SATURDAY, JULY 31, 2010
KLMNO WASHINGTON BUSINESS Economic growth slows in second quarter GDP from A1
half of the year.” The new numbers — and the spreading realization that slug- gish growth may be a lasting trend rather than a one-quarter phenomenon — hang over the political world heading into No- vember’s midterm elections. The House of Representatives left for its August recess Friday without resolution of policies meant to boost the economy, including legislation to support small-busi- ness lending. The stalemate over govern- ment policy notwithstanding, the economic dynamic for the months ahead appears to be set: Americans’ spending on goods and services is rising, but given high joblessness, stagnant wages and an overhang of debt from the boom years, consumption spend- ing is rising too slowly to create strong growth. Personal consumption rose at an annual rate of only 1.6 percent in the second quarter, and con- sumer spending appears to have softened as the quarter pro- gressed. “The problem is it looks like the consumer was really weak- ening in June, so you’re starting the third quarter in a position of weakness,” said David Shulman, senior economist at the UCLA Anderson Forecast. “The compo- nents of this report are ugly.” Meanwhile, a number of fac- tors that boosted economic growth starting last summer are about to run their course. The second-quarter GDP num-
ber, soft though it was, received a one-time boost from businesses building up their inventories (contributing 1.05 percentage points of growth) and federal government spending (0.7 per- centage points), both of which are likely to fade. Growth was also supported by a burst of resi- dential investment (adding 0.6 percentage points) — caused by home builders’ rushing to finish projects to take advantage of a home-buyer tax credit — that probably will turn negative in fu- ture quarters.
One bright spot: Business spending on equipment and soft- ware rose 22 percent, a strong gain. Imports were a major drag on second-quarter growth but tend to be volatile and could re- verse in future quarters. In effect, a growth rate in the
mid-2 percent range signifies an economy merely treading water. Population growth and techno-
EARNINGS
Coventry profit falls on litigation charge
Health insurer Coventry Health Care said Friday that its profit plunged in the second quarter af- ter it set aside $278 million to cov- er the costs of a lawsuit against a Louisiana subsidiary. The Bethesda-based company
also raised its earnings forecast for the second time in a month. Earlier this year, Coventry dis- closed lawsuits against its First Health Group business, alleging the company violated Louisiana law in its handling of workers’ compensation claims. A court awarded the plaintiffs $262 mil- lion, and on July 2 Coventry said a state appeals court had affirmed that decision. It set aside $278 million, or $1.18 per share, to cov- er those costs. Coventry said its net income dropped 94 percent to $1 million, or a penny per share, in the three months ended June 30. Excluding the litigation charge and a gain of 18 cents per share from a Medicare Advantage busi- ness Coventry chose not to renew, it said it earned $1.01 per share. Revenue fell 18 percent to $2.87 billion. Analysts expected a profit of 52 cents per share and $2.84 billion in revenue, according to a survey by Thomson Reuters. —Associated Press
SHANNON STAPLETON/REUTERS
A shopper studies the shelves at a New York Home Depot. Personal consumption rose at an annual rate of only 1.6 percent in the second quarter, and spending appears to have softened as the quarter progressed.
“You’re starting the third quarter in
a position of weakness.” — David Shulman, senior economist at the UCLA Anderson Forecast
logical improvement mean that the United States is capable of in- creasing its economic output by 2.5 to 3 percent per year indefi- nitely, so growth faster than that is needed to bring down jobless- ness and put idle factories to use. The middling pace of growth is being felt at the nation’s busi- nesses — especially those in the service sector — and leading them to hold back on hiring. “It’s hard to know what will happen next,” said Pamela Kebe, manager of Piccolo Piggies, a children’s clothing store in Georgetown. The retailer was ex- pecting the economy to improve, but it hasn’t happened. Kebe and her team have stopped carrying the most expensive children’s
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U.S. Stock Market Performance Index
Dow Jones Industrial Average
10,580 10,520 10,460 10,400 10,340
Nasdaq Composite Index
2315 2290 2265 2240 2215
S&P 500 Index
1121 1112 1103 1094 1085
Mon. Tue.
Dow Jones 30 Industrials Company Close Alcoa
Weekly %Chg
3M
AmExp AT&T BoA
Boeing
Caterpillar Chevron
Exxon Mobil GE
Home Depot HP
85.54 11.17
44.64 25.94 14.04 68.14 69.75 76.21
Cisco Systems 23.07 Coca-Cola DuPont
55.11 40.67 59.68 16.12 28.51 46.04
–0.7 1.1
–0.3 1.6 2.2 0.3 0.6 3.7
–1.2 0.7 6.1
–0.2
Other Measures Index
1 Year %Chg
22.4 –2.5 58.1 –1.5 0.5
57.6 60.7 12.6 5.0
11.0 32.0
–0.1 –15.6 2.6 0.9
23.0 10.3 7.8
Close
DJ Total Stock Market Index 11,492.94 Russell 2000
Post-Bloomberg DC Area Index 189.82 CBOE Volatility (VIX)
650.89 23.50 Wed. Thur.
Company Close IBM
Intel J&J
JPMorgCh Kraft Foods McDonald's Merck
Microsoft P&G Co Pfizer
Travelers
United Tech Verizon
Wal-Mart Walt Disney Fri.
Weekly %Chg
128.40 20.60 58.09 40.28 29.21 69.73 34.46 25.81 61.16 15.00 50.45 71.10 29.06 51.19 33.69
0.0
–5.0 0.8 1.1
–1.4 –0.2 –1.2 0.0
–1.2 2.9 0.6 0.3 3.7
–0.9 –1.3
1 Year %Chg
8.9 6.6
–6.0 4.7 2.2
25.4 15.1 8.4 8.8
–5.9 20.3 31.1
–3.7 2.4
28.5
Interest Rates Consumer Rates
Weekly%Chg 1 Year%Chg –0.1 0.0 1.7 0.1
13.3 16.7 13.1
–7.5
Money market funds 6-Month CDs 1-Year CDs 5-Year CDs New car loan Home-equity loan
0.75
0.80 1.14 2.43 6.16 7.35
0.45% 0.25% 3.25%
Bank Prime Federal Funds LIBOR 3-Month
3.19% 4.05% 4.59%
30-Year fixed mortgage 15-Year fixed mortgage 1-Year ARM
1101.60 –0.1 +11.6 2254.70 –0.7 +13.6
clothing lines, such as Simonet- ta, and are instead selling less- costly ones such as Eliane et Lena. Customers who used to come in willing to spend $5,000, Kebe said, are now willing to buy only about half that much. John Ho, co-owner of Yvonne’s
Day Spa in Mount Vernon, said foot traffic has been down about 25 to 30 percent compared with last year. Many of his customers are tourists, who aren’t traveling as much these days. “The ripple effect of the econo-
my is hitting us,” Ho said. The Labor Department will re-
port on the July employment sit- uation on Friday. The report is expected to show that private employers added 90,000 jobs
this month — a level consistent with the sluggish growth report- ed in second-quarter GDP and below the rate of job growth needed to keep up with an ever- growing labor force. The onset of sluggish growth presents a challenge to policy- makers in the Obama adminis- tration, in Congress and at the Federal Reserve. Unlike during the depths of the recession, when economic output was plummet- ing, the economy is not in the kind of crisis that creates impe- tus for bold action.
Economists are, for the most
part, predicting an ongoing slug- gish recovery rather than a re- newed contraction. “There are plenty of reasons to be concerned,” said Mark Vitner, senior economist at Wells Fargo. “But I don’t think we’re going to have an outright double dip.”
irwinn@washpost.com
THE MARKETS
Weekly Close %Chg
1 Year %Chg
10,465.94 +0.4 +14.3
Industry Group Real Estate Mgmt & Dev Office Electronics Biotechnology
Personal Products Air Freight & Logistics
Power Prodct & Enrgy Trdr Diversified Consumer Svcs Semiconductors & Semi Eqp Life Sciences
Building Products
S&P 500 Industry Group Snapshot –12%
Weekly %Chg
11.9 5.3 3.6 3.4 3.2
–3.4 –4.0 –5.0 –8.7
–10.0
International Stock Markets Americas
Close
Brazil (Bovespa) Canada (S&P/TSX Comp.) Mexico (Bolsa) Europe
Eurozone (DJ Stoxx 600) France (CAC 40) Germany (DAX) U.K. (FTSE 100)
Asia Pacific
Australia (ASX 200) China (CSI 300) Hong Kong (Hang Seng) Japan (Nikkei)
67,515.40 11,713.43 32,308.74
255.35 3643.14 6147.97 5258.02 4493.50
2868.85 21,029.81 9537.30
Cross Currency Rates EU €
US $
US $ per EU € per
Japan ¥ per Britain £ per Brazil R$ per
Canada $ per Mexico $ per
0.7670 86.4200 112.6700
0.6372 0.8309 0.0074 1.7564 1.0283
12.6484 16.4902 0.1460
2.2891 0.0203 1.3406 0.0119
Japan ¥
1.3038 0.0116 0.0089
Weekly %Chg
1.8 0.0
–1.5
–0.2 1.0
–0.3 –1.0 0.8
2.7 1.0 1.1
Britain £
1.5692 0.5692 1.2036 0.4368
Brazil R$ Canada $ Mexico $ 0.9725 0.0791 0.7459 0.0606
135.6000 49.1980 84.0400 6.8320 0.3629
2.7552 1.6135 0.5856
0.6197 0.0504 1.7081 0.1388 0.0813
19.8479 7.2020 12.3003 Treasury Performance Over Past Three Months
10-year note Yield:
5-year note Yield:
2.90 1.60
4:30 p.m. New York time.
2-year note Yield:
6-month bill Yield:
0.55 0.19
Note: Bank prime is from 10 major banks. Federal Funds rate is the market rate, which can vary from the federal target rate. LIBOR is the London Interbank Offered Rate. Consumer rates are from Bankrate. All figures as of
1Year%Chg –25%
0% +12%
Commodities Futures
Copper Corn
Crude Oil Gold
Natural Gas
Weekly Close %Chg
$3.3070 $3.9275 $78.95
+3.8 +5.8 0.0
$1181.70 –0.5 $4.92
+7.5
Value of $1000 invested for the past: Exchange-Traded (Ticker)
Weekly %Chg
0% +25%
Coffee (COFF.L) Copper (COPA.L) Corn (CORN.L) Cotton (COTN.L) Crude Oil (CRUD.L) Gasoline (UGAS.L) Gold (BULL.L)
Natural Gas (NGAS.L) Silver (SLVR.L)
6.4 3.8 3.0 3.5
–1.1 –1.2 –1.6 5.1
–1.4
Local Gainers and Losers Value of $1000 invested for the past: Company
Cuisine Solutions Radio One
IndependenceFederal Virginia Commerce Glen Burnie Bancorp Chindex Intl
Optelecom-NKF Inc Sourcefire Inc
AmericanWoodmark Deltek Inc
FBR Cap Markets
OnlineResourcesCorp NII Holdings Inc Integral Systems Gannett
TeleCommunicatinSys
$1.05 $1.19 $1.01 $6.41 $9.08 $14.01 $1.66
$21.34 week
Weekly Close %Chg
19.3 19.0 18.8 16.5 13.2 12.8 12.2 11.7
$16.53 –4.8 $7.50 $3.30
$37.46 $7.56 $13.18
$4.10 –5.7 –6.1 –6.1 –6.3
$3.59 –17.7
–5.1 –5.2
$0 $1000
year $2100
Orange Juice Silver
Soybeans Sugar Wheat
$700
Amerigroup sees income rise 35%
Amerigroup said Friday that its second-quarter net income climbed 35 percent, as the health insurer saw gains from premium revenues boosted by membership growth. The Virginia Beach company said it earned $67.2 million, or $1.31 per share, in the three months ended June 30. That com- pares with earnings of $49.6 mil- lion, or 94 cents per share, in the same quarter of 2009, when re- sults benefited from a tax ad- justment of 43 cents per share. Total revenue climbed 11 per- cent to $1.44 billion. Analysts polled by Thomson Reuters expected earnings of 62
LOCAL DIGEST
cents per share on $1.43 billion in revenue.
Amerigroup, which provides
coverage in 11 states, said mem- bership rose more than 10 percent to 1.9 million people compared with last year’s second quarter. —Associated Press
Genworth slides on disappointing results
Shares of Genworth Financial
plunged Friday, a day after the Richmond-based insurer and fi- nancial-services company’s sec- ond-quarter results widely missed Wall Street’s expectations. Late Thursday, Genworth said its second-quarter income totaled $42 million, or 8 cents per share, compared with a loss of $50 mil- lion, or 11 cents per share, in the year-ago period. On an adjusted basis, net operating income was 24 cents a share, which fell short of the Wall Street consensus esti- mate of 28 cents per share, ac- cording to an analyst poll by Thomson Reuters. Shares fell 14 percent to close at $13.58 Friday.
—Associated Press CONTRACTING
Harris completes purchase of CapRock Harris, a Melbourne, Fla.-based
government contracting and commercial information technol- ogy company with more than 1,500 Washington-area employ- ees, announced Friday that it has completed its acquisition of Houston-based satellite commu- nications provider CapRock Com- munications.
CapRock has about 100 local employees, Harris said in a state- ment. The $525 million acquisition is meant to expand Harris’s interna- tional presence — CapRock has employees in the United King- dom, Indonesia and Brazil — and help the company move into the energy market. CapRock chief executive Peter Shaper will serve as president of the business, which will operate as a Harris subsidiary. —Marjorie Censer
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S
A11
Weekly Close %Chg
$1.4660
$10.5250 $0.1957
week +0.7
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