Chin Up in the Downswing

positive economic news during recession

Consumer Spending Up; Dow Chemical, Procter & Gamble Beat Q1 Projections; China Stimulus Package Bolsters American Businesses

April 30, 2009 07:00 PM
by Anne Szustek
The month of April closes out with promising U.S. consumer spending figures, better-than-expected performance from Procter & Gamble and Dow Chemical and hope for the global economy, courtesy of China’s stimulus package.

Bright Spot in Wednesday’s Economic Report

Wednesday’s report on the state of the U.S. economy, at first glance, appears dreary at best. During the first quarter of this year, the American economy shrank by an annualized rate of 6.1 percent. Here’s the upside: after dropping the last two quarters of 2008, consumer spending was up 2.2 percent during the first three months of this year. That includes a 9.4 percent surge in spending on such durable goods as appliances and electronics.

P&G, Dow Chemical Outperform Analyst Estimates

Both Procter & Gamble and Dow Chemical beat analysts’ average estimates for their past accounting quarters. Market watchers polled by FactSet Research overall thought that P&G would earn $0.81 per share this past quarter on revenue of $18.9 billion. The leading household goods manufacturer pulled in profits of $0.84 per share, or $2.61 billion. This was down year-on-year from the first three months of 2008; however, P&G said it would have pulled in $0.86 per share had the company not sold off its Folgers coffee business.

Dow Chemical also beat projected estimates, earning a small profit; Wall Street analysts had predicted that the company would post a loss of $0.12 per share. Dow earned a net income of $0.03 per share during the first quarter of 2009, despite sales figures showing slower growth than expected. Also playing into Dow Chemical’s year-on-year 97 percent decrease in profits was its $18.8 billion acquisition of specialty chemicals manufacturer Rohm & Haas.

China’s Stimulus Package Also Revs Up U.S. Businesses

China’s $585 billion stimulus package, largely geared towards shoring up infrastructure in the world’s third-largest economy, is benefiting U.S. industrial equipment manufacturers who are seeing lag time in benefits from the United States’ own $787 billion stimulus package. Caterpillar and Goodyear Tires and Rubber are already cashing in. The latter sees potential in China due to record car sales there last month; Caterpillar CEO James W. Owens told The Wall Street Journal that company excavator sales have bounced back to some of the highest levels ever during the past few months. Earlier this month, Chin Up in the Downswing cited a report indicating that commodities producers like United States Steel Corp and Freeport-McMoRan stand to benefit, an argument backed up by The Wall Street Journal: “Rising demand in China helps all steelmakers … because it keeps excess Chinese steel from flooding the market and depressing prices.”

China’s spending on infrastructure more than doubled during the first three months of this year compared to the same period in 2008, as partly evidenced by an increase in the country’s Purchasing Manager’s Index from 49 in February to 52.4 in March. Indices of 50 or higher signal growth.

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