Tuesday, March 12, 2013 | Edited by Daniel Moores
||Americans Take Payroll Tax Increase in Stride
Consumers and businesses are treating higher payroll taxes and federal spending cuts as just a speed bump for a U.S. economy poised to accelerate later this year.
Americans are saving less and spending more for purchases such as new automobiles, as household net worth climbs with rising home values and stock indexes surging to record highs. Companies are ramping up hiring, adding 246,000 to private payrolls in February. They're also expanding investment and rebuilding inventories as they put profits accumulated during the recovery to work.
"A lot of things are going the right way," said Brian Jones, a senior U.S. economist at Societe Generale in New York, whose private employment forecast was closest to the February gain among economists surveyed by Bloomberg. "The labor market is picking up momentum. Businesses are seeing demand. More people working means more people will be spending money. To a certain extent, this neutralizes the effects" of higher taxes.
Growth will pick up in the second half of the year as the fallout from the budget cuts dissipates, paving the way for even stronger spending by businesses and consumers, projections from Barclays Plc and JPMorgan Chase & Co. show. Gross domestic product will rise at a 2 percent annual average pace in the latter six months of 2013 after a 1.5 percent rate in the first two quarters, said Dean Maki, chief U.S. economist at Barclays.
"The economy is at a point where it can handle the fiscal tightening without screeching to a halt," said New York-based Maki, who is also a former Federal Reserve board economist. "We'll see some slowing, certainly, but the economy is not as fragile as it was."
Even as Congress is forcing Brent Phipps's employer, the U.S. government, to reduce spending by $85 billion this fiscal year, the 25-year-old paralegal is still going shopping.
Browsing through an aisle of neon green, pink and transparent plastic storage containers at a Target Corp. store in Washington, Phipps, who works for the Justice Department, said the payroll tax increase hasn't altered his spending habits.
"I didn't really pay any attention to it," he said. "I can’t say I had any particular, 'oh no, I'm not going to do X, Y and Z thing.'"
Americans are opening their wallets for bigger-ticket purchases, too. General Motors Co. and Ford Motor Co. predict automobile sales, on pace for the best year since 2007, will remain resilient. Cars and light trucks sold at a 15.3 million annual rate in February after 15.2 million a month earlier, according to Ward's Automotive Group.
"Consumers appear to be taking higher payroll taxes in stride, at least when it comes to replacing older vehicles," Kurt McNeil, vice president of U.S. sales operations for Detroit-based GM, said on a March 1 conference call.
Norris Home Furnishings, a Fort Myers, Florida-based furniture retailer with three stores, exceeded its goal for 15 percent sales gains in January and February from a year earlier, company owner Larry Norris said. Rising home prices in the region have improved consumer attitudes even in the face of higher taxes, the 70-year-old business owner said.
"People are a lot more cautious with their money than they were at one time, but they are still spending," he said. "Consumer attitudes are improving, no question."
Retailers Gap Inc. and Limited Brands Inc. each reported sales at stores open at least a year rose 3 percent in February, exceeding analysts' forecasts. Gap also owns the Banana Republic and Old Navy store chains, while Limited's brands include Victoria's Secret. Costco Wholesale Corp., the largest U.S. warehouse-club chain, reported a 6 percent jump that also topped analyst estimates.
The improving sales outlook is encouraging businesses to expand and add workers. Lowe's Cos., the second-largest U.S. home-improvement retailer, is boosting spending on store upgrades and hiring. The Mooresville, North Carolina-based company said it plans to open 10 stores in 2013.
Labor Department data released on March 8 showed overall hiring jumped by 236,000 last month after 119,000 in January, and the unemployment rate fell to 7.7 percent, a four-year low. Together with a gain in average hourly earnings and a longer workweek, the latest figures bode well for consumer spending, which accounts for about 70 percent of the economy.
A report on Monday indicated job gains will continue. The Conference Board's Employment Trends Index increased 1.1 percent in February, the biggest advance in a year. The gauge aggregates eight labor-market indicators to forecast short-term hiring trends. On average, it can signal a rebound in hiring as little as three months before the fact and can predict job declines six to nine months in advance, according to the New York-based research group.
Americans also are benefiting from rising stock and home prices. Household wealth climbed in the fourth quarter to the highest level in five years, according to Fed data. At $66.1 trillion, net worth for households and non-profit groups is approaching its pre-recession peak of $67.4 trillion reached in 2007.
"It's definitely a big plus for the economic outlook," said Joe Carson, director of global economic research at AllianceBernstein LP in New York, who predicts net worth will climb to a record this quarter.
The S&P 500 index has advanced 8.8 percent since the beginning of 2013 to reach 1,551.18 on March 8, less than 1 percent from its record high reached in October 2007. Further gains are likely, and the stock gauge may climb to 1,600 later this year, said Allen Sinai, chief global economist at Decision Economics Inc. in New York.
The higher equity prices and improving job market are boosting consumer confidence. The Bloomberg Consumer Comfort Index, up for a fifth week, is at its highest level of the year, and the share of Americans with a positive view of the economy held at its strongest reading since early 2008.
Ann B. Lally, an Atlanta digital marketing consultant, said she'll spend a "few thousand dollars" on a weeklong ski vacation to Deer Valley, Utah, later this month with her sister and mother.
While taxes have been raised this year, "we have planned accordingly," she said. "I have budgeted for it. I love to ski -- and I am not a big spender."
One reason purchases are likely to hold up in the face of higher taxes is that affluent consumers, who make up a disproportionately large share of spending, tend to trim savings rather than consumption when faced with such constraints, economists at UBS Securities LLC said. They estimate the top 1 percent of income earners put 51 cents of each dollar toward savings, allowing plenty of leeway to keep spending.
Recent data show this is already happening. Consumer spending rose in January even as incomes dropped by the most in 20 years, pushing the saving rate to a five-year low.
Like households, companies are in better shape than they were a few years ago to ride out the drag from the $85 billion in across-the-board budget cuts, known as sequestration, that began this month. "Businesses have fortress balance sheets," Sinai said.
Profits for corporations in the S&P 500 index climbed to a record $100.75 a share in 2012, and will exceed $120 a share next year, double the $60.43 seen in 2008, according to Wall Street estimates compiled by Bloomberg.
The cash is stoking investment as corporate confidence and demand improve. Orders for non-military capital goods excluding aircraft, a proxy for future business spending on equipment and software, climbed 7.2 percent in January from the prior month, the biggest gain since September 2004. They're up 9.8 percent since November, the most for a three-month period since 1993.
"We will keep our foot to the floor and will almost certainly set still another record for capital expenditures in 2013," Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., wrote in an annual letter to shareholders posted online March 1. "Opportunities abound in America."
Buffett said his Omaha, Nebraska-based company last year spent $9.8 billion, an increase of about 19 percent from 2011, on plants and equipment as he bolstered railroad and utility units.
In another sign of growing confidence, manufacturers are trying to rebuild inventories and farm stockpiles also will catch up after the hit from last year's drought, according to UBS. This will add about 0.6 percentage point to first-half economic growth, said Drew Matus, deputy U.S. chief economist at UBS in Stamford, Connecticut. While the economy faces some drags, "people are ignoring the positives," he said.
"We're holding up better than people thought," said Matus, who is also a former Federal Reserve Bank of New York analyst. "Never count out the U.S. consumer. Households are doing what they do, which is to spend money." He said that's part of the reason why "the first half isn't looking awful, and the second half should end better."
(Source: Bloomberg, 03/11/13)
||Healthy Offerings on Retail Menu at Shopping Centers
Shopping can be good for your health.
The national obsession with fitness, healthy eating and battling obesity is altering the retail landscape of neighborhood shopping centers and strip malls: They are becoming suburban havens of healthy living.
Health clubs are increasingly anchoring outdoor shopping centers. Yoga studios, yogurt shops, vitamin and workout apparel stores, organic food markets and health foods restaurants quickly follow.
Health clubs -- from large workout centers featuring indoor pools and row after row of equipment to small home-gym types of franchises -- have undergone "a huge explosion over the last 10 years," says Tom Simmons, Mid-Atlantic president of Kimco Realty, the largest owner and manager of neighborhood and community shopping centers. "The consumer is becoming more mindful of healthy living."
Frozen-yogurt stores are replacing retailers of fattier ice cream, he says. Kimco had 13 yogurt stores in its portfolio just five years ago. Today, it has 73. The square footage they occupy went from 16,000 to 108,000 during that time.
Restaurants with names such as Sweetgreen, Sweet Leaf and Energy Kitchen (slogan: "fast food, not fat food") are sprouting in strip malls across the country, catering to the national passion for all things "green."
GNC, seller of vitamins, supplements and herbal remedies, is opening 150 stores this year, Simmons says, and Smoothie King plans 1,000 more stores in five years.
Fitness International, owner of 665 LA Fitness and City Sports Club locations, opened 54 clubs last year -- many in shuttered Circuit City and Borders stores, says Bill Horner, senior vice president/chief real estate officer.
"Typically, the health club member has higher educational attainment and disposable income," he says. "As a shopping center owner, if you think that's what's coming into your center two or three or four times a week, we've become a very viable anchor tenant to attract a pretty attractive customer."
Peak visits at health clubs are from 4-7 p.m. Monday through Thursday, Horner says. "We've taken the dinner prep time away from them," he says and that's where healthy prepared foods from restaurants such as Sweetgreen or produce from a MOM's Organic Market come in.
The shift is happening even in centers that don't have health clubs.
At one of Kimco's properties along Philadelphia's posh Main Line, Suburban Square in Ardmore, Pa., Macy's remains the anchor store, but the 63-year-old outdoor center's healthy makeover is striking:
"When we are looking at opportunities for new store locations, we look for areas that are considered the hub of health in the community," says Wynn Spencer, Lululemon vice president of store development. "Often, that means we are in close proximity to yoga studios, fitness centers, coffee shops and healthy eateries and grocers."
- The old Pierre Deux Furnishings is a New Balance store, a favorite of runners and workout enthusiasts.
- The former Seidenburg Luggage shop is now a Lululemon Athletica, the popular and fast-growing Canadian purveyor of fashionable yoga wear and free in-store yoga instruction.
- Zinman Furs is gone and Sweetgreen has swooped in in its place. A cafeteria line serves locally grown arugula and other fresh items for wraps and salads. Tables are made of reclaimed wood. The "responsibly sinful dessert" is fro-yo.
- Suburban Square also has City Sports, which sells athletic supplies from bike helmets to heart-rate monitors, and The Walking Company (stylish but comfortable shoes). At one end is a food paradise: The Ardmore Farmer's Market and a Trader Joe's.
Rebecca Olsen, a sophomore at Elizabethtown College about 80 miles from Philadelphia, takes the train to visit home in Mullica Hill, N.J. Instead of going all the way to Philadelphia, she gets off at Ardmore and her mother, Nancy, picks her up and drives the hour home. One reason they meet there: the healthy restaurant fare.
"My mom and I would both agree that when they put in a restaurant, both of us would rather go to healthier ones than not," says Olsen, 20.
The two also pick up fresh food at the farmer's market. And when Rebecca got home from spring break, her friends were "all excited" to tell her about the new place that just opened in a strip mall in her hometown: a make-your-own frozen-yogurt shop that offers a wide variety of fresh-fruit toppings.
"It's just a reflection of people being more in touch with their health and watching what they eat and their lifestyle," says Mark Bachus, general manager of Suburban Square. "It strengthens the brand and becomes a destination. The whole healthier lifestyle is not something that's going to go away. It's not a flash-in-the-pan trend."
(Source: USA Today, 03/07/13)
||The Rise of the Female Investor
How to Attract Women to Personal Finance? With a Long-Term, Goal-Oriented Approach
American women may be starting to outearn American men, but personal investing is a different matter: Many of them, even powerhouse female executives, hate dealing with it.
Darline Jean, president and chief executive of the About Group (which owns About.com), says that she doesn't "have the downtime to look at all those stock tickers and research every one of those companies' performance histories." The online interfaces of financial services firms, she says, offer "the kind of blipping screens that guys like -- to hunt stock prices like they're moving targets."
Like many other successful women, Ms. Jean outsources investing to a financial adviser who presents her with data on how to reach her long-term goals.
Financial services companies admit that, historically, they haven't done a great job of attracting women as customers, but with women rising fast in the income and managerial ranks, they're now paying more attention. The number of women-owned firms increased by 54% between 1997 and 2012 -- that's a rate 1.5 times the national average.
As of 2012, it is estimated that there are over 8.3 million women-owned businesses in the U.S., generating nearly $1.3 trillion in revenue. Liza Mundy, author of "The Richer Sex," says that if academic enrollment is any indicator, in 25 years women will dominate once male-dominated fields such as law and medicine.
Yet surveys show that men are still more likely than women to take the lead with the family financial account. According to a recent study by Prudential, 19% of wives said they took control of financial decision making, versus 38% of husbands. Among female breadwinners, 20% said they were "very well prepared" to make wise financial decisions, compared with 45% of their male counterparts. (It's worth noting, of course, that their levels of confidence are no indication of their real level of preparedness.)
In recent research, Karin A. Risi, principal at the Vanguard Group's Asset Management & Advice Services division, has found that women differ substantially from men in how they relate to investing. They don't want to hear about the growth or comparative performance of different funds; they want information about reaching their long-term goals, like putting a kid through college.
"Investing is not a hobby or sport for women," she says. "But because financial services have long been male dominated -- and because men respond to it that way -- much of our industry treats it that way."
Moreover, Ms. Risi says, "We've found that in general women, more than men, are disciplined thinkers, good long-term planners."
Vanguard's findings hint at a long-held stereotype about women as investors -- that they are somehow less aggressive than men when it comes to money management. To which one might respond: What's wrong with that? A number of studies over the years have found that women are more likely to buy and hold. And as a 2011 Barclays and Ledbury Research study put it, "women were more likely to make money as investors in the financial markets, mostly because they didn't take as many risks as men."
Such traits aren't exactly liabilities, whatever your sex. According to an index from the firm Rothstein Kass, female hedge fund managers produced a return of nearly 9% through the third quarter of 2012 (based on 67 hedge funds with female owners or managers), while their male counterparts, according to the HFRX Global Hedge Fund Index, choked out a mere 2.69% net return through September. Yet, despite their higher returns, female-run hedge funds are a small minority of the industry, a scant 16% of Rothstein Kass's respondents.
Of course, the bulk of new blood in female investing clients doesn't consist of hedge fund managers. They're more likely to be middle-income women (think physician's assistants, soldiers, teachers). And if financial services companies want to make a buck off the masses of these female breadwinners, they are going to have to engage with them on a different level. Companies such as Motif Investing, which encourages clients to make investments based on social trends and themes, or Betterment, which keeps clients on track with meeting their goals, are reaching out to women by focusing on their personal interests and long-term goals.
Nor is it up to the financial services industry alone, says Amanda Steinberg, the founder and chief executive of DailyWorth.com. It is also up to the rising ranks of female earners, who need to change their attitudes about money. Women, says Ms. Steinberg, need to get comfortable with investing not just by seeking out reliable financial advisers but also by educating themselves about the basics.
As longtime Silicon Valley marketing strategist and adviser Becky Saeger says to women who are taking the investment plunge: "Risk averse doesn't mean you're afraid -- it means you're thinking."
(Source: The Wall Street Journal, 02/25/13)
Daily Sales Tip: Get An Annual Checkup
Just as you should regularly go to the doctor for a checkup, you need to get a sales checkup.
You need to see a videotape or listen to a recording of yourself that captures how you look and sound when you pitch. What's good enough for your golf swing goes double for how you make your living.
Even if you saw a tape of yourself 18 months ago, you've changed. And even if it's for the better, you need to know.
Source: Marketing consultant/author Michael Schrage