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Fed: Economy Has Weakened As Shoppers Turn More Cautious


WASHINGTON (AP) -- The economy has weakened since the start of this year as shoppers turned even more cautious given the severe housing slump and painful credit crunch.
Manufacturers and other businesses, meanwhile, had to cope with skyrocketing prices for energy and other raw materials. The businesses' ability to pass along higher prices to their customers was mixed, according to the Federal Reserve's new snapshot of nationwide economic conditions released Wednesday. Oil hit jumped to a record of $104.52 a barrel.

Many economists fear that the country is teetering on the edge of a recession or is in one already.

"Economic growth has slowed since the beginning of the year," the Fed reported. Two-thirds of the Fed's 12 regions "cited softening or weakening in the pace of business activity, while the others referred to subdued, slow or modest growth," the Fed said.

The report suggested that persisting problems in the housing market and harder-to-get credit are affecting the behavior of individuals and businesses alike -- making them think twice about spending and investing.

Wall Street investors took the news in stride. The Dow Jones industrials gained 41.19 points.

The nation's retail sector is feeling the strain.

"Reports on retail spending were generally downbeat," the Fed said.

The Fed said that retailers in a majority of regions described sales as "below plan, downbeat, weak or having softened." Clothing sales, for instance, were reported as soft in the regions of New York and Philadelphia and Richmond, Va. Several regions noted declines in sales of "big ticket" goods and home-related items, the Fed said. Auto sales nationwide were characterized as slow or sluggish, the Fed said.

Spending by consumers accounts for a big chunk of overall economic activity and thus plays a major role in determining whether the economy will survive the housing and credit crises or fall victim to those problems.

Economic growth slowed to a near halt in the final three months of last year, advancing at a pace of just 0.6 percent. Many economists believe growth in the current January-to-March quarter will be worse -- a pace of around 0.4 percent. Some analysts, however, believe the economy is shrinking now.

To help shore up things, the Federal Reserve has been cutting a key interest rate since September. As the economic situation continued to falter, the Fed turned much more aggressive. It slashed rates by 1.25 percentage points in the span of just eight days in January -- the biggest one-month rate reduction in a quarter century.

Fed Chairman Ben Bernanke signaled last week that the central bank stands ready to lower rates again at its next meeting, March 18.

Some worry that the country could be headed for a bout of stagflation -- a dangerous mix of stagnant economic activity and stubborn inflation. But Bernanke, in his congressional appearance last week, said he didn't believe that was the case.

The Fed's report said that companies had to deal with rising energy prices, which translated into increased transportation and shipping costs. Companies also reported price increases for metals, petrochemicals and food.

However, "firms ability to pass along cost increases by raising selling prices varied," the Fed said.

The Boston region, for instance, noted that retailers were passing "some price increases on to customers and some manufacturers were raising selling prices to partially offset rising costs." Half the manufacturers in the Cleveland region had raised prices or added surcharges since the Fed's last report in mid-January. The Dallas and Atlanta regions reported some companies raised their prices but others were constrained by competitive pressures. The Kansas City region said retail prices were "mostly stable." The Chicago region said businesses -- other than construction and retail -- were passing along cost increases to their customers.

On the manufacturing front, activity was reported to be sluggish or to have slowed in about half of the Fed's regions, the survey said. Some areas continued to cite weak demand for products and equipment used for building and furnishing homes. All Fed regions, however, expressed "caution or concern" about their near-term business prospects, the Fed said.

A separate report from the Commerce Department showed factory orders fell 2.5 percent in January, the biggest decline in five months. Another report from the Institute for Supply Management said activity in the service sector shrank in February.

The Fed's report, meanwhile, continued to paint a bleak picture of housing.

Most areas continued to suffer sagging home sales and home prices.

The one exception: the Manhattan co-op and condo market, where prices were up 5 percent compared with a year ago, the Fed said.

For commercial real estate, there were signs of slowing in the markets for office and retail space in some regions.

On the labor market front, there was some "loosening" or slowing in hiring, the Fed said. The regions of New York, Philadelphia, St. Louis and Atlanta reported an increased prevalence of layoffs, reduction in workers' hours or hiring freezes, the Fed said.

The government on Friday releases the employment report for February. Many economists are predicting the unemployment rate climbed to 5 percent from 4.9 percent.

The Fed's survey is based on information supplied by the Fed's 12 regional banks. The information was collected before Feb. 25.

Age catches up with Amitabh Bachchan
6 Mar, 2008, 0225 hrs IST,......................MUMBAI/DELHI: The original ‘Don’ of Bollywood seems to be losing his grip steadily in the endorsement space. In an era where the youth is driving consumerism, a couple of flops at the box office and a string of political controversies seem to have stalled Amitabh Bachchan’s endorsement career.

Sample this: At an average of Rs 3-4 crore per ad deal, Mr Bachchan today commands the same value as Saif Ali Khan and Akshay Kumar. Shah Rukh Khan, the ‘Badshah’ of Bollywood who seems to have snatched Big B’s position in the past one year, garners as much as Rs 5.5-6 crore per ad.

On par with SRK is Hrithik Roshan. But all these pale in comparison to what Aamir Khan got for his latest deal with Parle: a cool Rs 10 crore.

Mr Bachchan’s business consultant Sunil Doshi (Alliance media & entertainment CEO) said, “The very fact that one wants to keep revisiting him is the proof of his iconic status. It’s unfair to compare a man who’s been in the business for 45 years with all other actors mentioned. Everybody is aware that in this business, you’re as good as your last film and endorsements are not yardsticks of success.”

In terms of sheer volume, Shah Rukh Khan seems to be ruling the endorsement roster, followed by Hrithik Roshan and Saif Ali Khan. Akshay Kumar is set to take off in a big way.

Globosport CEO Anirban Blah said: “Mr Bachchan does not seem to have the momentum that Saif, Hrithik and Akshay command. Mr Bachchan has stood for the same values for the last two decades. But SRK has attacked that space very aggressively and has managed to gain appeal from Colaba to Patna. The cooler and trendy space, which was earlier SRK’s domain is now being occupied by the three new entrants in the endorsement space.”

Cola major PepsiCo, which once used Big B in most of its commercials, has now opted for youngsters like Deepika Padukone and Ranbir Kapoor while continuing its association with SRK. However, Pepsico officials declined comment.

Said Percept Talent Management COO Vinita Bangard, “While Mr Bachchan remains an icon who stands for leadership values, stability and maturity, there are a slew of brands looking for a youth connect today. By that perspective, Mr Bachchan has reached a saturation point, while a younger star like SRK connects with a wider audience.”

A good example is that of Dabur Chyawanprash. While the company claims that Mr Bachchan’s endorsement has worked well for the brand, an advertising veteran said that the company might be forced to rethink its advertising strategy since “the brand ambassador for Chyawanprash may have alienated young consumers.”

In fact, even in the Dabur ads, Mr Bachchan has moved away from being the protagonist to be the spokesperson. The fact that Mr Bachchan has had no luck at the box office of late, dishing out a string of flops such as Nishabd, Jhoom Barabar Jhoom and Ram Gopal Varma Ki Aag, has helped younger starts get the lion’s share of the endorsement pie.

That’s not all. Reid & Taylor, which has been using the Mr Bachchan’s charisma for aeons, may also be contemplating a change, since its competitor Grasim is using the new-age style icon Akshay Kumar in its ads.

Grey Worlwide national creative director Preeti Nair puts it in perspective. “The endorsement space is usually a reflection of an actor’s position in Bollywood. With new-age products entering the market actors like SRK, Saif, Hrithik and Akshay have been doing really well for themselves going by the Bollywood barometer,” she said. “In 2006, one saw the Big B impact through KBC and a series of hits such as Bunty & Babli, Sarkar and Kabhi Alvida Na Kehna which got him on the radar of a lot of advertisers.”

Year 2007 saw Akshay Kumar re-emerging in a big way, SRK becoming a larger-than-life figure, Hrithik attaining a ‘Greek god’ status, and Saif diving into the cool, rugged and sexy mode.

However, not all agree that the Don is losing his lustre. Said Lowe India chairman R Balakrishnan: “Advertisers may take such calls, but that does not reflect on Amitabh Bachchan’s ability in terms of mass-appeal. These are fads, but Amitabh Bachchan will be ever-lasting. Two good films and the equations will change. The audience love to watch him, and hence expectations from him are a lot higher than any other actor. He needs two to three films in succession, and he will fly in the marketers domain.”

Brands such as Emami’s Navratna oil, Fast Relief and Boro Plus, which use Big B as their brand ambassador have adopted a multi-endorser strategy. In other words, Emami also has younger stars like SRK and Kareena Kapoor on board, so it has sufficiently hedged its risks. Emami MD Aditya Agarwal said: “Mr Bachchan’s association with our brands has been delivering the desired results. But it’s also true that Shah Rukh has covered much more ground in the past one year.”

A head of a leading brand that Big B endorses, told ET: “Apart from a bleak year at the box office, what has really got brands wary of him now is his political controversies, whether it’s his association with certain politicians, the recent Raj Thackeray controversy or the farmer-land issue.”

Hikal in supply pact with Bayer
6 Mar, 2008, 0000 hrs IST,......................Chemicals and pharmaceuticals maker Hikal said on Wednesday said that the company has signed a long-term deal with Bayer CropScience, a unit of Germany’s Bayer, for supplying active ingredients for crop protection products, reports Our Bureau in Mumbai.

The financial details of the deal is not disclosed. Hikal will start supplies from the second half of 2008. “The new product would cater to the anti-fungal segment of crop protection and the company would expand its manufacturing facility at Taloja in Mumbai to manufacture the new product,” Hikal vice-chairman and managing director Jai Hiremath told ET.

The market size of the new product is estimated at around $100 million.

Microsoft Releases Very Early Version of Internet Explorer 8


SEATTLE (AP) -- Microsoft Corp. gave early testers their first glimpse of its next-generation Web browser Wednesday, and said Internet Explorer 8 will adhere to the same standards as competitors' programs.

Microsoft's browsers, including the current Internet Explorer 7, gained notoriety among Web developers for handling Web page code differently than Mozilla Corp.'s Firefox, Apple Inc.'s Safari, the now-defunct Netscape Navigator and others.

For the most part, major non-Microsoft browsers and outside developers who built Web pages worked with agreed-upon technical standards, while Microsoft was accused of adding proprietary code to those standards. The result: Web pages that looked good in Internet Explorer but broke on other browsers, or vice versa.

At a Web developer conference in Las Vegas Wednesday, Dean Hachamovitch, general manager for Microsoft's Internet Explorer division, made light of Microsoft's past spotty standards and pledged to do better.

Hachamovitch said that in early Internet Explorer 7 days, his kids would hear about broken Web sites and ask, "Daddy, did you guys break the Web?"

"And most of the time I could honestly say, 'No.' But, you know, Web developers might answer that question a little bit differently," Hachamovitch said.

He elicited a laugh, but developers have sometimes had to build Web sites from scratch a second time to devise a version that worked with Microsoft's browsers.

Microsoft said the new version of the browser, when complete, will support industry-standard versions of the code that tells browsers what Web pages should look like, including CSS 2.1, by default.

"That's a big deal," said Chris Swenson, a software industry analyst for the NPD Group.

While most Web surfers might not feel a huge impact, Swenson said it will bring "a sigh of relief" for developers, who will spend a lot less time tweaking Web pages to work with different browsers.

However, both Swenson and Microsoft note that Web standards continue to evolve, and that definitive tests to determine compliance don't yet exist. Microsoft indicated Wednesday its intention to step up involvement with this process.

Microsoft's decision might also help it fend off a new antitrust investigation in Europe.

Regulators there are looking into whether the software maker held other browsers back by not following open Internet standards. The probe was launched after Norwegian browser developer Opera Software ASA filed a complaint in late 2007.

Microsoft unveiled a few features in the new browser that may appeal more to average Web users. For example, right-clicking on a Web page will give people more "to-do" options than they'd see today. Users will be able to "Send to Facebook," "Map with Live Search" or "Define with Dictionary.com" with a quick click.

Intel memory chip prices drop double projection-CEO
6 Mar, 2008, 0753 hrs IST..........................SANTA CLARA: Intel Corp Chief Executive Paul Otellini said on Wednesday the company has seen price erosion for certain memory chips in the first quarter that is nearly twice what it had predicted. Otellini said Intel's forecast for price erosion from the fourth quarter to the first quarter in NAND flash memory chips was 27 percent.

The actual figure it observed is 53 percent. The result of that pricing erosion was a "substantially lower product margin" and higher inventory write-downs. Intel late on Monday cut its gross margin forecast for the current first quarter, citing weaker pricing on certain memory chips known as NAND flash memory, used in cell phones and digital music players. That portion of the chip industry has been hit by over-capacity, some slowing demand among consumers, and intense price competition among Intel, its joint-venture partner Micron Technology Inc and Asian chipmakers.

Intel said on Monday it now expected a first-quarter gross margin of 54 percent, plus or minus a point, versus a previous forecast for 56 percent, plus or minus a couple of points. Otellini also reaffirmed the chipmaker's plans for what he called an aggressive plan to move into what it sees as a rapidly growing market for PCs -- both desktop and notebook -- costing as little as $250. "While we've gotten more efficient in the core business, we've put more investments in where we think the growth of the company is going to come from," Otellini said.

The company on Sunday announced it had picked "Atom" as the name for a new class of microprocessors aimed at the market it has dubbed netbook PCs, as well as emerging consumer devices. Intel aims to have Intel chips spanning the digital market from so-called mobile Internet devices all the way to high-end computer servers that form the backbone of corporate networks.

Otellini also said at the company's headquarters in Santa Clara, California, that he expected Intel to start shipping more chips using 45-nanometer chip-making technology in the third quarter than those using the previous 65-nanometer chip-making technology. "It's as aggressive as we said a year ago and on track," Otellini said. Sean Maloney, head of worldwide sales and marketing for Intel, said at the meeting that inventories of chips, chipsets and other components that Intel tracks are in line. "There isn't really any significant build-up of inventory," Maloney said. Stacy Smith, Intel's chief financial officer, said he has been pleased with the progress Intel made in the last two years in restructuring Intel and ensuring that its operating profit margin would grow at a faster rate than revenue growth.

"The goal is to continue that," Smith said. "I think we're very well positioned for growth." He also said that he expects Intel's dozen or so chipmaking plants around the world to be running at about 90 percent of capacity in 2008 and 2009, a figure he called ideal because it leaves Intel some flexibility to crank out more chips if demand is stronger than expected.

Female condom for Rs 5 in India
6 Mar, 2008, 0835 hrs IST,Kounteya Sinha................................NEW DELHI: A five-rupee female condom (FC) will now spearhead India's fight to control HIV spread among women.

Under the first phase, the National AIDS Control Organisation (NACO) is procuring 15 lakh female condoms from UK's Female Health Company (FHC), which will be doled out to sex workers and housewives in Andhra Pradesh, Maharashtra, Tamil Nadu and West Bengal over the next 8 months. A decision on a countrywide upscale will be undertaken after reviewing data from these four states.

According to NACO director-general K Sujatha Rao, a year-long pre-programme acceptability and feasibility study, involving 60,000 women in 13 sites — 11 involving high risk groups like sex workers and two family planning programmes — in eight states from November 2006, found 60% women re-purchasing the condom and over 98% of the users finding it comfortable. NACO through UNFPA had procured five lakh condoms from FHC for its acceptability study.

"The pilot project was highly successful showing consistent use of FCs. We have, therefore, decided to scale up the programme under which we will first train women on how to use these condoms," said Rao.

Union Health Minister A Ramadoss said: "When a male partner refuses to wear a condom, women need self-initiated methods to protect themselves against unplanned pregnancies and HIV/AIDS."

According to Manoj Gopalakrishna from Hindustan Latex Limited, India till now imported FCs making them expensive. "We have now set up an FC manufacturing unit in Kochi. FHC has transferred the condom manufacturing technology to us. We will manufacture 10 million FCs annually. Though the cost of making each condom will be Rs 40, it will be available to women for Rs 5 through 200 NGO-led targeted interventions."

Esther Bayliss from the Female Health Foundation said, "Female condoms — FC1 and FC2 — are the only ones approved by US FDA and WHO. These condoms are the first and only female-initiated barrier method that is safe and effective if used correctly and consistently providing dual protection against the transmission of sexually transmitted infections, including HIV/AIDS and unintended pregnancy."

Nearly 40% of the 2.5 million HIV positive victims living in India are women, most of them hapless housewives who don't look at their husbands as a threat and commercial sex workers unable to negotiate with clients refusing to use a condom.

TCS eyes SMEs with new business model
6 Mar, 2008, 0000 hrs IST........................MUMBAI: India’s largest software company is now wooing smaller customers. Tata Consultancy Services (TCS) has created a business unit (BU) that will offer software, hardware and the underlying networking infrastructure to small and medium-size companies on pay-as-you-go basis.

The economies of scale will come from standard processes and solutions that the firm will offer to all clients rather than software customised to individual needs.

The service, labelled as IT-as-a-service (ITaaS) is similar to the software-as-a-service (SaaS) model, which enables cost-conscious users to adopt technology without paying large licence fees, but by paying only periodical instalments. It also brings the products and services segments of the software industry together. The model is gaining popularity and is expected to be a key trend in the coming years.

Satyam opens Global Solutions Center in Egypt
5 Mar, 2008, 2049 hrs IST..................................HYDERABAD: IT major Satyam today announced the inauguration of its Global Solutions Center (GSC) in Egypt.

The GSC will employ about 300 professionals and serve as a major technological development and software support for Satyam's customers in the Middle East, North Africa and Europe, a company release said here.

The center, spread over 2,100 sq metres, has facilities such as training labs, video conferencing, high-speed networks and round-the-clock connectivity to other global locations.

The 300-seater GSC will mainly house locals and will be headed by Mohamed Embaby, an Egyptian national. The GSC aims to train locals and create more jobs for them, it said.

Speaking at the inauguration, Tarek Kamel, Egyptian Minister of Communications and Information Technology, said the center is an enormous step towards achieving the country's ambitious goals for the local IT sector.

"We are looking forward to having more projects of this kind in the future."

Higher Revenue, Smaller Losses From Subprime Subsidiary Push H&R Block to Narrower 3Q Loss


KANSAS CITY, Mo. (AP) -- H&R Block Inc., the nation's largest tax preparer, said its third-quarter loss shrunk on higher revenue and smaller losses from the windup of its subprime mortgage lending subsidiary and other charges.

The Kansas City-based company said late Wednesday it lost $47.4 million, or 14 cents per share, in the three months that ended Jan. 31, compared with a loss of $60.3 million, or 18 cents per share, during the same period a year ago.

The company said it earned $9.3 million, or 3 cents per share, from continuing operations, compared with $21.9 million, or 7 cents per share, during the year-ago period.

Not counting a $26.3 million pretax charge for costs of staff reductions and executive departures, the company said it would have earned $25 million, or 8 cents per share, beating the 6 cents per share predicted by analysts surveyed by Thomson Financial.

Revenue during the quarter rose 4.3 percent to $972.6 million, below analysts' average prediction of $1 billion.

The company said net losses from its discontinued operations, which include its Option One Mortgage Corp., were $56.6 million, smaller than the $82.2 million those operations lost a year earlier.

The losses in the most recent quarter included money the company has put aside for bad loans and to repurchase defaulted loans from investors, as well as impairment charges to the value of the remaining loans and other charges tied to the closing of most of Option One's operations.

The subprime mortgage subsidiary collapsed last year as higher interest rates and falling home prices led many borrowers with poor credit to default on their loans.

H&R Block said it saw a 3.5 percent decline in the number of clients coming to its retail tax preparation office during the third quarter, but overall tax revenue is up 5.4 percent from a year ago thanks to higher fees.

The company blamed the drop on a slow start to the tax season, which was delayed by a last-minute change to federal tax laws dealing with the Alternative Minimum Tax. The AMT was designed to make sure wealthy taxpayers didn't avoid their tax liability, but it has come to catch more medium-income taxpayers.

For February, the company said the number of retail clients had risen 6.8 percent from last year, which had one fewer day, and retail tax fees have gone up 12.6 percent.

Adjusting for Leap Day, the company said its year-to-date client figures are up 1.3 percent from last year.

The number of customers using H&R Block's digital operations, which include online and software products, was down 1.9 percent during the third quarter.

"Our tax business is tracking toward a solid season despite a slower start than in prior years," interim Chief Executive Officer Alan Bennett said in a news release. He said the company is hoping to see a larger number of clients needing help to take advantage of the federal government's economic stimulus rebates.

The company's consumer financial services, which include the H&R Block bank and its Financial Advisors division, saw revenue during the quarter increase 8.9 percent to $117.1 million, while revenues at the company's business services division declined slightly to $191.9 million from $192.1 million.

Europe shares dip as banks offset retailer gains