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A2 | Friday, March 13, 2015
THE WALL STREET JOURNAL.
* *
U.S. NEWS
This Was the Winter of Retailers’ Discontent
Harsh weather and
Three’s Not a Charm
consumer caution cited Overall retail sales fell for the third consecutive month amid harsh weather in parts of the country and as
in decline in retail sales, consumers showed continued caution despite still-low gasoline prices.
but hope springs eternal Monthly change in retail sales for select sectors, seasonally adjusted
February -0.6%
2%
WASHINGTON—U.S.
retail
sales fell for the third consecutive month in February as a mix
of bad weather and consumer
caution outweighed an improving labor market and cheap gasoline prices.
Sales at retailers and restaurants decreased 0.6% last month
to a seasonally adjusted $437
billion, the Commerce Department said Thursday. Retail sales
fell 0.8% in January and 0.9% in
December.
“There is no getting around
the headlines on the past three
retail sales reports have been
lousy,” said Richard Moody, chief
economist at Regions Financial
Corp.
Consumer spending is a key
driver of growth, and a persistent slowdown bodes ill for the
economy. But many economists
The surging dollar and a global
slowdown are likely to restrain
the U.S. economy through at least
the first half of the year, according to economic forecasters who
participated in a Wall Street
Journal survey this month.
Harsh weather already is slowing output in the current quarter.
But when that
WSJ
drag ends, a wider
SURVEY
trade gap will remain a headwind,
the
economists
predicted. That could keep overall economic growth just below
3% in 2015.
The panel of 63 economists,
not all of whom answered every
question, forecasts inflation-adjusted gross domestic product to
clock in at an annual rate of
2.3% this quarter, little changed
from the 2.2% pace of 2014’s final quarter.
They expect much of the lost
activity will be made up in the
spring, allowing the economy to
grow at a 3% pace in the second
quarter. For the entire year, the
economists think GDP will grow
2.9%. That would beat the 2.4% increase in 2014 and be fast enough
to push the unemployment rate
down to 5.1% by December from
5.5% in February, they said.
“The economy is growing at a
sustainable rate, but it’s not robust,” said Douglas Duncan of
Fannie Mae. Two big pluses, he
said, were still-low gasoline
prices and the rising number of
young adults forming their own
households. That will lift housing and consumer spending.
But stronger domestic demand
is contributing to a wider U.S.
trade deficit, already evident in
–4
–6
Overall sales of retail
and food services
–8
–10
2012
’13
’14
’15
Building
materials and
garden supplies
Motor vehicles
and parts
Gasoline
stations
2014
2014
2014
’15
’15
and some retailers expect
sharply lower gasoline prices
and steady job gains to deliver a
stronger spring.
Business fell off by about 40%
in February at Circle Furniture
because of inclement weather
and a resulting loss of parking
while streets and lots remained
STRAIGHT COLORADO WHISKEY
Founded by Jess Graber in 2002, Stranahan’s is Colorado’s first
legal distillery since Prohibition. Made in Denver at 5,251
feet, our whiskey is double-distilled from barley and aged in new
American white oak barrels. Darn high up.
clogged with snow, said Harold
Tubman, an owner of the Boston-area chain.
He’s hopeful, however, that
the one-month slowdown simply
means more pent-up demand in
March and April, fueled in part
by rising home prices and years
of customers holding back on
bigger purchases.
“We’re hoping [sales are] delayed instead of wiped out,” Mr.
Tubman said. “If you’re going to
redo a room in your home, it’s a
longer-term decision.”
In February, spending at gasoline stations rose for the first
time since May 2014, a reflection
from month to month, and the
overall trend over the past half
year has been mixed. Overall
personal consumption—a broad
category that captures spending
on goods and services, and accounts for about two-thirds of
output in the U.S.—matched its
fastest rate of growth since early
2006 during the final three
months of the year.
But the broadly positive numbers from early in the fourth
quarter quickly gave way to a
slowdown in consumer spending
during December, January and
now February, leaving some retailers guarded.
“Clearly, there are some positive signs,” Michael O’Sullivan,
Ross Stores president and chief
operating officer, recently told
investors. “I think lower unemployment, lower gas prices,
those are good things. We have
no way of knowing whether
those trends will be sustained
over time.”
As a result, the company is
moving cautiously. “So bottom
line is we don’t really know
what’s going to happen in the
economy,” Mr. O’Sullivan said.
Wealth Gains Start to Lift More Boats
BY NEIL SHAH
the fourth quarter. Faster consumer and business spending in
the U.S. caused imports to jump
during the quarter, while exports
grew only modestly. The wider
trade gap subtracted a huge 1.15
percentage points from GDP
growth in the fourth quarter.
The trade imbalance will remain an obstacle at least
through the first half of this
year, the economists say. The average forecast of economists in
the March survey projects the
continued widening in the net
export deficit will subtract 0.2
percentage point from the
growth rate this quarter and a
larger 0.4 percentage point in
the second quarter.
A majority of forecasters—55%—cite the stronger U.S.
dollar as the top reason for the
widening trade gap. The greenback’s increased value makes
American-made goods more expensive in the global marketplace.
“We have some currency wars
going on,” said Mr. Duncan. He
pointed to easier-money policies
adopted by central banks around
the world. Looser monetary policy, such as the European Central Bank’s move to buy bonds,
typically weakens a region’s currency—a plus for its exporters.
The euro has fallen close to a 12year low against the U.S. dollar.
The second-biggest problem,
say the forecasters, is that the
rest of the world is struggling.
Rajeev Dhawan of Georgia
State University said until the eurozone and China find paths to
stronger economic growth, the
trade deficit will continue to subtract from overall U.S. economic
growth. “We can’t get to 3%
growth if we can’t export to our
major trading partners,” he said.
Stranahan’s® Colorado Whiskey. 47% Alc/Vol. (94 proof). ©2015 Stranahan’s Colorado Whiskey, Denver, CO. Please drink responsibly.
Not surprising; we invented it.
’15
THE WALL STREET JOURNAL.
Source: Commerce Department
of Colorado whiskey.
l
+1.5%
–2
A lot of people have never heard
100% MALTED BARLEY
-2.5%
0
Dollar’s Rise Seen
Curtailing Growth
BY KATHLEEN MADIGAN
-2.3%
Americans’ combined wealth
hit the highest level ever at the
end of last year, thanks to gains
in the stock market and home
prices that could lend support to
consumers and prop up economic growth this year.
The net worth of U.S. households and nonprofit organizations—the value of homes, stocks
and other assets minus debts and
other liabilities—climbed about
2%, or $1.5 trillion, between October and December to $82.9 trillion, after dipping in the previous
quarter, according to a Federal
Reserve report released Thursday.
The figures aren’t adjusted for inflation or population growth.
The value of stocks and mutual
funds owned by households jumped
$742 billion during the quarter,
when the Standard & Poor’s 500stock index gained 4.4%. Much of
the nation’s stock-market gains go
to the wealthy, who tend to save
the proceeds.
However, the value of residential
real estate—the biggest asset for
most Americans—also saw a
healthy pickup of $356 billion last
quarter. That shows the expansion
is being felt more broadly.
“More people are participating
in the wealth creation in America,” said Joseph Carson, an
economist at Alliance Bernstein.
BOEING
Continued from Page One
cant enough to trigger an additional “economic-impact review”
and, potentially, rejection.
The requirement didn’t specifically include aircraft purchases, but Delta Air Lines Inc.
and some lawmakers wanted the
bank to include them in the
rules, too.
That’s when Boeing and Ex-Im
Bank started discussing how the
rule should be written. Many of
the emails between the bank and
Boeing deal with the guidelines
the bank was creating to determine which aircraft transactions
would trigger the additional review.
The collaboration appears to
have worked. In the nearly two
years since the rule went into effect, no Boeing sales have been
nixed as a result.
Officials at Boeing declined to
comment on the emails. In general, said Tim Myers, president
of Boeing Capital Corp., Boeing’s
aircraft-financing unit, “it would
be only natural” for the bank to
ask for input since Boeing is the
only U.S. maker of wide-body
commercial aircraft.
Matt Bevens, a spokesman for
Ex-Im, said other countries have
their own export-financing agencies, but Ex-Im is the only one
that assesses the economic impact of its transactions. Mr. Bevens, speaking on behalf of the
individual employees named in
THE WALL STREET JOURNAL (USPS 664-880)
(Eastern Edition ISSN 0099-9660)
(Central Edition ISSN 1092-0935)
(Western Edition ISSN 0193-2241)
Editorial and publication headquarters:
1211 Avenue of the Americas,
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Letters to the Editor:
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Better Balance Sheets
Americans are regaining wealth lost in the most recent recession, thanks to rising stock and real estate values.
Liabilities, trillions of dollars*
Assets, trillions of dollars*
Home Real estate
mortgages
9.4
Other liabilities, $1.5T
Consumer credit, 3.3
23.5
Durable
goods
Stocks†
5.1
23.7
Currency and
deposits**
10.2 Other ﬁnancial, 34.0
Other nonﬁnancial, 0.4
Change since the recession began:
Liabilities
Nonﬁnancial assets
K Consumer credit
40%
20
0
All liabilities
–20
40%
K Home mortgages
–40
K Durable goods
0
–20
’12
’13
’14
K Currency
and deposits
20
All
ﬁnancial
assets
0
All nonﬁnancial
assets
K Real
estate –20
–40
’08 ’09 ’10 ’11
K Stocks
40%
20
Recession
Financial assets
–40
’08 ’09 ’10 ’11
’12
’13
’14
’08
’10 ’11
’12
’13
’14
*Household sector, which includes nonproﬁts †Directly and indirectly held **Includes money-market funds
Source: Federal Reserve via Moody’s Analytics
Neil Shah and Andrew Van Dam/THE WALL STREET JOURNAL.
Rising wealth, combined with
robust job growth and big savings from lower gasoline prices,
could give U.S. consumers more
cash to spend, underpinning the
nation’s economic prospects.
Wealth also tends to rise just
from population growth, productivity gains and inflation. A
Flight Patterns
Boeing is one of the biggest
beneﬁciaries of deal ﬁnancing
through the Export-Import Bank.
Percentage of Boeing aircrafts
ﬁnanced by Export-Import bank
2008 16%
2009 35
2010 37
2011
25
2012 30
2013 15
2014 10
Source: the company
THE WALL STREET JOURNAL.
the emails, said the bank developed the new guidelines voluntarily and that it would have
been “irresponsible if Ex-Im
Bank had failed to consult the
only American manufacturer of
commercial aircraft.”
Bank supporters say foreign
airlines would buy planes from
European rival Airbus Group NV
without Ex-Im financing. Boeing
customers are among the biggest
recipients of Ex-Im Bank loan
guarantees. In the most recent
fiscal year ended Sept. 30, 2014,
the bank helped Boeing sell 61
wide-body planes to foreign airlines by guaranteeing more than
$7 billion in loans.
Overall, in that fiscal year the
bank guaranteed $20.5 billion in
financing for U.S. exports. The
cleaner gauge of Americans’
wealth—U.S. net worth as a
share of disposable income—remains well below pre-recession
levels. This so-called wealth-toincome ratio stood at 630% last
quarter, compared to 651% in the
fourth quarter of 2006.
Still, American families have
made major progress cutting
their debt burdens, putting them
in a stronger position to drive
spending and growth. Total U.S.
household debt was about 107%
of disposable income in the
fourth quarter, down from 108%
in the previous quarter and well
over 130% before the recession.
bank charges a fee on its loans
and made $675 million in profit
that it sent to the U.S. Treasury.
Yet while the bank helps some
American exporters, it irks other
domestic firms.
Delta, for one, says the bank’s
financing gives rivals such as
Emirates Airline, Thai Airways
International PLC and Air India
an advantage in their aircraft
purchases that isn’t available to
U.S. carriers.
It’s amid such criticisms that
the Ex-Im Bank and Boeing collaboration began. In August
2012, a bank official forwarded a
draft proposal on the economicimpact trigger to several senior
executives at Boeing and its aircraft-financing unit.
“Please note that this is an internal Ex-Im document still in
draft form, but we wanted to get
your input on several aspects of
it prior to further developing the
paper,” wrote Claire Avett, an
Ex-Im policy analyst on Friday,
Aug. 31.
“We look forward to working
closely with you to define concrete next steps to be able to
achieve these ends,” she wrote,
referring to imminent internal
deadlines.
The next morning, Saturday,
Sept. 1, a second bank official
sent a follow-up email. “We do
not have a lot of time,” wrote
Mr. Morin, the Ex-Im official in
charge of aircraft financing.
The emails suggest Ex-Im
Bank officials wanted Boeing’s
help to write guidelines that
would limit the number of addi-
tional reviews on aircraft purchases.
“Subjecting and applying
other transactions to detailed
analysis under economic impact
procedures has had the effect of
killing most of those deals,”
wrote Mr. Morin, in the Sept. 1
email. “Accordingly, it is very
important that we establish the
correct procedures here,” he
said.
Mr. Bevens, the Ex-Im Bank
spokesman, says those deals
were killed by delays and uncertainty created by the review process, not the review process itself. He said those delays are
why Boeing and its suppliers opposed subjecting aircraft purchases to potentially lengthy
scrutiny.
On Sept. 6, James Cruse, a senior vice president at Ex-Im’s
policy and planning group, wrote
to Boeing to thank the company
for its input. “We recognize we
are pushing and pressing you in
ways that are not in your natural
strike zone (and may verge toward ridiculous),” he wrote.
The next month, the partners
delved into nitty-gritty details,
including the time frame that
would be used to assess economic impact (shortening the
time period to 12 months might
be best, one Boeing official suggested). They settled on 12
months.
They also discussed who
would conduct the reviews, if
they were ever triggered. Boeing
itself was an option because it
had access to industry data.
Other options were Ex-Im Bank
or an outside consulting firm.
In one email where the two
sides discussed who should conduct the analysis, Ms. Avett, the
Ex-Im Bank policy analyst, asks
for input on “what would be
most palatable to Boeing.”
In the end, Ex-Im Bank took
the job of performing the reviews. In the two years since the
new rules went into effect, Ex-Im
has helped finance roughly 50
aircraft deals. Just one of
those—a lease deal of Boeing
planes by Aeroflot Russian Airlines—triggered the detailed
economic review. Ultimately,
that transaction was approved.
—Doug Cameron
contributed to this article.
CORRECTIONS  AMPLIFICATIONS
Snapchat Inc. is based in
Venice, Calif. A Business & Tech
article in some editions Thursday about Alibaba Group Holding Ltd.’s investment in the
startup incorrectly said it was in
Silicon Valley.
Investment firm Grain Management LLC didn’t participate
in the recent Federal Communications Commission auction of
wireless airwave licenses. Arti-
cles about the auction in Marketplace on Nov. 20 and on Page
One on Nov. 22 incorrectly said
that Grain Management was a
bidder.
Diageo PLC uses cassava to
brew Ruut, its Ghanaian beer. A
Business & Tech article Thursday about smallholder farmers
in Africa cultivating crops for
brewing incorrectly said Ruut is
made with yams.
Readers can alert The Wall Street Journal to any errors in news articles by emailing
[email protected] or by calling 888-410-2667.
P2JW072000-2-A00200-1--------XA
BY JEFFREY SPARSHOTT
of slightly higher prices at the
pump. Sales are down 23% from
a year earlier, though, which
should free up money for U.S.
consumers to either save or
spend elsewhere.
But in February, Americans
trimmed spending at restaurants,
as well as auto dealers, electronics, building supply and department stores. Sales at grocery,
sporting goods stores and nonstore retailers—a category that
includes online retailers—rose.
Weather was likely one factor
in disappointing retail numbers
last month. The Northeast was
particularly hard hit, with Boston receiving record snow and
Chicago, Cleveland and Buffalo,
N.Y., all registering their coldest
February. Other parts of the
country, though, were relatively
balmy. Arizona, California, Nevada, Utah and Washington all
had their warmest winter on record, according to the National
Oceanic and Atmospheric Administration.
Compared with a year earlier,
overall retail sales were up 1.7%
in February.
Retail data can be volatile
Composite
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