second quarter as consumers spent at their slowest pace in a year. But Tuesday’s data showed consumer spending lost momentum throughout the period when taking inflation into account.
Household income rose in June by 0.5 percent – the most in three months – although consumers socked away part of the extra cash by saving more.
Analysts had expected a gain of 0.4 percent. After tax income climbed 0.3 percent in June when accounting for higher prices.
With price-adjusted incomes rising in June and consumption falling, the saving rate for households rose to 4.4 percent, its highest level in a year.
A report on Friday is expected to show the jobless rate holding at 8.2 percent in July. It has been above 8 percent since February 2009 – nearly all of Obama’s time in office so far.

MasterCard reports higher quarterly profits as consumers use cards more

PURCHASE, N.Y., Wed May 2, 2012 – MasterCard Inc. the world’s second-largest credit and debit card network, reported higher quarterly profits as consumers spent more with their cards.

Net income in the first quarter was $682 million, or $5.36 a share, compared with $562 million, or $4.29 a share, a year earlier, the company said on Wednesday.

Cardholders made $629 billion of millions of purchases worldwide in the quarter, up 17 percent from a year earlier, the Purchase, New York-based company said.

Visa Inc., the MasterCard’s larger competitor in card payment processing, is scheduled to report its results following the close of New York Stock Exchange trading.

Consumer, business spending point to slower growth

WASHINGTON ― U.S. consumer spending was tepid in November and a gauge of business investment plans fell for a second month, pointing to some loss of momentum in the economy as the year ends.

The Commerce Department said on Friday consumer spending ticked up 0.1 percent after rising by the same margin in October. Economists had expected spending, which accounts for two-thirds of U.S. economic activity, to rise 0.3 percent.

In another report, the department said non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 1.2 percent last month after declining 0.9 percent in October.

While the reports suggest some slowing in activity, they are unlikely to change perceptions that economic growth will top 3 percent in the current quarter after a 1.8 percent pace in July-September, boosted in part by a rebound in inventories.

U.S. stock index futures pared gains on the data, while prices for U.S. government debt trimmed losses. The dollar fell against the euro.

The tepid consumer spending is in stark contrast with robust Black Friday business reported by retailers.

When adjusted for inflation, spending rose 0.2 percent last month after a similar gain in October. The government on Thursday revised down third-quarter consumer spending growth to a 1.7 percent annual pace from 2.3 percent because of a slump in spending at hospitals.

Income ticked up 0.1 percent last month, the weakest reading since August, after increasing 0.4 percent in October. Last month’s increase was below economists’ expectations for a 0.2 percent rise.

Taking inflation into account, disposable income was flat after rising 0.3 percent in October.

“The lack of real income growth really raises questions as to what is going to happen to the economy in the first quarter,” said Mark Vitner, senior economist at Wells Fargo Securities in Charlotte, N.C.

Phil Derrow invested during the recession to set Ohio Transmission Corp. up for growth

Phil Derrow, President and CEO, Ohio Transmission Corp.

Phil Derrow had been kicking around the idea of investing in the future of his company, Ohio Transmission Corp., for some time. One way or another, he was going to do it, but the question was this: Should he spend the cash when business was so bad during the bottom of the recession or wait?

With several locations outside of the state, it was simple to see that it was time to drop the “Ohio” tag from Ohio Transmission and Pump Co., a division of the corporation, because it was becoming more of an issue as the company grew.

“It wasn’t that much of an issue; we were able to deal with it, but when you’re down in Kentucky, they want to work with Kentucky people, not Ohio people,” says Derrow, president and CEO. The situation was the same in West Virginia. “You know, people have a sense of place; they have a sense of their own community, and being an outsider is never a positive thing.”

Not only that but the types of products offered and the focus of the business had changed since 1963 when it was founded by Derrow’s father, David Derrow. Also, the website needed a major makeover.

The second division, Air Technologies, also needed some investments along the lines of staff and production facilities.

Deciding if the projects, which would include rebranding and capital improvements, were worth the money during a recession hinged on a feeling that the recession had bottomed out ― and a belief in the future. The moves put the company back on the growth track.

Five years ago, the corporation had 290 employees and annual revenue of $100 million. Now, it has 360 employees across seven states, and 2010 revenue was $116.5 million.

The new website brought results almost immediately. More traffic was seen on the first day than what was seen in the previous six months. The switch to the name OTP Industrial Solutions brought all positive reactions.

Here’s how Derrow used belief in a better future to take action and grow the company.

Have confidence and believe

Change is said to be the only constant thing in life. When business is going really well, it’s easy to forget the fundamentals, such as that the economy will change at some point. Derrow believed that rather than pull back, he would opt for change.

Derrow was considering ideas for both divisions. Ohio Transmission and Pump Co. needed to be rebranded; Air Technologies needed to expand to fill the growing demand for industrial air compressors. The only question was, “Why spend money now when things are so challenging?”

The recession was tightening its grip on the company. With nearly 15 years under his belt as CEO, Derrow had been following good business practices. They put the part employee-owned company in a position to hopefully weather the storm. The company was not overleveraged and it didn’t get too far out on a credit limb with customers. In addition, it had employment practices that had some self-adjusting mechanisms, for instance, a compensation structure that was somewhat self-correcting, linking company financial health to wages.

“Business was down quite a bit, and our sales teams and managers were trying to figure out how to maximize business as much as we could,” Derrow says. “We decided not to conduct layoffs, we had plenty of people, and it was a decision to go ahead and do this now because we believe in the future, we know recessions end, we have the fat, let’s go ahead and make this investment.”

He saw some indications that the recession had bottomed out, and while he doesn’t quite call it a hunch, he felt it was time to take action.

“If you believe and know recessions always end, then there is frankly no better time to invest in the end of the recession than during the recession,” Derrow says.

Prices for labor and material are likely to be bargains, and through investment, you may be able to increase your market share even though the market is contracting.

“Continuously invest in yourselves and your company,” he says. “I make a big deal about the fact that investment is a continuous and ongoing process, and it is an essential statement of a belief in the future. If you believe based on knowledge that recessions always end, then you continue to invest. It’s no more complicated than that.”

You have to have the confidence to know that recessions end and act accordingly. If you don’t believe things are going to get better, and you aren’t prepared to act accordingly ― act in ways that they will get better ― then it is difficult to take advantage of the opportunity.

The reality is the United States economy follows a cycle, although expansions and recessions cannot be pinpointed ahead of time. Recessions happen about every five to seven years ― the National Bureau of Economic Research notes recent recessions happened in 2007, 2001, 1990, 1980, 1973, 1970, 1960, 1957, 1953, 1949 and 1945.

“There will be another recession,” Derrow says. “There will be another recovery. And so on and so forth. Even as each one is different, there are enough similarities in actions to take before, during and after that it isn’t impossible to make a plan.”

Energize employees

Darrow’s strategy was to rebrand Ohio Transmission and Pump Co. into OTP Industrial Solutions, with a new logo and website, and to invest in employees and a new factory for Air Technologies. With those as objectives, he set out to energize the troops.

“Actually, I would say if there were any concerns, it was over not doing it,” he says. “In most of our markets outside of Ohio, we were downplaying the Ohio element of it anyway. We were going to market as OTP rather than Ohio Transmission and Pump. So there wasn’t much of any resistance. But to the extent that there was any, it was, ‘Well, gee, this isn’t free. Why should we spend money now when things are so challenging?’

“That is where leadership is so important to demonstrate to people by action that your core values actually mean something,” Derrow says.

He found it more important than ever to reinforce the company’s core values of integrity, achievement, balance and, especially, investment. By showing that a core value (investment) was being shored up with the decision to spend during a recession, it elicits trust and confidence from employees.

Derrow took advantage of the culture of collaboration that had been built at Ohio Transmission Corp. to get the employees engaged in the investment “fever.”

“We talk about everything,” he says. “Involve your management, executive management, local management, sales people and staff people. We talked about the entire process, what the name was going to be, what the logo was going to look like, we talked about all of it.”

Cultural collaboration eliminates a sole deciding figure. Accordingly, decisions are those of a team.

“There isn’t one person who gets to say, ‘We’re doing this,’” Derrow says. “Even in my position as chief executive, one would think that I can, and maybe even should, simply say, ‘We’re doing this and everybody has to follow along.’

“I may have a good idea, and I certainly do have responsibility to set primary strategic goals, but even that is a process of talking to your folks, listening to your folks, listening to what your customers say and in making decisions that are collaborative no matter what your role is.”

If you don’t have a culture of collaboration, bring in outside resources that have the talent or skills you need.

“It is still then a matter of what you want to do as a company, where are you trying to go, and what is your objective,” Derrow says. “Ultimately, you end up collaborating. You have a culture of collaboration of some sort whether you like it or not, even if you are bringing in outsiders. It’s a collaborative process for you to tell the outside entity, the consultant, what it is you are trying to accomplish and you work together to get the outcome.”

You have talented people who built your success and are best positioned to make decisions about where you’re going next, and you can bring in outsiders to help you go where you want to go rather than tell you where that ought to be.

“An interesting part of this is I was not involved much at all in the details of the rebranding process and the website design,” Derrow says. “That was something mostly our team did. My role was to say yes to the investment, and I do care about the design looked like, so I had input what the logo was and color scheme and such for the website, but other than that, our team and our service providers ― they made all the decisions.”

A new logo was designed for OTP Industrial Solutions, along with a new, interactive website.

Meanwhile, Air Technologies received a large investment in not only a new factory, but in a decision to keep all employees on the payroll and even add some sales representatives.

“We were not sure that we would be able to regain profitability during the recession, because it was a deep one,” Derrow says. “Yet we believed that our people are the ones who are responsible for our success and that when times get tough, it’s not our way to just toss people overboard.”

The decision to invest in production facilities was made before business had fully recovered. The company’s Direct Air product, which is compressed air as a utility much like natural gas, has been a fast-growing business for Air Technologies. The new factory went online last year.

“Those (the staff and the factory) were significant investment decisions when business was still pretty bad,” he says.

Don’t forget the human factor

Even though the strategies were accepted and the rebranding and expansion projects were going ahead, Derrow still had to contend with managing during a recession.

“Our sales volume dropped very rapidly and that’s always one of those things that comes as a surprise, and is not a particularly positive surprise,” he says. “So I guess for us, and this really gets back to the notion that each company is unique, each company’s culture is unique, the attitudes and objectives of the owners and leaders of each company are unique, so there isn’t one right answer on how to manage through a recession.”

For Derrow’s company, it was a matter of collaborating with the people and talking openly with the teams.

“We have 360 people now, and you can’t manage through such a challenging period without engaging the people in the organization,” he says. “We believe in being open and honest with our people and telling them what’s going on, telling them the company’s position, telling them our strategy and making them part of the process from start to finish.”

Within a small group of options, communication methods are fairly standard. What Derrow found important was that the more effective you want your message to be received, the more methods you should use.

“Have meetings, send out e-mails to folks, to all of your associates, share what’s going on and what you are doing on an ongoing basis through multiple means,” he says. “Have corporate-level meetings and all-associates type e-mails, local meetings and one-on-one conversations with people. People get nervous. People have families to take care of. They have their own mortgages to pay.

“There are individuals who work for you who have their own lives and so during a tense period, you have to be receptive to the fact that there are real individual human beings involved,” he says. “So you could have global e-mails and meetings, but at the end of the day, you have to be one-on-one with people and listen to their fears and concerns and show them the way forward.”

The good thing is that your managers are people, too ― they have their own fears. They carry it out in the same way that the executive team carries it out with them.

“So if you start there, and make it clear that you expect that the kind of conversations you’re having with the executive team the executive leaders are having with their managers, expect their managers to have those very same kinds of conversations with the people on their teams all the way to the line-level people that work there.”

How to reach:Ohio Transmission Corp., (614) 342-6123 or www.otpnet.com

The Derrow File

Phil Derrow, President and CEO, Ohio Transmission Corp.

Birthplace: New York City. But I was only there for three days, or for however long they kept my mother and me in the hospital. My family lived in New Jersey at the time, and the hospital was in New York. I’m from Columbus. My family moved there when I was 3.

Education: I am a graduate of The Ohio State University. I was a marketing major. I suppose you could say I minored in engineering, but my degree did not say engineering. I took mechanical engineering classes and then moved to the business school and got a marketing degree.

What was your first job?

My very first job out of college was with a local car dealer, selling cars. That particular profession has a lot of negative things associated with it, and the reality is I worked for a good guy, and I learned how to sell. I learned that the best way to sell is to listen to customers and let them sell themselves. It was a straight commission job, and if I wasn’t any good at it, I didn’t make any money. No draw. I would say there were some valuable lessons and there were also some valuable lessons about how to manage differently, shall we say. I didn’t want to manage others the way I was. I was there six months.

What was the best business advice you ever received?

The best business advice came from watching my father who was the founder of the company along with a partner. So this kind of takes the form of a story. Leadership and management are always about others. It isn’t about you. So that’s how I would phrase the best business advice. And the story is, I think I was about 8, and I wanted something as most 8-year-olds do, and my father said no. I said, ‘How come?’ and he said, ‘Because we can’t afford it.’ I said, ‘Why not? You’re the boss; why don’t you just take more money?’ His response was something along the lines of, ‘There are other people who work for the company, and if I just take more for me, then I’m not treating them with the respect that they deserve. They’re the ones who are helping to build the company along with me.’ So it was one of those lessons that said it isn’t all about you. It’s about others.

What’s your definition of success?

Getting back to the best advice ― it isn’t about you, it’s about others ― my definition of success would be defined as creating a workplace where others can be successful together and create a thriving and successful business.

Chain store sales seen up again in October as consumers spend

NEW YORK ― October sales reports this week will show steady spending by U.S. consumers, as improving finances for many shoppers helped overcome a barrage of scary headlines about the economy.

October can be a slow month, falling in the lull between the back to school season and the start to year-end holiday shopping. But it does give retailers a read into shoppers’ mindset and intentions ahead of the Christmas blitz.

A tally issued by Thomson Reuters on Monday found that Wall Street analysts expect the 23 retailers in its index — including Costco Wholesale Corp and Macy’s Inc — to report a 4.7 percent increase in October sales at stores open at least a year, or same-store sales, well above the 1.6 percent increase in October 2010.

Most of the chains will report monthly sales on Wednesday and Thursday of this week.

“The consumer is out there spending,” said Craig Johnson, president of Customer Growth Partners. “Consumers are financially healthier now than they’ve been in years.”

Shoppers have paid down enough personal debt since the recession ended that those with jobs feel comfortable spending more and are doing just that, said Johnson, who last week forecast the best holiday season since 2004.

But they are not spending with the reckless abandon of a few years ago and insist on deals if they are to spend.

“As has been the case for the past year, there will be a focus on value. Shoppers will be lured to specific promotions, especially for mid-tier retailers,” said Paul Lejuez, a Nomura analyst.

Department stores should continue to show solid gains, particularly Macy’s Inc and Kohl’s Corp, which got boosts last month from their exclusive Karl Lagerfeld and J.Lo clothing lines, respectively.

At the high end, Nordstrom Inc. and Saks Inc. are also expected to report strong October sales, helped by luxury’s continued recovery.

Costco is expected to log the biggest gain in the survey, with higher gas prices contributing to a 8.7 percent jump. The last in class is expected to be Gap Inc., hurt by a 6.3 percent drop at its struggling North American flagship chain and an even steeper overall drop abroad.

Consumer spending up in September after savings efforts are cut back

WASHINGTON ― Sluggish growth in U.S. consumer income in September led households to cut back on saving to increase their spending, casting doubts over the durability of the economy’s third-quarter growth spurt.

The Commerce Department said on Friday consumer spending increased 0.6 percent, matching expectations, after a 0.2 percent gain in August. Consumer spending accounts for about 70 percent of U.S. economic activity.

With income edging up 0.1 percent last month, spending was at the expense of saving, which dropped to an annual rate of $419.8 billion, the lowest level since August 2009, from $479.1 billion in August.

The saving rate, the percentage of disposable income socked away, fell to 3.6 percent, the slowest since December 2007, from 4.1 percent in August.

Income fell 0.1 percent in August and economists had expected a 0.3 percent increase in September.

“Very weak income, but very solid consumption even though consumer confidence is in recession. So that’s good news for the economy,” said Kurt Karl, chief U.S. economist at Swiss Re in New York. “(But) it’s hard to sustain without more income growth.”

A separate report from the Labor Department showed wages and salaries expanded 0.3 percent in the third quarter — the smallest rise in a year — after gaining 0.4 percent pace in the prior quarter.

U.S. Treasuries prices held steady at higher levels after the data. Stock index futures were lower after a big rally on Thursday, while the euro extended a decline against the dollar.

In September, inflation-adjusted disposable income slipped 0.1 percent, declining for a third straight month.

Sturdy consumer spending contributed to gross domestic product growing at a 2.5 percent annual pace in the third quarter, the fastest rate in a year, after an anemic 1.3 percent rate in the second quarter. Much of the spending data was included in Thursday’s GDP report.

But given that income is not driving spending, the economy could lose some of its new found momentum. Consumer spending grew at a 2.4 percent pace in the last quarter, the fastest in nearly a year.

Transportation boosts July durable goods orders

WASHINGTON ― New orders for long-lasting manufactured goods rose more than expected in July on strong demand for aircraft and motor vehicles, government data showed on Wednesday, but a gauge of business spending fell.

The Commerce Department said durable goods orders surged 4 percent after a revised 1.3 percent drop in June, which was previously reported as a 1.9 percent fall.

Economists polled by Reuters had expected orders to rise 2 percent last month. Orders were buoyed by a 14.6 percent jump in bookings for transportation equipment, which was the largest increase since January.Excluding transportation, orders unexpectedly rose 0.7 percent after gaining 0.6 percent in June. Economists had expected this category to fall 0.5 percent.

But non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 1.5 percent last month after a revised 0.6 percent rise in June.

Economists had expected a 1 percent fall from a previously reported 0.4 percent gain.

The decline in business spending plans, coming on the heels of weak readings on regional factory activity so far this month, could add to fears that the manufacturing sector is running out of steam.

However, this business spending plans category normally weakens in the first month of each quarter in part because of an incomplete seasonal adjustment of the power equipment subcomponent.

Manufacturing has supported the economy’s recovery. However, a plunge in share prices has hit both business and consumer confidence. Regional Federal Reserve factory surveys so far for August have been sharply weaker.

Last month, durable goods orders were buoyed by a 43.4 percent surge in aircraft orders, which erased June’s 24 percent slump. Boeing received 115 aircraft orders, up from 48 in June, according to information posted on the plane maker’s website.Motor vehicle orders jumped 11.5 percent, the largest increase since January 2003, after edging up 0.1 percent the previous month, indicating a fading of the supply chain disruptions from Japan.

Outside of transportation, details of the report were mixed, with orders for machinery and computers and electronic products falling. However, orders for primary metals, and capital goods rose.

Shipments of non-defense capital goods orders excluding aircraft, which go into the calculation of gross domestic product, edged up 0.2 percent after rising 1.9 percent in June.