The inexhaustible American consumer is still helping haul the US economy out of recession, according to data issued yesterday by the US Department of Commerce.
Apart from the automobile sector, US retail sales surged by a larger-than-expected 1.2 per cent in January - the highest rate for 22 months. This helped restore some confidence to a stock market battered by accountancy scandals and mammoth bankruptcies, and the Dow Jones rose to triple-digit gains by midday. The fall in car sales resulted from a huge jump in purchases of vehicles during the autumn when makers offered interest-free loans to move inventory.
Retail sales dipped 0.2 per cent overall in January when vehicle sales were included. Analysts had expected sales to fall 0.3 per cent overall in January, but rise by 0.4 per cent when vehicles were excluded.
In another sign that the world's biggest economy is emerging more quickly from recession than expected, the Commerce Department revised December sales upwards to a 0.2 per cent rise overall and a 0.7 per cent gain excluding cars. The department had previously reported declines of 0.1 per cent in both categories. Consumer spending on goods and services makes up two-thirds of US economic activity and the resilience of consumers offset weak investment by businesses in new plants and equipment.
The morning rally on Wall Street was helped by an indication from technology giant Applied Materials that the microship industry was on the way back. Applied Materials, the world's largest manufacturer of chip-making equipment, reported a quarterly net loss but said semiconductor revenues had apparently reached a bottom, and memory chip prices had risen and activity in chip factories had increased.
In the latest corporate scandal, the New York Times reported yesterday that since July 1999, Tyco chairman Dennis Kozlowski and Tyco chief financial officer Mark Swartz made more than $500 million (€573 million) selling Tyco stock, while saying publicly that they rarely, if ever, reduced their holdings. A Tyco spokesman said the stocks sales were to pay taxes and for tax planning.
The Wall Street Journal reported that Global Crossing, which collapsed in January in America's fifth-biggest bankruptcy, boosted revenue and share value by controversial accounting practices involving unnecessary swaps of capacity with other companies. In one case it said the fibreoptic cable company listed a $40 million payment for use of EPIK Communications facilities as capital expenditure, while taking the same amount from the company for acces to its routes.
The FBI and the SEC are investigating whether Global Crossing recorded hundreds of millions of dollars in swaps of capacity it didn't need. The SEC is meanwhile investigating Microsoft over the possibility that the giant software company used accountancy systems to hold back revenue as cash reserves during some quarters and then included the reserves in future quarters to boost earnings.
The SEC is looking at allegations from a former EMC employee, the data storage company, that it was shipping goods to some resellers of its equipment to avoid having to list them in its own inventory.
