U.S. stocks flat on GDP report
NEW YORK, Jan. 30 (UPI) -- U.S. stock indexes were flat Wednesday after the government said the economy shrank in the fourth quarter of 2012.
The advanced figure released by the Commerce Department, which is subject to two revisions in the next two months, pegged the gross domestic product at minus 0.1 percent October through December.
The contraction was a surprise. Economists had predicted GDP growth of 1.1 percent.
Balancing out the dour report, Automatic Data Processing Inc. said the economy added 192,000 private sector jobs in January,which beat expectations.
In early afternoon trading, the Dow Jones industrial average added 2.54 points, or 0.02 percent, to 13,956.96. The Nasdaq composite of tech-oriented stocks lost 1.03 points, or 0.03 percent, to 3,152.63. The Standard and Poor's 500 index lost 0.77 points, or 0.05 percent, to 1,507.07.
The 10-year treasury note fell 7/32 to yield 2.027 percent.
Against the dollar, the euro rose to $1.3568 from Tuesday's $1.3492. The dollar rose to 91.10 yen from Tuesday's 90.73 yen.
In Tokyo, the Nikkei 225 index added 2.28 percent, 247.23 points, to 11,113.95.
In London, the FTSE 100 index dropped 0.25 percent, 16.08 points, to 6,323.11.
U.S. GDP slipped in fourth quarter
WASHINGTON, Jan. 30 (UPI) -- The U.S. Commerce Department said the economy put on the brakes in the fourth quarter, dropping from a modest gain to a contraction of 0.1 percent.
The U.S. gross domestic product came in short of the economists' forecast of 1.1 percent growth.
The department said third quarter growth reached 3.1 percent, revising a figure that started at 2 percent when it was at the advanced estimate stage three months ago.
Stock markets have been on a four-week winning streak with the Dow Jones industrial average reaching a 63-month high Tuesday. The dour GDP report and a recent drop in the consumer confidence index is likely to hold the stock rally in check.
The contraction, when considered along with the difficult budget negotiations in Washington, could also impact the U.S. credit rating, which affects borrowing costs negatively, setting up a deeper contraction, said University of Maryland economics professor Peter Morici.
The Commerce Department said the GDP dropped with a pull back in exports and a $40 billion contraction in business inventories.
Consumer spending adjusted for inflation rose 2.2 percent in the fourth quarter after rising 1.6 percent in the third. In another positive development, commercial fixed investment expenditures rose 8.9 percent after shrinking 1.8 percent in the previous quarter.
Exports, however, fell 5.7 percent in the quarter and imports shrank 3.2 percent, a net negative on the GDP.
Federal spending fell sharply, off 15 percent in the quarter, the bulk of that national defense spending, which was off 22.2 percent. Separately, non-defense spending rose 1.4 percent October through December.
Commerce said personal income rose sharply, up 7.9 percent, pushed by "a sharp acceleration in personal dividend income," which was brought on, partly, by companies anticipating changes in the individual income tax rates.
Private jobs up by 192,000 in January
ROSEAND, N.J., Jan. 30 (UPI) -- Payroll firm Automatic Data Processing said the U.S. economy added 192,000 non-farm private sector jobs in January, beating economists' expectations.
Following a gain of 185,000 jobs in December, ADP said firms with under 50 employees added 115,000 jobs in January, while medium sized firms added 79,000.
Firms with 500 to 999 employees added 7,000 jobs in January, but firms with 1,000 employees or more lost 9,000 positions, ADP said.
Economists expected 165,000 jobs were added in January. ADP, meanwhile, lowered its December estimate of jobs gained from 215,000 to 185,000.
ADP said the construction sector added 15,000 jobs in the month. Manufacturing firms gave up 3,000. Trade, transportation and utilities as a group added 33,000 jobs, financial services another 12,000 and professional business services an additional 40,000.
In a separate breakdown, goods producing jobs rose by 15,000, most of that coming from the construction industry. Service oriented jobs increased by 177,000.
According to the ADP's figures, the economy has added an average of 183,000 jobs per month during the last three months. "This is an encouraging sign of steady improvement in the job market," said ADP President and Chief Executive Officer Carlos Rodriguez in a statement.
U.S. welcomes Japan's move on U.S. beef
WASHINGTON, Jan. 30 (UPI) -- Japan, starting Friday, will import more U.S. beef after easing its 10-year-old restrictions arising from mad cow disease concerns, officials said.
The decision to let in more U.S. beef and beef products into Japan was announced this week under new import terms including permitting U.S. beef from cattle less than 30 months old, up from the previous 20-month limit, U.S. Agriculture Secretary Tom Vilsack and U.S. Trade Representative Ron Kirk announced.
"This is great news for American ranchers and beef companies, who can now – as a result of this agreement – increase their exports of U.S. beef to their largest market for beef in Asia," Kirk said in a statement, adding it would help grow American exports and jobs.
The U.S. Agriculture Department said the new import terms will "result in hundreds of millions of dollars in exports of U.S. beef to Japan in the coming years."
Secretary Vilsack said the agricultural exports this year are "expected to set yet another record."
The issue with Japan goes back to December 2003 when Japan banned U.S. beef and beef products after detection of just one animal with the mad cow disease also called bovine spongiform encephalopathy or BSE. In July 2006, Japan partially reopened its market for imports of some U.S. beef from animals aged 20 months or less.
Later, following Japan's independent Food Safety Commission's risk assessment to raise the maximum age of cattle, Japan and the United States entered into consultations to revise the import requirements, the Agriculture Department said.
The decade-old restrictions had hit the U.S. industry hard.
The New York Times, quoting industry experts, reported that although Japan has eased its restrictions, U.S. beef producers still face challenges to come out of their difficulties as the restrictions had led to the paring of cattle population to its lowest in 60 years, blamed also on drought. This occurred even as feed prices jumped, partly as a result of corn being diverted to ethanol production.
The Wall Street Journal, citing official data, said before the restrictions, the United States exported $1.3 billion worth of beef to Japan in 2003. In the 11 months of last year, the exports totaled $849 million, up from $704 million in the same period of 2011.
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