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Sat, March 23

Business in Brief: Deere, hit on both sides of trade war, posts weak 1Q earns

John Deere products, including a toy tractor on the sign, are on display at the "Spring into Spring" home and garden trade show in Council Bluffs, Iowa. Deere cited rising costs and anxious farmers in reporting a profit shortfall for the first quarter Friday, Feb. 15, 2019. (Nati Harnik/AP, File)

John Deere products, including a toy tractor on the sign, are on display at the "Spring into Spring" home and garden trade show in Council Bluffs, Iowa. Deere cited rising costs and anxious farmers in reporting a profit shortfall for the first quarter Friday, Feb. 15, 2019. (Nati Harnik/AP, File)

Deere, hit on both sides of trade war, posts weak 1Q earns

MOLINE, Ill. (AP) — Deere & Co., a manufacturer that faces threats from both ends of a trade war, cited rising costs and anxious farmers as it reported a profit shortfall for the first quarter Friday.

Shares bounced back from sharp premarket declines, however, on a relatively strong outlook, and hopes that tensions with China will recede.

The U.S. and China will continue to try to hash out trade differences this week in Washington after two days of talks wrapped up Friday in Beijing. But ongoing trade tensions have damaged U.S. farmers to a degree that they are pulling back on investing in heavy equipment.

President Donald Trump last year started slapping import taxes on Chinese goods and on foreign steel and aluminum. China, which buys almost 60 percent of all soybeans the U.S. exports, retaliated by imposing tariffs on soybeans and other farm products.

Farms already hurting because of slumping commodity prices have begun failing at an advanced rate.

The number of farm bankruptcies in Minnesota, Montana, North Dakota, South Dakota, and portions of Wisconsin and Michigan reached 84 in the 12 months leading up to June 2018, according to the Federal Reserve Bank of Minneapolis which monitors the region.

That is more than double the total from four years earlier, when rising farm bankruptcies were first noted, according to the Fed.

“Our results were hurt by higher costs for raw materials and logistics as well by customer concerns over tariffs and trade policies,” said Deere Chairman and CEO Samuel Allen. “These latter issues have weighed on market sentiment and caused farmers to become more cautious about making major purchases.”

U.S-China trade negotiations continue this week while a planned American tariff hike on $200 billion of Chinese imports looms on March 2. President Trump has said he might let the March 2 deadline slide if the talks go well.

Deere did bounce back from losses last year to a first-quarter profit of $498.5 million. But its per-share earnings of $1.54 were 26 cents short of Wall Street expectations, according to a survey by Zacks Investment Research.

US industrial output tumbled 0.6 percent in January

WASHINGTON (AP) — U.S. industrial production fell 0.6 percent in January, stemming in large part from an 8.8 percent plunge in the making of motor vehicles and auto parts.

The Federal Reserve said Friday that the manufacturing component of the index dropped 0.9 percent last month, reversing a 0.8 percent gain in December. Over the past 12 months, factory production has increased just 2.9 percent. Manufacturing of wood products, computers, electrical equipment, apparel and chemicals also fell in January.

The decline suggests a clear cooling at U.S. factories that could prompt a slower pace of growth this year compared to 2018. While job growth has been solid, other sectors of the economy are showing signs for caution. Consumers appeared to retreat in December as the Labor Department reported that retail sales fell.

Manufacturers were hit last month by the partial government shutdown as well as the persistent cost pressures from the tariffs that President Donald Trump imposed on China. Even though the Trump administration has suggested progress in trade talks with China, the industrial production report shows that American companies have taken a hit.

“Manufacturing is under real pressure from the slowdown in China and the trade war, and we expect output to drift down over the first half of the year, putting the sector into a mild recession,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “This won’t kill the rest of the economy, but it won’t look good, either.”

Still, some reports about factory activity have stayed positive. The Institute for Supply Management, an association of purchasing managers, said its manufacturing index improved to 56.6 in January, after dipping to 54.3 in December. Anything above 50 signals growth in manufacturing.

In the Fed’s industrial production report, utility output rose 0.4 percent as the winter caused more natural gas usage. Mining edged up 0.1 percent.

Overall industrial production is up 3.8 percent from a year ago.

The industrial sector used less of its capacity in January, as the capacity utilization rate fell to 78.2 from 78.8 in January. When manufacturers rely on less of their capacity, they have less need to invest in new equipment and facilities.

Internet company must pay more than $200K in restitution

PHOENIX (AP) — An online business that offered fraudulent investment opportunities must pay more than $200,000 in restitution.

The Arizona Attorney General’s Office said Thursday that Charles Richard Montoya Mayville has been ordered to repay consumers up to $265,000.

Prosecutors say Mayville’s company, Alternative Online Design, sold work-from-home opportunities and advertising services.

But complaints arose that the company promised that people who bought a website built by it could make thousands of dollars in commissions every month.

The Attorney General’s Office found that Alternative Online Design could not prove any customer made back the money spent on its services.

Prosecutors are currently evaluating which customers can receive restitution.

Mayville, meanwhile, is prohibited from selling any business opportunity in Arizona for 20 years.

US retail sales drop 1.2% in December

WASHINGTON (AP) — U.S. retail sales fell in December, posting the biggest drop since September 2009 and delivering more evidence that last year’s holiday sales fizzled unexpectedly. Even e-commerce suffered a big setback.

The Commerce Department said Thursday that December retail sales fell 1.2 percent from November. They were up 2.3 percent from December 2017. Total retail sales for 2018 rose 5 percent from the previous year.

Excluding gasoline station sales, which swing widely as pump prices rise and fall, retail sales dropped 0.9 percent in December. Non-store retailers, which include mail-order and e-commerce vendors, saw sales tumble 3.9 percent. That’s the most since November 2008 in the midst of the Great Recession.

The discouraging December report raises concern about whether the retail sales slowdown was just a blip or points to a more sustainable weakness in consumer spending. But many analysts, as well as an industry group, questioned the reliability of the data. The National Retail Federation said the government shutdown and the resulting delay in collecting the data made the results less accurate.

The stock market recorded big drops in December. And a partial shutdown of the federal government began Dec. 22 at the end of the holiday shopping season.

“We caution against excessive pessimism,” the economists at Oxford Economics wrote in a report about the government’s report.

Jack Kleinhenz, chief economist at the National Retail Federation, said that the government’s sales figures tell an “incomplete story” and that the group will be in a better position to judge the reliability of the results when officials revise its 2018 data in coming months.

A spokesman for the Commerce Department, however, defended the reliability of the data, referring to a statement in the report that “processing and data quality were monitored throughout and response rates were at or above normal levels for this release.”

Separately Thursday, the NRF said that holiday sales in the combined November and December period increased a lower-than-expected 2.9 percent as worries about the trade war with China, the government shutdown and stock market turmoil dampened shopper spending in December.

The result was far below the group’s forecast of 4.3 to 4.8 percent growth in holiday season sales. It marked the slowest pace since 2012 when the figure rose 2.6 percent. The figures include online sale but exclude business from automobile dealers, gas stations and restaurants.

Neil Saunders, managing director of research firm GlobalData Retail, said he expects retail sales to slow in 2019 but doesn’t expect it to be disastrous. He notes that shoppers are benefiting from a strong job market and rising wages, though there are also plenty of headwinds like rising interest rates and overall uncertainty. The benefits of tax cuts have also faded.

“The consumer could go either way,” he said.

The NRF said earlier this month that annual retail sales should grow between 3.8 and 4.4 percent, to more than $3.8 trillion this year as employers continue to hire and the economy hums along.

But it did acknowledge that the ongoing trade war with China and volatile global markets are a threat to the growth.

Storied chains like Sears Holdings Corp. are shrinking. But others — including Walmart and Target — are ringing up strong sales as they adjust to shifting consumer trends and take advantage of a solid economy.

A full picture of the holiday season will be revealed when major retailers report final fiscal fourth-quarter results starting next week.

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