(Headlines - scroll down for full stories)
1. Will the Manufacturing Sector Slump into Recession?
2. Construction Falls by Largest Amount Since Recession
3. OPEC President: Crude Output Cut ‘Likely'
4. WSJ: Kerkorian Dumps GM Stake
1. Will the Manufacturing Sector Slump into Recession?
Manufacturing in the U.S. is experiencing a sharp slowdown. For the first time
since 2003, the Institute for Supply Management, based on data from its monthly
survey of manufacturing purchasing managers, reports that the sector contracted
in November.
The ISM's manufacturing index sank to 49.5 in November from 51.2 in October. It
was the lowest reading since April 2003. A reading below 50 indicates that the
sector is contracting. A reading above 50 indicates growth in the sector.
Story Continues Below
Analysts were expecting a bump in the manufacturing index to 52, according to
the Associated Press.
And the future doesn't look too bright for manufacturing. New orders fell to
48.7 in November from 52.1 in October, and the order backlog of products yet to
be delivered came in at 46.5, the third month in a row below 50. Production also
contracted, from 51.9 to 48.5. Put together, the survey information indicates
the manufacturing sector may shrink for some time to come.
Moody's Economy.com points out that the manufacturing slump began in autos and
auto parts with the Big Three's hard times, but now has spread to furniture,
appliances, and other household-related products because of the housing slump.
The brightest spot on the otherwise dismal survey shows export orders continue
to grow, posting a 56.9 reading.
Editor's Note:
2. Construction Falls by Largest Amount Since Recession
Construction activity in October plunged by the largest amount since the
recession in 2001 as home building fell for a record seventh consecutive month.
The Commerce Department reported that building activity dropped 1 percent to a
seasonally adjusted annual rate of $1.18 trillion in October following a 0.8
percent fall in September. It was the biggest decline since a similar 1 percent
drop in September 2001, a month when the country was hit by the terrorist
attacks as it was mired in a recession.
Residential construction fell for a seventh month in October, the longest
stretch of weakness on record. The 1.9 percent drop in this category in October
was the biggest decline since July.
The weakness in housing was compounded by a drop in non-residential
construction, which fell by 0.7 percent, the second straight decline in this
category.
Only government construction activity showed strength in October, rising by 0.8
percent to an all-time high of $273.1 billion at an annual rate.
The new report served to underscore the significant reversal in the fortunes of
the housing industry, which had been one of the economy's standout performers as
the lowest mortgage rates in four decades pushed sales up to record highs for
five straight years.
Demand, however, has cooled this year as buyers have balked at the huge run-up
in prices of recent years. Builders have been offering a host of incentives from
kitchen upgrades to free swimming pools to move a record backlog of unsold
homes.
The government reported this week that the slowdown in housing trimmed 1.16
percentage point from economic growth in the July-September quarter, a period
when the economy slowed to a lackluster growth rate of 2.2 percent.
The 1.9 percent fall in private residential construction pushed this category
down to an annual rate of $597.1 billion, 9.4 percent below the level of a year
ago.
Non-residential activity fell 0.7 percent to an annual rate of $308.2 billion.
Even with the decline, non-residential building was still 16.4 percent above the
level of a year ago.
Economists are hoping that strength in the non-residential sector will help to
cushion the drag from the steep fall in housing activity. But in October, there
were declines in spending on office buildings, shopping centers and
communication projects.
The 0.8 percent rise in public construction reflected a big 11.6 percent jump in
spending on federal building projects which offset a flat reading for state and
local projects.
© 2006 Associated Press.
Editor's Note:
3. OPEC President: Crude Output Cut ‘Likely'
OPEC is likely to trim production again, the president of the oil cartel said
Friday, adding that he expects a cut of at least 500,000 barrels a day.
The specific amount will be decided at the OPEC meeting scheduled for this month
in Nigeria's capital, he said.
"There is likely to be some further trimming, the actual amount will depend on
the circumstances," Edmund Daukoru, who is Nigeria's oil minister and president
of the 11-member Organization of Petroleum Exporting Countries, told a group of
reporters ahead of a news conference in Abuja.
On Thursday, Venezuelan oil Minister Rafael Ramirez said OPEC could cut
production by 500,000 barrels a day when it meets in Dec. 14 in Abuja, and
Daukoru agreed.
"I don't expect anything less" than 500,000 barrels per day to be cut, Daukoru
said. He declined to give a specific figure, saying only: "When we meet, we will
look at the data and the trends."
Oil prices retreated Friday amid profit taking and easing worries that OPEC will
significantly reduce output to boost prices.
Prices had jumped to two-month highs on Thursday on news of declining U.S. fuel
inventories and the approach of the Northern Hemisphere winter, when heating
fuel demand rises.
But by afternoon Friday in Europe, light, sweet crude for January delivery was
down 72 cents to $62.41 a barrel in electronic trading on the New York
Mercantile Exchange.
Venezuelan President Hugo Chavez said Thursday that OPEC members had reached a
consensus to keep oil prices at $50 a barrel. The average for the OPEC basket
price this week currently stands above $56 a barrel.
Daukoru said he didn't "see prices getting back to the $70s, definitely not the
upper $70s that we saw back in August."
Asked about the possible expansion of OPEC's membership, Daukoru replied, "We
have made a membership drive to Angola and Sudan and we are optimistic that
those two countries will respond."
Nigeria is Africa's biggest oil exporter, but its usual 2.5 million barrels of
output per day have been cut by 25 percent because of a wave of militant attacks
and kidnappings since the beginning of the year.
© 2006 Associated Press.
Editor's Note:
4. WSJ: Kerkorian Dumps GM Stake
Billionaire investor Kirk Kerkorian's investment firm Thursday said it had cut
its stake in General Motors Corp. by half with a second large sale, prompting
speculation about whether the activist investor had moved to sell his entire
stake in the automaker.
In a regulatory filing with the Securities and Exchange Commission, Tracinda
Corp. said it had agreed to sell 14 million shares in a private transaction for
$28.75 a share, cutting Kerkorian's stake in the automaker to 4.95 percent --
half of what he had owned earlier this year.
The Wall Street Journal, quoting an unnamed source, reported in its online
edition that Tracinda subsequently sold its remaining 28 million GM shares on
Thursday.
That development, which could not be immediately confirmed, would have ended
Kerkorian's largely contentious 19-month involvement with the world's largest
automaker.
A spokeswoman for Tracinda Corp. declined to comment.
Kerkorian had agitated for an accelerated turnaround at GM and some analysts had
expected him to mount a proxy fight for control of GM rather than cash out of
his stake with the modest profit implied by his disclosed and reported stock
sales.
"Clearly, he wasn't happy with the outcome of the Nissan-Renault talks and he
has expressed frustration with the trajectory of the turnaround," Morningstar
analyst John Novak said.
Kerkorian's disclosed sale on Thursday came just a week after he sold a block of
14 million GM shares for $33 a share, cutting his stake from 9.9 percent to 7.4
percent of GM.
Kerkorian's associate Jerry York resigned from GM's board in October in a
dispute over board oversight and strategy triggered by the automaker's decision
not to pursue an alliance with Renault-Nissan he had attempted to broker on
Kerkorian's behalf.
York's resignation from GM's board - and his public criticism of the oversight
it provided - led many analysts to believe that Kerkorian could be gearing up
for a proxy fight.
But Kerkorian's recent sales of GM stock suggested otherwise, analysts said.
"Maybe he realizes he can't create the controversy he needs to change the
board's direction," AMR Research analyst Kevin Reale said.
GM shares closed down 27 cents, or 0.9 percent, at $29.23 on the New York Stock
Exchange on Thursday.
GM said it would not speculate on what Kerkorian's disclosed stock sale implied.
"We don't speculate on the motivations or actions of our shareholders,"
spokeswoman Renee Rashid-Merem said.
Tracinda had been the second-largest GM investor before last week's sale.
Kerkorian first began amassing what became a $1.7 billion stake in GM in April
2005.
At the Greater Los Angeles Auto Show this week, GM Chief Executive Officer Rick
Wagoner said he was "not excessively worried" about a possible proxy fight with
Kerkorian.
"We're just running the business every day to do the right thing for the
business and our shareholders and not excessively worried about the rest of
that," Wagoner told reporters, referring to the risk of a possible proxy fight.
© 2006 Reuters.
Editor's Note:
Editor's Notes:
