Business this week
Aug 3rd 2013 |From the print edition
The American economy grew at an annualised rate of 1.7% in the three months to June, compared with 1.1% in the previous quarter. Companies restocked their inventories faster than expected, offsetting government spending cuts imposed by the “sequester”. The Federal Reserve said it expects growth to pick up further despite the fiscal drag.
The latest numbers reflect a change in how American GDP is calculated. From now on the figures, revised all the way back to 1929, will include intangibles like R&D spending. The tweaked method, meant to capture the shape of modern economies, swelled output by 3.6%. It also reduced federal spending as a share of GDP.
The recovery in American house prices continued apace. The S&P/Case-Shiller index for the 20 biggest cities rose by 12% year on year in May, the biggest rise since March 2006.
The unemployment rate in the euro zone stood at 12.1% in June, with 24,000 fewer jobless than in May, the first dip since April 2011. Around19.3m people remain out of work.
The IMF warned that Greece may need an additional euro10.9 billion ($14.5 billion) in bail-out loans from euro-zone partners by the end of 2015. Paulo Nogueira Batista, a Brazilian who represents 11 Latin American countries on the IMF’s board, abstained from approving a new euro1.7 billion ($2.3 billion) tranche of rescue loans to the country. Mr Batista argued that the fund’s outlook forAthens is too rosy and that the debt may not be repaid.
Publicis, a French advertising giant, and Omnicom, an American one, announced a $35 billion “merger of equals”. The combined firm, which will pipBritain’s WPP to become the industry’s biggest, hopes size will give it an edge in the growing market for data-driven digital ads. Investors were cautious: transatlantic consolidation is likely to throw up a host of problems, not least keeping PepsiCo and Coca-Cola sweet under one roof.
Perrigo, an American pharmaceutical company, said it would buy Elan, an Irish biotechnology firm, for $8.6 billion. The deal will allow Perrigo, which makes private-label remedies for Walmart, among others, to lower its tax burden by benefiting fromIreland’s low corporate rate.
Saudi Arabiaawarded infrastructure contracts worth $22.5 billion to three Western-led consortiums. They will build a metro system in the capital,Riyadh.
Peter Löscher resigned as boss of Siemens after the German engineering giant had to issue a surprise profit warning in late July. Joe Kaeser, hitherto the chief financial officer, takes the helm. The firm’s second-quarter revenues fell year on year, though by less than analysts had feared.
The EU and China averted a trade war by settling an antidumping spat over solar panels. The European Commission put a floor on the price of Chinese panels that was much lower than expected. In return, the Chinese withdrew their threat to retaliate against wine and polysilicon imports fromEurope.
JPMorgan Chase agreed to pay $410m to settle allegations byAmerica’s Federal Energy Regulatory Commission that the bank had manipulated power markets in parts of theUnited States. Days earlier the bank said it would leave the business of trading physical commodities altogether.
American authorities brought criminal charges against SAC Capital, a hedge fund at the centre of an insider-trading probe. The move came days after its boss, Steven Cohen, was charged in a civil case for failing to supervise employees, some of whom already await criminal trials. Mr Cohen has not been named in the indictment, which makes references only to SAC’s “owner”. Both Mr Cohen and SAC deny the charges against them.
Barclays, a bank, announced a ￡5.8 billion ($8.9 billion) rights issue to help plug a ￡12.8 billion capital hole and meet a 3% leverage ratio set by its British regulator. Deutsche Bank said it plans to reduce leverage by shedding assets worth euro250 billion ($330 billion).
In Americaa judge ruled that the Federal Reserve’s cap on “interchange fees” that retailers pay on debit-card transactions is too high and must be lowered. The American Bankers Association said the decision would have “disastrous consequences” for banks, for which the fees are an important source of revenue.
Uralkali, a Russian producer of potash, pulled out of the Belarus Potash Corporation, one of two cartels that control exports of the stuff, which is used to make fertiliser. Uralkali suggests that the unravelling of the arrangement could send potash prices tumbling by 25%.