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SB Authority: Discretionary Consumer Spending Slowed Down in May

The index issued by the SB Authority reveals that economic activity of small businesses increased a mere 0.35 percent in May compared to the previous month. The index for May reached 104.89 points. The small increase was driven mostly by the creation of new businesses and the Russel microcap.

The index registers monthly results on six other components – the prime rate, default loan rate of small business, processing volumes of merchants, reports on national employment, retail sales, and loan origination.

The chief executive officer and president of Newtech Business Solutions, Barry Sloane, said that the US economy was slowing down despite federal efforts. He explained that the slow-down trend continued despite the fact that the Federal Reserve purchased assets worth trillions of dollars from financial institutions, and the 600 million dollars invested in long-term government obligations. Also, budgetary stimulus does not appear to have any positive impact yet. Barry Sloane added that rising employment and the discretionary spending of consumers are the two main factors on which small businesses rely on to increase their economic activity.

As consumers increase their savings to protect themselves from loss of income in a climate characterized by job insecurity, their spending decreases, they pay less and less of their debt and they have to face rising energy and food costs. This consumer behavior also prompts small businesses to put a hold on their investments and employment for future growth.

Newtech provides business services to more than 100,000 companies. The US is estimated to have some 27.5 million small and medium-sized companies, which account for almost 99.7 percent of American employers.


TD Economics: Manufacturing Industry in North Carolina Transitions to High Tech

TD Economics, a TD Bank affiliate, finds in its latest report that the economy of North Carolina continues its transition period and, while the economy diversifies, it will gradually become increasingly resistant to economic downturns.

The author of the TD Economics report, economist Christos Shiamptanis, said that the transition is a necessary evil, as the state’s manufacturing sector moves from traditional industries like apparel and textiles to biotechnology, high-tech and services. He added that the state’s economic output is boosted by the improved productivity and the enhanced efficiency of high-tech businesses. These businesses also require high-skilled workers, and high-skill jobs are more resilient to negative economic evolutions than middle-skilled positions.

The report identifies several growth opportunities for the state of North Carolina, which include a shift to industries with high potential, such as pharmaceutical and electronics, the strong research universities with world-class educational programs and the development of technology business clusters.

Shiamptani, explaining the potential of North Carolina, said that the decade of 1999-2009 the output of electronics and computer manufacturing increased by 569 percent, way above the national average, while production of chemicals grew by 9 percent, in the context of national production dropping 3 percent. He added that high-tech manufacturers and pharmaceutical companies tend to stay above the floating line even in crisis times. If the state’s economy were to transition to these types of businesses, the manufacturing jobs in this area of the country should not be as volatile as they currently are.

The transition to pharmaceutical, biotechnology and high-tech production is even more necessary since the traditional manufacturing businesses have a much less optimistic outlook and declines will most probably persist.


NCVA, Deloitte: Health of World Venture Capital Markets Depends on Strong IPOs

Venture capitalists worldwide believe that the current IPO activity is too weak, and it will not support a healthy industry in their respective national economies.

In a recent survey by NCVA and Deloitte, approximately 80 percent of the polled venture capitalists said that their countries were registering very low levels of initial public offerings. The survey also reveals that many venture capitalists see the high returns from initial public offerings as key to achieving high returns to portfolio companies in development and to limited partners.

Venture capitalists from France, India, Brazil, China and the US were the most energetic in stating the importance of having a very active IPO market in their national markets, followed by Israel, Germany, Canada and the United Kingdom.

In the US, 91 percent of the respondents said that an active and healthy IPO market was vital to the country’s venture capital markets. However, only 36 percent said that other countries’ IPO markets had an impact over the success of the US industry.

Moreover, 87 percent of the polled venture capitalists said that the current US IPO activity was too low, as the global venture capital industry was looking to the US to provide a healthy market.

Worldwide, 87 percent of the participants in the survey said that the stock exchange with the greatest potential for venture-backed initial public offerings was NASDAQ, followed by NYSE, with 39 percent, and the Shanghai Stock Exchange, with 33 percent.

Deloitte & Touche partner, Mark Jensen, said that the industry was clearly still affected by the fallout of economic downturn, especially through a less than desirable number of exit opportunities. However, he added, as the liquidity crisis eases and the economy shows signs of improvement, a most sought-after turn of tide might be close.

Consumer Reports: Up to 311 Percent Interest Rates when Renting Appliances Instead of Buying

Consumers who believe that renting appliances and electronics is cheaper than buying them are in for an unpleasant surprise. A recent investigation made by Consumer Reports revealed that the interest rates of appliance-renting services can go as high as 311 percent, meaning the consumer paid more than three times the price of the item.

Several rental companies were passed through the microscope by Consumer Reports (CR), and the results of the investigation show that people who rent appliances could easily end up paying more than three times the price of an item without owning it at the end of the rental agreement. Also, if the same item would be purchased, consumers would save significant amounts of money.

Consumer Reports Associate Editor, Anthony Giorgianni, said that appliance rentals are especially attractive to low-income families, which don’t have the financial strength to buy the needed appliances and electronics right away. Giorgianni recommends them to postpone purchases to a more convenient time or even try to obtain a small loan to cover the purchase cost.

A case study is a Toshiba laptop worth 612 dollars. One of the rental stores investigated by Consumer Reports offered it for a rental fee of 38.99 dollars weekly with a minimum rental period of 48 weeks. The cost for renting this laptop, not including sales tax and other fees, would be 1,872 dollars. With this amount of money, the renter would be able to purchase three laptops and end up owning all of them at the end of payment, if purchased at the price suggested by the manufacturer. The interest rate for the rental amounts to 311 percent.

The rental option is an expensive one even when compared to credit cards with high-interest rates. If the same laptop was purchased with a credit card at an interest rate of 29.99 percent, by paying 38.99 dollars weekly, the laptop would cost 1,000 dollars less than in the renting scenario, and it would be the consumer’s property in approximately 20 weeks. In this scenario, if the consumer were to wait four months, and save 38.99 dollars every week, he or she would be able to buy the laptop with the savings, paying no interest rate whatsoever and saving a total of 1,260 dollars.

Among the suggested alternative to cover the necessity period without throwing away money at rental shops are borrowing from a friend or using free/cheap public alternatives (such as library computers) until the required amount of money for the purchase is saved or until the consumer is able to secure a retail loan.

According to data from Consumer Reports, Canada and the US have some 8,600 rental stores which generate annual sales of more than seven billion dollars. These stores are attractive because they don’t usually perform credit checks, and rentals are for small periods of time (weekly or monthly basis) but many of them use questionable business practices, on top of the already proven high interest rates.


Happiness Index: One Third of Americans Very Happy, Men’s Happiness Lowers

A third of Americans (33 percent) are happy, reveals the latest Happiness Index from Harris Poll. The share of happy Americans is down two percent from the results in 2009 and 2008, when the portion of very happy Americans was 35 percent.

The survey was conducted by Harris Interactive from May 9-16 with the participation of 2,184 American adults. The poll uses timeless and standard questions to assess the overall level of happiness in the US each year.

The participants were asked if they disagreed or agreed with a series of positive and negative statements about their relationships with friends, their health concerns, their financial situation, hobbies and activities, and various other aspects of their life.

The survey also revealed that women are happier than men – 31 percent of the men said they were very happy, down one percent from last year, and 3 percent from 2009, while 36 percent of women said they were very happy, up one percent from last year.

Racial groups show some significant differences. White Americans are the least happy, with only 32 percent saying they were very happy, while 44 percent of African Americans said they were very happy, up from 40 percent last year. Latin Americans come in second according to happiness levels, with 35 percent of the group saying they were very happy, down four percent from last year.

Not surprisingly, the happiest Americans are those from households with income of at least 100,000 dollars per year. The surprise came when Harris Interactive identified the least happy group – households making 75,000-99,999 dollars per year. In this group, only 29 percent of the respondents said they were very happy.


AAA: Travel for Independence Day Expected to Go Down 2.5 Percent This Year

The recent decline of gas prices will not do much for economic indicators. Following a sustained period of high prices for fuel, as well as other vital goods, several economic indicators will see their growth offset this year.

One such indicator is the amount of travel in the US. One of the most anticipated holidays, the weekend for Independence Day, will not generate as much travel as in the previous years. Specifically, 39 million Americans will travel in June 30 to July 4 holiday time more than 50 miles, a drop of 2.5 percent from last year’s figures.

The estimate comes from AAA, which is projecting this decline based mostly on the gas prices, as the price per gallon is nearly one dollar higher than in 2010, said the director of Travel Services at AAA, Glen MacDonell. He added that high gas prices will also lead to a shift in Independence Day travel demographics, as the low-income households will be more severely affected than households with medium to high incomes.

Since fuel is a necessity, the sums spent on fuel are unlikely to change for day-to-day activities. However, in the case of households with low incomes, it is highly probable that leisure expenses will suffer some cuts, including fuel costs for Independence Day travel. According to AAA estimates, from households with incomes of up to 50,000 dollars only 33 percent will travel for Independence Day, down from last year’s 41 percent. Conversely, those from high-income households (100,000+ dollars annually) will travel more, the estimated number of Independence Day travelers going up to 35 percent, from 26 percent last year.

GfK: High Prices at the Gas Pump Boost Interest in Compact Cars

Compact cars appear to be in higher demand, nearly double, than vehicles powered by alternative energy, or AEVs, including electric and hybrid cars.

The prolonged period of high gas prices has prompted consumers to reconsider their choice of cars, and they are increasingly looking to purchase vehicles with improved levels of fuel efficiency that are also cost-effective.

The Automotive research division at GfK found that, despite an increased demand of compact cars, subcategories such as AEVs and sub-compacts do not benefit from the same kind of interest.

The research points out that while 18.1 percent of the demand of light vehicles over six months was for compact vehicles, the sub-compacts accounted for only 3.6 percent. Hybrids and electric cars fared slightly better than sub-compacts, representing 9.4 percent of the demand for light vehicles.

Despite expectations of increased sales of hybrid and electric vehicles in times of high gas prices, consumers appear to steer clear of AEVs. GfK identified three main detractors – lack of convenience, high purchase prices and low familiarity with these vehicles.

GfK Automotive senior VP for consulting, Doug Scott, said that customers see the value of downgrading to a compact car in times when gas prices are high, but they are not willing to sacrifice the convenience and comfort of a compact in favor of sub-compacts. He added that AEV sales will not increase if automakers do not address the challenges that the purchase of AEVs poses to the average customer – cost, familiarity and convenience.


Florida Realtors: May Ends with Year-on-Year Increase of Existing Condo and Home Sales

Sales of existing condos and homes in Florida posted a year-over-year increase of 17 and 3 percent, respectively, in May, according to the latest data from the Florida Realtors.

During May, a number of 17,228 existing homes were sold, up three percent from 16,790 in May last year.

This is the sixth month in a row with year-over-year growth in sales of both existing condos and existing homes. Furthermore, Florida Realtors data shows that sales of existing homes increased in 12 of the state’s metropolitan statistical areas, while sales of existing condos increased in 14 metropolitan statistical areas.

The president of Florida Realtors, Patricia Fitzgerald, said that many buyers realized that the current times could be the best in a long time to buy homes and condos, as mortgage rates are low and the inventory of properties at affordable prices is high.

The median price in Florida for existing homes was 135,000 dollars, down 5 percent from May 2010, when it was 142,900 dollars. May also brought a 2.9 percent increase of the median price for Florida homes.

The median price for condos was 98,200 dollars, up two percent from 96,400 dollars in May last year. Compared to April this year, the median price was 6.9 percent higher but still way below the national average of 167,300 dollars.

Real estate analysts pointed out that the increase must take into account the high number of distressed and foreclosed properties, which still has negative effects on the statewide median price. Another factor with negative influence on the real estate market is the tight credit conditions, which continue to suppress the recovery of the market.

Experts forecast that the condo and homes market will increase at an uneven pace for the remainder of the year, and tight credit is making market recovery more difficult than it should be, as banks continue to hold on to high reserves of cash.


Zoosk Survey Reveals Opinions of Singles on Taboo Conversation Topics and Splitting Checks

More than 4,500 US members of the Zoosk dating community gathered their thoughts in the latest Zoosk survey, revealing the “trends” of the US dating world during the summer of 2011.

Summer months will see an increase in dating, as 51 percent of the singles polled by Zoosk in the US said that they planned to boost up their dating during summer. They also said that outdoor dates are more fun than indoor ones, and they identified some of the worst first-date conversation topics, among other things.

Co-CEO and co-founder of Zoosk, Alex Mehr, said that the survey aims to help singles with their selection of dating options.

The Zoosk survey revealed that the worst conversation topic on a first date was talking about the ex. Particularly men are appalled by the idea of having to hear about the exes of their dates, with 71 percent saying that this topic would be a buzz-killer. In a proportion of 67 percent, women agree that this is the worst topic. Although not as bad as talking about the ex, personal health issues are also frowned upon, with 19 percent of the survey participants saying that they don’t want to hear about medical issues of their date. Other bad topics are politics and religion, pointed out by 9 percent and 6 percent of poll participants, respectively.

A thorny subject on a first date is paying the check. Men will find that women are quite open to splitting the check. When asked, only 18 percent of the men said that the check should be split compared to 35 percent of women. Furthermore, only 64 percent of women think that the guy should pay, while 81 percent of men thought it was their duty. There is also a small group of 1 percent on each side that thinks women should pay the check on the first date.

Another useful finding for the singles that plan on dating this summer is that men are quicker to judge how well a first date is going. Male participants said that they usually made up their mind within the first hour, some even after 15 minutes (29 percent). Women usually decide by the end of the date. However, even if the date is not going as expected, men are more likely to suck it up and see it through in the hope that it would get better (93 percent compared to 85 percent of women). The exceptions are New York men and Tampa women, who would use the excuse of not feeling well to cut short a bad date.


S&P/Experian Credit Default Indices Show Mainly Decreases in Default Rates

Over the past twelve months, the indices that follow consumer default rates have shown improvements, according to Experian and S&P.

Data released today by Standard & Poor’s and Experian for the indices of consumer credit defaults shows that, in May, the year-over-year defaults of consumer credits have decreased to 2.09 percent for first mortgages and to 1.42 percent for second mortgages, from the levels in April, of 2.16 percent and 1.51 percent.

The default rate for auto loans has also dropped to 1.34 percent in May, from 1.45 percent in April. In the credit cards sector, the default rates have increased slightly from 5.91 percent in April to 5.93 percent in May.

Chairman and Managing Director of the S&P Indices’ Index Committee, David Blitzer, said that month-to-month statistics presented some volatility. However, he added, the evolutions of default rates for several categories of consumer loans indicate that consumers are straightening out their balance sheets over the past years. Compared to the same period of last year, said David Blitzer, the indices show lowered default rates, and the image is even more optimistic if the data from this year is compared to that of 2008 and 2009.

The largest decreases of default rates were noted in New York – from 2.11 percent to 1.94 percent, Los Angeles – from 2.57 percent to 2.39 percent. Miami and Chicago posted default rates for May of 5.31 percent and 2.37 percent, respectively. In Dallas, there was a slight increase from 1.56 percent to 1.59 percent.

The data was provided by Experian, which has access to a database covering 11 trillion dollars worth of outstanding loans, collected from 11,500 financial lending institutions in the US.