Consumer Confidence, House Prices Offer Hope for Economy

March 31, 2015, 2:04 am

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Filed under: Mortgages, Real Estate, Housing Market, Home Buying, Economy

By Ryan Vlastelica, Dan Burns and Rodrigo Campos

NEW YORK -- U.S. consumer confidence rebounded strongly in March amid optimism over the labor market while house prices increased in January, hopeful signs that a recent sharp slowdown in economic activity was probably a blip.

A combination of harsh winter weather, a now-settled labor dispute at the country's busy West Coast ports, softer global demand and a strong dollar dampened growth early in the first quarter.

The moderation in activity is a replay of early 2014, when an unseasonably cold winter caused a contraction in output, which was followed by a sharp rebound in growth.

Rising confidence and home prices adds to the belief that the first-quarter slowdown will be temporary.

"Rising confidence and home prices adds to the belief that the first-quarter slowdown will be temporary," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

The Conference Board said Tuesday its index of consumer attitudes rose to 101.3 this month from 98.8 in February. That was well above economists' expectations for a reading of 96.

While consumers were less optimistic about the short-term outlook, they had greater confidence in the labor market, with the share of those anticipating more jobs in the months ahead increasing significantly.

The proportion of consumers expecting income growth also rose solidly, which should help to underpin consumer spending.

Consumption, which accounts for more than two-thirds of U.S. economic activity, has been soft in the last three months, despite households receiving a massive windfall from lower gasoline prices. Some of the weakness has been blamed on harsh weather that kept shoppers at home.

"Consumers have emerged from the winter blues. If they spend anywhere as great as they feel right now, then this economy is going to roar over the next few months," said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.

The dollar rose against a basket of currencies, while U.S. stocks fell after a sharp rally Monday. Prices for U.S. Treasury debt rose.

Weak First Quarter

First-quarter growth estimates range between a 0.8 percent and 1.2 percent annual pace. The economy expanded at a 2.2 percent rate in the fourth quarter.

Some economists believe that weak first-quarter growth could cause the Federal Reserve to delay an interest rate increase to later this year.

Richmond Fed President Jeffrey Lacker, however, said Tuesday that the U.S. central bank would have a "strong" case to tighten monetary policy in June, adding that transitory factors had weighed on growth in the first quarter.

A second report showed single-family home prices rose in January from a year earlier, in part boosted by a shortage of properties on the market.

The S&P/Case Shiller composite index of 20 metropolitan areas gained 4.6 percent in January on a year-over-year basis after rising 4.4 percent in December.

Housing has been sluggish amid a dearth of properties, as insufficient equity keeps potential sellers from entering the market. The reacceleration in home prices could see more houses put up for sale.

"This report signaled healthy home price growth -- strong enough to make current owners consider listing their homes, but slow enough to keep those homes within buyers' reach," said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts.

"This is an important development ahead of the spring selling season, and should provide upside support for inventory growth in the first half of the year."

For now, the economy remains in a soft patch.

In another report, the Institute for Supply Management-Chicago said its Business Barometer edged up to 46.3 from 45.8 in February. A reading below 50 indicates contraction in the region's manufacturing sector.

New orders contracted for a second straight month, while inventories rose sharply. Economists said the persistently weak readings suggested the strong dollar and weak global demand are acting as a drag on manufacturing.

"The manufacturing sector is more exposed than the non-manufacturing sector to the negative effects of dollar appreciation and weaker foreign growth," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York.

-With writing by Lucia Mutikani.

 

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Student Loan Recipients Start Repayment Strike, Face Default

March 31, 2015, 2:11 am

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Filed under: Student Loans, Personal Finance, College, Education, Debt Collection

By KIMBERLY HEFLING

WASHINGTON -- Sarah Dieffenbacher is on a debt strike. She's refusing to make payments on the more than $100,000 in federal and private loans she says she owes for studies at a for-profit college that she now considers so worthless she doesn't include it on her resume. The sentiment is catching on.

Calling themselves the "Corinthian 100" -- named for the troubled Corinthian Colleges which operated Everest College, Heald College and WyoTech before agreeing last summer to sell or close its 100-plus campuses -- about 100 current and former students are refusing to pay back their loans, according to the Debt Collective group behind the strike.

They're meeting Tuesday with officials from the Consumer Financial Protection Bureau, an independent government agency that already has asked the courts to grant relief to Corinthian students who collectively have taken out more than $500 million in private student loans. The Education Department is the group's primary target, because they want the department to discharge their loans. A senior department official is scheduled to attend the meeting.

Uncle Sam's Stance

Denise Horn, an Education Department spokeswoman, said the department has taken steps to help Corinthian students, but is urging them to make payments to avoid default. The department has income-based repayment options.

By not paying back their loans, the former Corinthian students potentially face a host of financial problems, such as poor credit ratings and greater debt because of interest accrued. The former students argue that the department should have done a better job regulating the schools and informing students that they were under investigation.

"I would like to see them have to answer for why they allowed these schools to continue to take federal loans out when they were under investigation for the fraudulent activity they were doing," said Dieffenbacher, 37. Dieffenbacher said she received an associate's degree in paralegal studies from Everest College in Ontario, California, and later went back for a bachelor's in criminal justice before later dropping out.

She said she left school with about $80,000 in federal loans and $30,000 in private loans, but when she went to apply for jobs at law firms she was told her studies didn't count for anything. Dieffenbacher, who works in collections for a property management company, said she was allowed at first to defer her loan payments, but now should be paying about $1,500 a month that she can't afford.

In Debt and Nothing to Show for It

Makenzie Vasquez, of Santa Cruz, California, said she left an eight-month program to become a medical assistant at Everest College in San Jose after six months because she couldn't afford the monthly fees. She said she owes about $31,000 and went into default in November because she hasn't started repayment. "I just turned 22 and I have this much debt, and I have nothing to show for it," said Vasquez, a server at an Italian restaurant.

Many of Corinthian's troubles came to light last year after it was placed by the Education Department on heightened cash monitoring with a 21-day waiting period for federal funds. That was after the department said it failed to provide adequate paperwork and comply with requests to address concerns about the company's practices, which included allegations of falsifying job placement data used in marketing claims and of altered grades and attendance records.

The Education Department last week released a list of 560 institutions -- including for-profit, private and public colleges -- that had been placed on heightened cash monitoring, meaning the department's Federal Student Aid Office is providing additional oversight of the schools for financial or compliance issues. The department said the effort was done to "increase transparency and accountability."

The administration has taken other steps to crack down on the for-profit college industry, such as announcing a new rule last year that would require career training programs to show that students can earn enough money after graduation to pay off their loans. The rule has been challenged in court by the for-profit education sector.

 

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Jay-Z and Pals Launch Tidal Music Streaming Service

March 31, 2015, 2:36 am

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Filed under: Technology, Apple, Mobile Technology, Music & Entertainment

By Morgan Quinn

Jay-Z is trying to make music history with Tidal, his music streaming service that launched on Monday. To help promote the service, Kanye West, Rihanna, Coldplay, Jack White, Madonna and (of course) Beyonce turned their Twitter profile pictures turquoise and tweeted with the hashtag #TidalForAll.

Tidal is expected to compete with Spotify, Deezer and other streaming services, including the soon-to-be-relaunched Beats Music from Apple and YouTube's Music Key. In a news release, the company described Tidal as "a single destination for artists and fans to share ideas, exclusive content, songs, videos, studio sessions, rough tracks, personal conversations and more."

According to the Guardian, Tidal was first launched in October 2014 by Norwegian firm Aspiro. Earlier this month, Project Panther Bidco, a Jay-Z-controlled company, purchased Aspiro for $56 million.

Tidal charges a monthly fee of $19.99, which is double that of Spotify's subscription service, but its key feature is its "lossless" sound quality. That means users bigger files so the quality of sound is not compromised when music is streamed through a variety of audio products, including portable players.

Business Insider reviewer James Cook noted that Tidal "is big on curated playlists," but does have flaws, like "a search for 'Jay Z' doesn't show his music (you have to include the hyphen)."

Why Spotify Should Worry About Tidal

Spotify reached 10 million paid subscribers last year. However, Tidal has an impressive roster of artists backing the new streaming site. Taylor Swift has already removed her catalog from Spotify's streaming service, and if Tidal can lure enough big artists away from Spotify, then the company might become a major contender in the music streaming space.

A Showbiz report contained leaked information that Jay-Z convened a secret summit of artists, including Madonna, Kanye West, Daft Punk, Nicki Minaj, Jack White and Rihanna to outline his grand plans for "a streaming and video service akin to the old United Artists pictures, in which artists would actually profit from their art and put out quality material."

Insiders speculate that Tidal is offering better deals to artists, which could entice them to also move their discographies over to the new service. If Spotify loses a significant number of their major artists to Tidal, it's very likely their users will follow suit. And if that happens, Spotify will definitely have a lot more than 99 problems -- and Jay-Z is sure to be one.

 

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Simple Strategies to Boost Your Budget -- Savings Experiment

March 31, 2015, 2:50 am

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Filed under: Personal Finance, Savings Experiment

Whether you're a college graduate, a new parent or a retiree, the most practical way to get a grip on your spending is by creating a solid budget. If you're looking for long-term savings that'll last, here are some easy tips that can help you start budgeting right.

The first thing to do is figure out how much you actually make every month. This isn't as simple as taking your yearly salary and dividing it by 12. Make sure to deduct income taxes and other upfront costs, like health insurance, as well. Once you've done that, you've got a much more accurate number to start budgeting with.

Once your framework is set, the next step is to determine how much of that money you actually spend. There are a few ways you can do this. One way is to go the old fashioned route and save every receipt and bill over the course of a few months and then calculate your average. If that sounds like a big headache to you, there are lots of budgeting programs out there that can help you keep track of it all.

One of those programs is called Mint. This tried and true app gathers all your spending patterns, bills and other expenses and presents it in a clear way that's easy to understand and learn from. And it's free!

Lastly, form a specific long-term savings goal so that you have something tangible to aim for. Let's face it, making an effective budget is going to involve some cuts to your spending that won't be fun, like reducing your dinner and movie nights. However, if you create an end goal you'll know that you're working towards something tangible, so those small sacrifices won't be quite as difficult.

While some methods of budgeting work better for different people, these tips are the essential building blocks everyone can use to get started. Give them a try, and you'll see that saving more isn't always about spending less; it's about making the best choices with what you already have.

View Poll

 

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It's No Joke: America's First Junk Food Tax Is Here

March 31, 2015, 4:14 am

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Filed under: Health Care, Food & Beverage, Restaurants

By Karla Bowsher

The first junk food tax in the U.S. goes into effect Wednesday in the Navajo Nation. The Healthy Diné Nation Act of 2014 increases the sales tax on "all minimal- to no-nutritional-value food items" by 2 percent.

The tax revenue will benefit community wellness projects such as "farming, vegetable gardens, greenhouses, farmers markets, clean water, exercise equipment [and] health classes," according to a Navajo Nation press release issued when the legislation was signed in November.

David Foley, an epidemiologist for the Navajo Nation Division of Health, told Indian Country last year that an estimated 24,600 Navajos -- 10 percent of the tribal population -- have diabetes and another 75,000 have pre-diabetes. The legislation states that obesity rates in the Navajo Nation range from 23 percent to 60 percent, and overweight rates range from 17 percent to 39 percent.

No Sales Tax on Healthy Food

The new tax follows the elimination of the Navajo Nation's sales tax on fresh fruits and vegetables, water, nuts, seeds and nut butters. Critics argue, however, that the tax changes will make it more expensive overall for many people to eat in what the Los Angeles Times calls "one of the most economically depressed areas in the country, where more than 40 percent of people are unemployed."

As the Times reports: "For many in the tribe, a limited budget and few stores to choose from -- the U.S. Department of Agriculture has declared parts of the vast reservation a food desert -- mean gas stations and convenience stores are their primary grocers."

The Native American reservation covers more than 27,000 square miles of Arizona, New Mexico and Utah, making it bigger than U.S. states such as Massachusetts, Maryland and West Virginia.

Does the rest of the country need a junk food tax? Sound off with a comment below or on our Facebook page.

 

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Noodles & Co. Ditches Pasta for Protein-Obsessed Diners

March 31, 2015, 4:20 am

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Filed under: Company News, Food & Beverage, Restaurants, Stocks

Noodles & Co. (NDLS) is fleshing out its menu, and the new additions have nothing to do with the signature food item that put it on the map. The fast-casual chain Wednesday is introducing Buff Bowls, versions of its four most popular entrees that replace the chain's signature noodles with a double portion of veggies.

The new Buff Bowls -- Japanese Pan with marinated steak, Bangkok Curry with organic tofu, Pesto with pork, and Fresca with grilled chicken -- will be priced at $8.75 apiece. This isn't the first time that Noodles & Co. reaches out to folks interested in non-pasta dishes. There are plenty of noodle-free salads, sandwiches and soups available on the menu. However, this is just another step that the chain is taking to appeal to diners attracted to Noodles & Co.'s freshness but apprehensive about noodles and pasta that are high in carbohydrates.

Whether folks are counting carbs, have gone paleo, or are simply looking for slightly healthier fare, Noodles & Co. knows that it doesn't always have to live up to its name. Given the chain's lumpy financial performance since going public two years ago, it can't afford to stand still in this environment.

Wet Noodle

Noodles & Co. drew plenty of attention when it went public at $18 during the summer of 2013. It was as hot as its spicy Indonesian peanut saute, more than doubling on its first day of trading. Some called it the next Chipotle Mexican Grill (CMG) since both chains are part of the "fast casual" segment that's faring well with customers trying to step up from fast food without having to deal with the high prices, long waits and suggested tipping practices of casual dining.

Unfortunately, it wasn't the next Chipotle. The stock has shed roughly two-thirds of its value since peaking a few days after going public. The shares fell sharply through 2014, and things haven't gotten any better in 2015, with the stock moving lower every single month so far this year.

Noodles & Co. never lived up to the scintillating comparable-restaurant sales of Chipotle. Comps rose a mere 0.2 percent in 2014, failing to keep up with inflation. It hasn't gotten any prettier on the bottom line, with Noodles & Co. falling short of analyst profit targets in three of the past four quarters.

What's Pasta Is Prologue

The new Buff Bowls are being pitched as a "limited time" offering, but it's fair to say that if they prove popular they will probably stick around. Noodles & Co. struggled to grow sales last year, and it's not going to slay the golden goose if hungry patrons gravitate to the four new dishes that pack less than 400 calories and no more than 39 grams of carbs each.

The chain continues to grow quickly despite its near-term challenges. It had 291 company-owned locations when it went public, with another 52 franchised locations. It's now up to 386 company-owned eateries with 53 franchised units.

Noodles & Co. can use the boost. At least three Wall Street analysts cut their price targets on the stock after its most recent disappointing quarter, and history has proven that it's hard for a chain to keep expanding at a heady pace if its store-level popularity is merely treading water. So, yes, Noodles & Co. is widening its offerings, and it's hoping that Buff Bowls also buff up sales when it needs it the most.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. Check out our free report on one great stock to buy for 2015 and beyond.​​

 

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Indiana Gov. to 'Fix' Religious Freedom Law This Week

March 31, 2015, 4:47 am

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Filed under: Small Business, Scandals and Lawsuits, Economy, People

By Fiona Ortiz

Indiana's Republican Gov. Mike Pence, responding to national outrage over the state's new Religious Freedom Restoration Act, said Tuesday he will "fix" it to make clear businesses cannot use the law to deny services to same-sex couples.

Pence, in a news conference, said the law he signed last week had been unfairly "smeared" but he called on the state's Republican-controlled General Assembly to come up with clarifications this week.

I believe it would be appropriate to make it clear that this law does not give businesses the right to deny services to anyone.

"I believe it would be appropriate to make it clear that this law does not give businesses the right to deny services to anyone," he told reporters at a testy, nationally televised news conference in the state capital, Indianapolis.

Pence, who was brought up Catholic but is now an evangelical Christian, faced massive pressure from businesses over the bill, which passed with an overwhelming majority in the state's legislature.

Major companies including Walmart Stores (WMT), Apple (AAPL), Angie's List (ANGI), diesel engine-maker Cummins (CMI), Salesforce Marketing Cloud and drugmaker Eli Lilly (LLY) have called on him to clarify or repeal the law.

Rock band Wilco canceled a show in Indianapolis and Democratic governors from both coasts, joined Tuesday by New York Gov. Andrew Cuomo, banned official travel to Indiana. Auto racing company NASCAR and the Indianapolis-based NCAA, an organization for university athletic programs, expressed concern over the law.

At the news conference Pence said the law protected people of all faiths from being forced by the government to go against their beliefs. He repeatedly denied that the intent of the law was to allow discrimination.

Critics said Indiana's law as it is now written would allow businesses to deny services such as wedding cakes or wedding music for gay marriages, on religious grounds.

Pence, a lawyer and one-time radio talk-show host, is seen as a moderate on education and healthcare issues. His is one of many Republican names that have come up as a possible presidential contender.

The Indiana governor found support from conservatives including Republican presidential hopeful Ted Cruz and possible presidential contenders Jeb Bush and Marco Rubio, who all praised the law.

Everything You Wanted to Know About RFRA's

The federal government and 20 states have passed Religious Freedom Restoration Acts, known as RFRAs, since the early 1990s. But Indiana's is the first enacted since gay marriage became legal in many states last year, and it has been seen by critics as a backlash against same-sex marriage.

Indiana's RFRA is also one of the first to adopt language from recent appeals court rulings and specifically allow individuals and companies to sue other individuals or companies on religious freedom grounds.

Earlier RFRA's mostly gave individuals recourse to sue government entities they claim are infringing on their First Amendment right of free exercise of religion.

For instance, using an RFRA lawsuit, a Muslim man won the right to not shave his beard while incarcerated and Amish have challenged compulsory school attendance rules.

Same-sex marriage became legal in Indiana under an appeals court ruling last year.

Jim Bennett, Midwest director for LGBT rights group Lambda Legal, said the business uproar had forced Pence to make changes after he pushed the law through quickly and refused to discuss possible balances to protect same-sex couples.

"He did not want to have a discussion. Fortunately for Indiana and the country, the business community and all the people demanded that that discussion take place," Bennett said.

Lori Windham, senior counsel with the Becket Fund for Religious Liberty, which has brought RFRA cases on behalf of people of different faiths, said the clarification shouldn't be necessary.

"It should already be clear that these laws require courts to balance religious freedom against other interests. They don't mean religion always wins, they mean that religious people have their day in court," she said.

The controversy over Indiana's law appeared to stall Religious Freedom Restoration Acts in the legislatures in Georgia and North Carolina.

In Arkansas, Republican Governor Asa Hutchinson has said he will sign into a law an RFRA that is expected to move to his desk from the legislature this week. But he may face similar pressures as Pence.

On Tuesday the Democratic mayor of Little Rock said the law was too divisive and asked Hutchinson to veto it.

-With reporting by by Mary Wisniewski and Suzannah Gonzales in Chicago; Jon Herskovitz in Austin, Texas; Emily Stephenson and Susan Heavey in Washington, D.C.; and Colleen Jenkins in Winston-Salem, North Carolina.

 

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States Go After Subscription Scam That Targeted Millions

March 31, 2015, 7:31 am

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Filed under: Publishing, Scandals and Lawsuits, Consumer Protection, Junk Mail and Telemarketing, Ripoffs & Scams

Five attorneys general joined forces and filed lawsuits intended to shut down a massive alleged newspaper and magazine subscription scam that solicited millions of consumers nationwide, officials announced Tuesday.

Solicitations pitching "one of the lowest available rates" or renewals when none were due were sent out by a collection of companies that charged as much as double the publication price, New York's Attorney General Office said. The notices -- appearing to be from the publications themselves -- were sent without the permission of the publishers and the solicitors allegedly pocketed the overcharges.

This sophisticated mail scam ripped off thousands of Oregonians and others across the country.

In addition to New York, attorneys general from Oregon, Minnesota, Missouri and Texas also are involved. Consumers who realized they were being taken advantage of began complaining, leading several to launch their own campaigns to get the solicitations to stop. Dow Jones, publisher of The Wall Street Journal, estimated that it spent $3.5 million to try to combat the subscription pitches. Thousands of consumer complaints were documented by government agencies and the Better Business Bureau. Many consumers complained that they had paid for subscriptions or renewals but never received them.

"This sophisticated mail scam ripped off thousands of Oregonians and others across the country," Oregon Attorney General Ellen Rosenblum said. "Consumers thought they were dealing with legitimate companies, and that they were paying the lowest available price. Instead, they sent payments to a dishonest third-party, who pocketed the money."

Return addresses from the subscription services were usually from Nevada or Oregon, and officials said so many different names were used to spread out the number of complaints to delay detection. Subscriptions were sold to at least 44 different publications. Among the publications considered to be "victimized" in this case are Consumer Reports, Woman's World, National Geographic, Forbes, The New York Times, The Wall Street Journal, The Washington Post and Sports Illustrated.

Examples of the overcharge cited include $59.95 a year for Consumer Reports, which actually costs $29.95, and $600 a year of The Wall Street Journal -- a subscription that regularly sells for $413.

The states filed lawsuits against Orbital Publishing Group Inc. and collection of related companies believed to be part of the alleged scam. They sold subscriptions under these names: Magazine Payment Services, Associated Publishers Network, Publishers Periodical Service, United Publishers Service, Publishers Billing Exchange, Publishers Billing Association, Publishers Billing Center, Magazine Billing Network, Publishers Distribution Services, Magazine Distribution Service and Subscription Billing Service.

Those named in the lawsuits include: Liberty Publishers Service Inc., Express Publishers Service Inc., Associated Publishers Network Inc., Publishers Payment Processing Inc., Adept Management Inc., Customer Access Services Inc., Consolidated Publishers Exchange Inc., Magazine Clearing Exchange Inc., Henry Cricket Group , Laura Lovrien and Lydia Pugsley. Laura Lovrien is reportedly chief operating officer of Orbital and the president of Liberty Publishers. Pugsley is said to be owner of Adept Management.

 

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You're Still Working for the Tax Man - But Relief Is Soon

March 31, 2015, 7:41 am

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Filed under: Taxes, Government Spending, Income Tax, State Income Tax

If you're feeling burned out from work by late April, here's a possible reason: Americans will spend almost a third of 2015 -- until April 24 -- to pay their total tax bill for the year. After Tax Freedom Day, the money you earn is yours to keep.

That day of tax freedom is 114 days into 2015, one day later than last year, the Washington-based Tax Foundation announced Tuesday.

If working the first third of the year just to pay federal, state and local taxes isn't depressing enough, here's another fun fact: Americans will collectively spend more on taxes in 2015 than they will on food, clothing and housing combined. Read that again. The basic necessities of life this year will cost less than the average tax bill.

Americans will pay $3.28 trillion in federal taxes in 2015, and $1.57 trillion in state and local taxes, for a combined tax bill of $4.85 trillion, or 31 percent of the nation's income. It will take Americans 43 days to pay those income taxes, followed by 26 days to pay payroll taxes, 15 days for sales and excise taxes, 12 days for corporate income taxes, 11 days for property taxes and the remaining seven days for estate and inheritance taxes, custom duties and other taxes.

Tax Freedom Day Differs Across the U.S.

Across the country, Tax Freedom Day depends on your state's tax laws. Connecticut and New Jersey have the latest freedom date -- May 13 -- preceded by New York on May 8. Louisiana has the lowest average tax burden, with its residents gaining tax freedom on April 2. Other early arrivals are Mississippi on April 4 and South Dakota on April 8.

Tax Freedom Day is a day later this year mainly because of the country's steady economic growth, according to the foundation, which calls itself a nonpartisan research think tank. Higher wages and corporate profits are expected to boost tax revenue.

The good news is that Tax Freedom Day in 2015 isn't the latest date among previous days of tax freedom. That distinction goes to the year 2000, when it was on May 1 and Americans paid 33 percent of their total income in taxes.

In 1900, Americans paid 5.9 percent of their income in taxes, when Tax Freedom Day came on Jan. 22. The last time Tax Freedom Day was this late in the year was 2007 when it was held on April 25.

At Least the Deficit Is Dropping

If annual federal borrowing is included, which represents future taxes owed, Tax Freedom Day is 14 days later this year -- May 8.

Federal expenses have surpassed federal revenues since 2002, with the budget deficit exceeding $1 trillion annually from 2009 to 2012, and more than $800 billion in 2013, according to the foundation.

The deficit is on track to decline in 2015, to $580 billion. Including federal borrowing results in a later Tax Freedom Day, but the good news is that the country's deficit is dropping. That may be the best news since the latest deficit-inclusive Tax Freedom Day -- May 25, 1945.

 

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Doctors Accused of Offering Free Shoes to Defraud Medicaid

March 31, 2015, 9:30 am

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Filed under: Health Care, Healthcare Industry, Scandals and Lawsuits, Health Insurance, Ripoffs & Scams

By Laila Kearney

NEW YORK -- Twenty-three New York City doctors and medical workers have been charged with running an insurance fraud scheme in which they persuaded homeless and poor people to get unnecessary medical testing with promises of free shoes, prosecutors said Tuesday.

Nine doctors and other employees of eight city medical clinics are accused of fraudulently billing Medicaid $7 million in expenses for patients recruited from homeless shelters and welfare centers from October 2012 to September 2014, Brooklyn District Attorney Ken Thompson said in a statement.

These defendants allegedly exploited the most vulnerable members of our society and raked in millions of dollars by doing so.

"These defendants allegedly exploited the most vulnerable members of our society and raked in millions of dollars by doing so," Thompson said in the statement.

The people targeted, referred to by the accused schemers as "guinea pigs," were given free footwear if they produced a Medicaid card and agreed to have their feet examined at one of the involved medical clinics, prosecutors said.

They were often taken to the clinics for physical therapy and tests including cardiograms that spanned hours and sometimes days, prosecutors said. Patients were also given medical equipment such as leg braces that they didn't need.

Daniel Coyne, acting deputy Medicaid inspector general for investigations, said the patients could have had actual and serious medical problems left untreated by getting the arbitrary testing.

The accused face up to 25 years in prison if convicted on the top count of enterprise corruption. A hearing in the case is set for May 19.

 

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Market Wrap: Stocks Retreat; S&P, Nasdaq Post Quarterly Gains

March 31, 2015, 9:50 am

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Filed under: Energy, Market News, Mergers & Acquisitions, Job Market, Oil & Gas Industry

By Caroline Valetkevitch

NEW YORK -- U.S. stocks ended lower Tuesday in a retreat from the previous session's sharp rally as energy shares declined and the dollar edged up, but the S&P 500 and Nasdaq registered their ninth straight quarterly rise.

The S&P's 500 quarterly winning streak was its longest since 1998, while the Nasdaq's was its longest ever. The Dow registered a slight loss for the quarter.

In the day's action, energy shares were among the biggest drags as crude oil fell. The S&P Energy index declined 0.9 percent, while shares of Exxon Mobil (XOM) fell 0.7 percent to $85.

Oil was pressured as Iran and six world powers continued talks on a nuclear deal that could see the energy-rich country increase oil exports.

The dollar added to its sharp gains for the quarter, stoking worries about earnings for U.S. multinationals. S&P 500 earnings are expected to have declined by 2.8 percent in the first quarter from a year ago, Thomson Reuters data showed.

"Today's price action is a reflection of all the bad in the quarter -- the stronger dollar, weaker oil -- and in some respects just a snapback from yesterday's outsized gains," said John Canally, chief economic strategist for LPL Financial in Boston.

"Tomorrow's a new quarter and there's a new batch of people ready to take some risks, so I wouldn't be surprised if we see an up day."

The Dow Jones industrial average (^DJI) fell 200.19 points, or 1.11 percent, to 17,776.12, the Standard & Poor's 500 index (^GSPC) lost 18.35 points, or 0.88 percent, to 2,067.89 and the Nasdaq composite (^IXIC) dropped 46.56 points, or 0.94 percent, to 4,900.88.

The day's decline in stocks followed gains of more than 1 percent Monday on each of the major indexes.

All three indexes also posted losses for the month, with the Dow down 2 percent, S&P 500 down 1.7 percent and the Nasdaq down 1.3 percent.

For the first quarter, the Dow declined 0.3 percent, the S&P 500 gained 0.4 percent and the Nasdaq gained 3.5 percent.

Mergers and Acquisitions

Endurance Specialty Holdings agreed to buy reinsurer Montpelier Re Holdings for about $1.83 billion, while Charter Communications agreed to acquire Bright House Networks in a roughly $10 billion deal.

Charter (CHTR) rose 5.3 percent to $193.11 while Montpelier (MRH) rose 0.8 percent to $38.44. Endurance (ENH) fell 4.9 percent to $61.14.

March payrolls data are due Friday, when the stock market is closed for the Good Friday holiday. If the report is strong, investors could view the U.S. Federal Reserve as more likely to raise rates earlier than currently expected.

NYSE decliners outnumbered advancers 1,794 to 1,247, for a 1.44-to-1 ratio; on the Nasdaq, 1,649 issues fell and 1,090 advanced, for a 1.51-to-1 ratio.

The S&P 500 posted 22 new 52-week highs and 2 new lows; the Nasdaq composite recorded 72 new highs and 42 new lows.

About 6.2 billion shares changed hands on U.S. exchanges, below the 6.7 billion daily March average, according to BATS Global Markets.

What to watch Wednesday:

• Monsanto (MON) reports quarterly financial results before U.S. markets open.
• Automakers release vehicle sales for March.
• The Mortgage Bankers Association releases weekly mortgage applications at 7 a.m.
• ADP (ADP) reports private payroll employment for March at 8:15 a.m.
• At 10 a.m., the Institute for Supply Management releases its manufacturing index for March, and the Commerce Department releases construction spending for February.

 

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3 Tax Loopholes for the Merely Middle Class

March 31, 2015, 11:00 pm

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Filed under: Taxes, 529 Plans, Roth IRA, Tax Credits, Tax Deductions

By Beth Pinsker

NEW YORK -- Former presidential candidate Mitt Romney's legendary tax deduction for his horse may sound like the ultimate boondoggle of the super rich.

Ditto for writing off the private jet, stashing money in offshore accounts and paying the nanny as a corporate employee.

Here are some other tax loopholes that might be within your reach:

1. Maximize your 529. The tax benefits of a 529 college savings plan are baked right into the plan -- you put in after-tax money and the proceeds grow tax-free, like a Roth individual retirement account. In some 34 states and the District of Columbia, you also get a tax benefit on your state taxes. But there's more to it than that.

Depending on the state, each parent can make a contribution for each child. That's why Patrick Beagle, a financial planner at WealthCrest in Springfield, Virginia, has four accounts for his two children. Beagle and his spouse each contribute the maximum of $4,000 a year for his state's tax break, for a total of $16,000.

You can also "front-load" your 529 savings by making several years of contributions at once, something President Barack Obama and his wife Michelle were able to take advantage of for their two daughters, putting $240,000 away all at once in 2007.

Depending on the state, there may be no time limit on how long your contribution has to stay in the 529 account before you get a deduction. If you have a child who is already in college, you can make your yearly contribution, get the tax credit and then withdraw it for use immediately.

2. After-tax Roth conversions. Want to fill up your Roth but either make too much to qualify or find the $5,500 a year limit too low? You can contribute after-tax money to your 401(k) and convert it to a Roth, thanks to a new Internal Revenue Service notice.

Jim McGowan, a certified financial planner with the Marshall Financial Group in Doylestown, Pennsylvania, altered his tax-planning strategies for many of his clients because of this change.

For those whose companies allow it, McGowan is having clients put aside $20,000 to $30,000 extra in their 401(k)s after they have maxed out the $18,000 allowed with pre-tax money.

The total an individual can save a year, including any matching funds, is $53,000, so there is plenty of wiggle room.

McGowan's clients are just starting to utilize Roth conversions, so nobody has rolled over funds yet. "Potentially, it could be an enormous benefit tax-wise," he says.

Not the least of which is that if you put the same amount in a brokerage account, you'd be paying capital gains every year. But with the extra in a 401(k) and then rolled into a Roth, the funds are sheltered.

Likewise, you can make a "back-door" Roth contribution, even if you are over the income level of $183,000 for singles or $193,000 for married couples.

First, you contribute after-tax dollars to an IRA, which you can do up to the regular limits of $5,500 or $6,500 for those over 55. You can then convert this "non-deductible IRA" at will to a Roth, says Harvey Bezozi, a tax accountant with his own firm in Boca Raton, Florida.

"Some people commingle the funds with a traditional pre-tax IRA, but I like to keep them separate so you can keep track of what you did," he says.

3. 'Business' income. You don't have to buy a farm, like one of Patrick Beagle's clients did, just to get some additional expenses to off-set income. Any small business will do.

Beagle has clients who sell products at home-based parties through companies like Thirty-One and Silpada. This opens up a lot of other deductions because they are using part of their home as an office or to store merchandise. There are also phone costs, office supplies and advertising costs to consider.

And all that guacamole for the handbag party? A legitimate business expense.

 

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Your State Income Tax Return: 3 Things You Should Know

March 31, 2015, 11:00 pm

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Filed under: Taxes, Personal Finance, Income Tax, State Income Tax, Tax Laws

Getting your federal tax return off to the IRS by April 15 is hard enough for most Americans. But for those who live in the 43 states that charge at least some form of state income tax, getting your 1040 finished is just half the battle. To complete the job, you need to get your state return completed -- and that can involve an entirely different set of challenges.

To help you navigate the ins and outs of your state income tax return, we've put together a few must-know aspects to make sure you don't make any obvious mistakes. As tempting as it can be to take some shortcuts, you can't afford to make incorrect assumptions about how your state income tax laws work. Let's take a look at three things you should know about your state income tax return.

1. Your State Might Have Different Tax Rules Than the Federal Government. If you were putting together a tax system for a state, the simplest thing to do would be to take the numbers from your federal return and use them to calculate your state income tax. In fact, for a long time, some states did exactly that, imposing a fixed percentage of your federal tax bill as the state tax.

Unfortunately, most states have different definitions of what qualifies as taxable income, as well as what deductions, credits and other tax breaks are available. Even things as simple as the standard deduction can differ from state to state, and some states will have flat tax rates while others have several brackets similar to the federal system.

Because of the differences between the state and federal systems, you need to give yourself enough time to treat your state return as a brand-new exercise. If you think that your federal return will get you most of the way toward completing your state tax return as well, you're probably in for a nasty shock.

2. You Might Have to File More Than One State Tax Return. The nice thing about the federal tax return is that you only have to file one each year. But in many cases, you might have to file multiple state tax returns.

For example, if you moved during the year, you'll likely have to file part-year returns in both of the states you lived in, allocating your income between the two states and paying tax to both. In addition, if you live close enough to a state border that you work and earn income in a different state from where you live, then the state where you work will typically require you to file a return covering your work income, while the state where you live will tax all your income but give you a credit for what you paid the state where your job is located. Some neighboring states have reciprocal agreements that simplify tax preparation, but if you're not one of those fortunate people who benefit from such agreements, you might well end up facing extra work come tax time.

3. If You Need an Extension, Make Sure You File With Your State If Necessary. It's easy to get an extension of time to file your federal tax return. Simply by making a request either electronically or on a paper extension form, you can get six months of extra time to finish your return and send it to the IRS.

Again, the simplest way for states to handle extensions would be to have your federal extension automatically apply to your state return as well. Unfortunately, state and federal government agencies aren't well enough connected to handle that kind of situation, and so you'll typically have to file a separate extension request with your state. The good news, though, is that most states are almost as generous in granting extensions as the IRS is. Just be sure to pay enough of your outstanding tax liability with your extension request to avoid any interest and penalties from having to file later than the original deadline.

State tax returns can be an added pain in the neck for taxpayers if you're not prepared. By being aware of some of the traps for the unwary, you can make sure you don't make mistakes that will create problems with your state tax return.

Motley Fool contributor Dan Caplinger surprised himself when he moved from a state that didn't have income taxes to one that did. You can follow him on Twitter @DanCaplinger or on Google Plus. Check out our free report on one great stock to buy for 2015 and beyond.

 

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10 Clever Hacks That Save Both Money and the Earth

March 31, 2015, 11:00 pm

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Filed under: How to Save Money, Saving

Earth Day is all about being kinder to the planet we live on, a worthy goal in and of itself. But did you know that many of the ways you can live greener can also help put a little green back into your wallet?

Consider these 10 hacks that can reduce your spending and reduce your waste and consumption. The ultimate win-win comes from helping both the environment and your finances.

Paula Pant is an entrepreneur and real estate investor who has traveled to 32 countries. Her blog Afford Anything is not the same tired, stodgy, uninspired financial advice that you'll find on other websites. Afford Anything shows you how to crush limits, create wealth and maximize life.

 

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Google, Facebook and Amazon Dream Big and Bold

March 31, 2015, 11:00 pm

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Filed under: Company News, Technology, Google, Amazon.com, Facebook

By Nelson Wang

Outlandish initiatives have started to become commonplace in Silicon Valley.

Google (GOOGL), in particular, is pursuing a strategy of investing in projects with vast transformative potential. The search giant has its own lab for these skunkworks-type projects, Google X, led by Astro Teller, whose title is captain of moonshots. Among the projects Google X has abandoned over the years are a hoverboard, a jetpack and ia space elevator.

While Wall Street analysts often question the wisdom of investing large amounts of money in pie-in-the-sky projects like this, their skepticism certainly hasn't other tech giants from pursuing them. Here are some of the most audacious moonshot projects out there.

1. Google's Self-Driving Car

Work on Google's autonomous car began in 2010 and was Google X's first project. The technology is now being tested via simulators logging millions of miles a day, as well as in real-world driving experiments, according to ReCode, and the project's head predicts it could be available to the public within five years. Uber, in which Google has invested, recently announced it, too, was working on driverless car technology.

2. Google's Internet Access From Balloons

The tech giant's Project Loon seeks to provide Internet access to rural and remote areas via a network of high-altitude balloons positioned throughout the stratosphere, above the weather and planes. Reaching the two-thirds of the world's population that doesn't currently have internet access holds obvious benefit for Google. In its latest tests, Loon has dramatically increased access speeds and coverage areas, and Google is now working toward commercializing the technology in deals with network operators, according to The Verge.

3. Facebook's Internet Delivery Via Drones

Facebook's (FB) answer to Google's Project Loon is a similarly strange-sounding project to deliver Internet access to remote regions via solar-powered drones cruising at 60,000 to 90,000 feet above the Earth. The project, code-named Aquila, is part of Facebook's Connectivity Lab, which was launched last year to bring Internet access to the rest of the world's population via everything from drones to satellites and lasers. CEO Mark Zuckerberg said this month that the social network had successfully conducted its first test flight of a drone prototype in the U.K.

4. Google's Smart Contact Lens

Google's foray into futuristic health care is a partnership with Novartis to make a contact lens with a chip and sensor so that diabetics can measure their blood sugar levels constantly and non-intrusively. The lens contains a low-power microchip and an extremely thin electronic circuit that sends data to a mobile device. Google recently received a patent for a contact lens with an embedded chip, although Google would not say whether it was for the previously discussed product for diabetics.

5. Google's Project to "Cure Death"

Google announced its radical life extension project named Calico (for California Life Co.) in September 2013 in a splashy Time cover story. Calico's goal is nothing less than to reverse the effects of aging and in effect, cure death. In September 2014, Calico announced it was partnering with AbbVie to develop drugs targeting diseases associated with old age; the two firms each committed $250 million to fund a research center in San Francisco.

6. Amazon's Drone Package Delivery

In December 2013, Amazon (AMZN) posted a provocative video on YouTube of an Amazon Prime-branded drone delivering a small package to a customer. It was his dream, Amazon CEO Jeff Bezos said at the time, to deliver goods to customers in as little as 30 minutes using unmanned drones by 2015. Temporary Federal Aviation Administration guidelines out this month give companies that have acquired the proper permits permission to operate drones under 200 feet for commercial purposes, as long as there is one human operator per drone and the drone is kept in sight at all times. So far, about 50 companies have this permission. Unfortunately for Amazon, this stopgap measure and other proposed rules don't allow it to do what it wants: Use sophisticated computers to safely deliver packages a distance of 10 miles or more.

7. Google Glass

First announced in April 2012, Google Glass is the ambitious attempt by Google to turn us all into cyborgs. The company's stated mission was to free people from always looking down at their smartphones, but it hasn't resonated. Yet, slow sales, a skeptical public, and even the emergence of a catchy way to make fun of users of the product (they're often referred to as "glassholes") hasn't completely deterred Google. This January, Google announced that it would stop producing the product as it is today, but hasn't given up on the idea altogether.

 

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Dear England, We Like You - But Do You Like U.S.?

March 31, 2015, 11:00 pm

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Filed under: Travel, Global Economy, Travel Industry, Vacation Planning, Spending

The snow is melting, the birds are chirping, and all around us, spring has sprung. So naturally, it's time to start thinking about summer. Specifically, the summer vacation season, and where you want to spend it this year.

Summer Is Coming

America holds multiple possibilities for vacation destinations, from Disneyland to Mt. Rushmore to ... Disney World. (We jest a bit, here.) But to get the most bang for your buck this year, you'll probably want to think about traveling internationally.

According to CNBC, "the ruble is down, and the euro is sliding back to levels not seen in over a decade." If this keeps up, vacationing abroad could be the best way to stretch your dollars furthest. And in that case, even though spring just sprang, it's already time to start booking flights.

But to where?

Where Would You Like to Go Today?

The possibilities are legion. Take Russia, for example. Who wouldn't want to take a tour of the Kremlin, ride the Trans-Siberian Railroad, or see the White Nights in St. Petersburg? And with U.S. dollars buying nearly twice as many rubles today as they did a year ago, Russia's almost never been cheaper.

Problem is, the Russians themselves aren't particularly pleased with the devaluation of the ruble, and all too often, they blame us for that. The latest reports out of Pew Research show that only 23 percent of Russians polled have a favorable opinion of the United States -- while 71 percent view us unfavorably. This suggests that despite its current cheapness, a visit to Russia today could prove uncomfortable.

Perhaps it's better to visit a country that we like, and where they like us, too?

A Continent's-Worth of Possibilities

The rest of Europe, however, offers better possibilities. Currently, $1 will buy you 92 euro cents. That's up from about 75 euro cents a year ago -- making Europe, as CNBC put it, the cheapest it's been "in over a decade." So where would you like to go?

According to a new poll out of Gallup, the country we like best worldwide is Canada. Americans give our neighbor to the north a 92 percent rating for "overall" favorability. But in decade-cheap Europe, our top three favorite countries are Great Britain, France and Germany -- in that order. Ninety percent of Americans polled view our former Colonial masters favorably, with France and Germany polling positively at 82 percent and 81 percent, respectively.

These feelings, however, are not always mutual.

Oh, Britons like us just fine -- 66 percent favorable, 27 percent unfavorable, according to Pew Research. And in France, they positively nous aiment -- 75 percent favorable ratings for the U.S., versus just 25 percent unfavorable. Germany, however, is almost evenly split in their opinions of Amerikaner, with 51 percent expressing favorable sentiment for the U.S., but a whopping 47 percent unfavorable.

So if you're planning a trip to Germany, maybe it's best to give them some time to reconsider. (Oktoberfest, anyone?)

Meanwhile, one possibility that wasn't covered on Gallup's poll of countries that Americans love most (but maybe should have been) is Italy. At 78 percent favorability, it's the single European country that appears to love us best.

Act Fast, This Offer Expires Soon

Final thought here: Now that you know which countries Americans like most -- and which ones are likely to give you the warmest reception on your summer vacation -- it's time to talk timing.

According to website FareCompare.com, the best time to reserve a ticket for international travel is "between 5½ months and 1½ months before departure." Meanwhile, CheapAir.com suggests you book even further in advance -- and try especially hard to avoid buying within three months of departure, warning that "about 90 days before departure... the pace of [price] increase starts to accelerate." In which case, the time to start looking for plane tickets for summer travel is... now.

So act soon, while these countries are still cheap, and while their affection's still warm.

In just a couple of weeks, Motley Fool contributor Rich Smith will be flying off to Austria -- one of the few countries for which Pew doesn't provide favorable/unfavorable ratings. He's not at all certain what sort of reception he'll get. Try any of our Foolish newsletter services free for 30 days, and check out The Motley Fool's one great stock to buy for 2015 and beyond.

 

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8 Best Things to Buy in April

March 31, 2015, 11:00 pm

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Filed under: Consumer Goods, Food & Beverage, How to Save Money, Home & Garden, Spending

April means different things for different people. For some, it's the ushering in of spring, complete with fragrant buds and lawn maintenance. For others, it's the doomsday of taxes. Others yet think about Easter, cleaning and seasonal wardrobes.

 

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The 3-Step Strategy to Financial Freedom

March 31, 2015, 11:00 pm

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Filed under: Personal Finance, Investing, Planning, Saving

The financial world is far more complicated than it was a generation ago. When I was growing up, my parents didn't have to worry about 401(k)s or individual retirement accounts. Virtually nobody carried a credit card, and if they did, it was likely a Sears card. Cell phones could only be seen on "Star Trek," and TV consisted of three channels that went off the air at midnight.

Today life is a bit more complicated. Yet the path to financial freedom is as simple as it's always been. In fact, it comes down to just three steps:

1. Save: Aim to save 20 percent. of gross income (or more).
2. Invest: Embrace a low cost, tax smart, diversified portfolio of index funds.
3. Grow: Stick to your investment plan, rebalancing periodically.

Easy peasy, lemon squeezy. Or is it?

Simple doesn't mean easy. Golf is simple; it's not easy. Just ask Tiger. With this distinction in mind, let's look at each step on the way to financial freedom.

Step 1: Save

Arguably the most difficult step, saving any amount can be difficult. For some, the idea of saving 20 percent is insane. There are three things that can help.

First, start small. Even saving 5 percent of income is a good first step. As you receive raises (hopefully), increase the amount you save. Eventually, your savings rate will increase.

Second, question every expense. For some reason the American Dream now means owning more home than we can afford, a car based on whether we can make the monthly payment, and a cable package with 500 channels. The point here isn't that you should or should not have these things. Rather, the key is to question what's really important to you, not what fits into an American Dream stereotype.

Finally, automate your savings. Whether it's contributions to a company 401(k) or automatic deposits to an IRA, taxable investment account or savings account, automating the process increases the likelihood that you'll stick to a savings plan.

If you're wondering why a savings rate of 20 percent, we'll cover that at the end of the article.

Step 2: Invest

While investing for the first time can be intimidating, it's actually the easiest part of the process. Thanks to low-cost index funds, It's easy to create a well diversified tax efficient portfolio.

Using Vanguard and other index fund providers, one can build a diversified portfolio with as few as three mutual funds. Alternatively, one could follow the portfolio David Swensen recommends in his book "Unconventional Success." Swensen is the chief investment officer at Yale University, where he manages more than $20 billion in assets. His model portfolio and specific mutual funds to implement his portfolio can be found here.

Alternatively, you can consider using one of several automated investment services. These low-cost investment options make it easy to build a low-cost diversified portfolio. The services automatically rebalance your portfolio, and they also reinvest dividends.

Step 3: Grow

Growing your wealth largely involves repeating steps one and two above, but with a twist. It's critical to stick to the investment plan you establish in step two. This is where many people falter.

Think back to the stock market crash of 2008 and 2009. The banking system was convulsing, real estate was in a free fall, and unemployment was on the rise. Against this backdrop the market crashed. From October 2007 to March 2009, the Dow fell 50 percent.

Investors panicked. In October 2008, Bloomberg reported that both individuals and institutions were running scared:

Not only are stock traders running scared, so are financial institutions. "You've got panics not only among individual investors but panic in the industry itself," says John Merrill, chief investment officer at Tanglewood Wealth Management.

Those who stuck to their investment plan, however, enjoyed remarkable returns. As of March 6, 2015, the Dow stood at 17,856.78 (after a 278 point single-day loss). Yet in March 2009 the Dow bottomed out at 6,594.44. Those who sold in fear back 2008 and 2009 lost out on significant gains.

The key is to stick to your investment plan by rebalancing your investments periodically.

Why 20 Percent?

Now to the big question. How much should we save? We can try to answer this with a rule of thumb. Most such rules suggest 10 percent to 20 percent of gross income. The problem is that it's difficult to put these numbers into meaningful context. Whatever rule of thumb one might choose, it's quickly followed by a very difficult question to answer -- why?

One way to answer that question is in the context of financial freedom. How long does it take to save enough money so that you can stop working? The answer depends on several factors, one of which is your savings rate. Save 20 percent of your gross income and you should be able to retire in 25 to 35 years, depending on your investment returns.

If you are wondering how these numbers are calculated, check out the free Financial Freedom Calculator.

 

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Private Payrolls, Factory Data Point to Weak Economic Growth

April 1, 2015, 1:27 am

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Filed under: Economic Indicators, GDP, Job Market, Manufacturing, Economy

By Lucia Mutikani

WASHINGTON -- U.S. private employers added the smallest number of workers in more than a year in March and factory activity hit a near two-year low, fresh signs that economic growth slowed significantly in the first quarter.

The economy has been slammed by a harsh winter, a strong dollar and weaker global demand. While the effects of bad weather should start to fade, dollar strength could remain a constraint for a while and limit a rebound in output.

The economy hit yet another rough spot in the first quarter ... which is one of many factors that will make it difficult for the Fed to achieve 'lift-off' by mid-year.

Soft growth could prompt the Federal Reserve to delay an anticipated interest rate increase until September. The U.S. central bank hasn't raised its key lending rate since 2006.

"The economy hit yet another rough spot in the first quarter ... which is one of many factors that will make it difficult for the Fed to achieve 'lift-off' by mid-year," said Diane Swonk, chief economist at Mesirow Financial in Chicago.

Private payrolls increased by 189,000 last month, the smallest gain since January 2014, the ADP National Employment Report showed Wednesday.

That was well below economists' expectations for an increase of 225,000. Job gains slowed almost across all sectors, with manufacturing payrolls declining for the first time since January 2014.

The ADP (ADP) report, which is jointly developed with Moody's Analytics, was released ahead of the government's more comprehensive employment report Friday.

While the ADP report has a poor track record predicting nonfarm payrolls, it raises the risk that Friday's number could be softer than economists are forecasting. A Reuters survey predicted payrolls increased 245,000 last month after rising 295,000 in February.

In a separate report, the Institute for Supply Management said its national factory activity index fell to 51.5 last month, the lowest reading since May 2013, from 52.9 in February.

A reading above 50 indicates expansion in the manufacturing sector. New orders and factory employment hit 22-month lows. Order books shrank and export orders contracted further.

U.S. stocks fell, while prices for U.S. government debt rose on the weak reports. The dollar slipped against a basket of currencies.

Weak First Quarter

First-quarter gross domestic product estimates range between a 0.8 percent and 1.2 percent annual pace, setting up what could be a replay of sorts of 2014, when output contracted sharply before rebounding strongly.

The economy expanded at a 2.2 percent rate in the fourth quarter. Forecasting firm Macroeconomic Advisers estimates that the harsh weather subtracted about 0.7 percentage point from first-quarter growth.

The strong dollar, which has gained 12 percent against the currencies of the main U.S. trading partners since June 2014, is pressuring manufacturing by making U.S.-made goods more expensive relative to imports. It also is pinching the profits of multinational companies.

Technology giant IBM (IBM), semiconductor maker Intel (INTC), industrial conglomerate Honeywell (HON) and Procter & Gamble (PG), the world's largest household products maker, have warned that the dollar will hurt their profits this year.

In addition, lower crude prices have squeezed oil companies' profits, prompting some to either postpone or scrap capital expenditure programs.

The sector, which accounts for about 12 percent of the economy, was hit by supply chain disruptions created by a now-resolved labor dispute at the West Coast ports. Manufacturers continued to complain about the dispute's lingering effects.

Another manufacturing survey produced by financial data firm Markit showed factory activity at a five-month high in March.

"Manufacturers will likely continue to have to contend with a stronger dollar, but we think factory activity will pick up in the coming months as the influence of the more transitory headwinds of the weather and the ports dissipates," said John Ryding, chief economist at RDQ Economics in New York.

Separately Wednesday, the Commerce Department said construction spending fell 0.1 percent in February, restrained by a drop in public construction outlays. January's construction spending was revised to show a 1.7 percent decline instead of the previously reported 1.1 percent drop.

-With additional reporting by Sam Forgione and Rodrigo Campos in New York.

 

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Car Buyers Tap the Brakes in March, Following Sales Streak

April 1, 2015, 1:54 am

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Filed under: Company News, Economic Indicators, Automotive Industry, Car Buying

By DEE-ANN DURBIN

DETROIT -- U.S. car buyers tapped the brakes in March, a sign of a long-expected slowdown in the blistering pace of sales.

March sales were up less than 1 percent compared with the same month a year ago. U.S. consumers bought 1.5 million new cars and trucks in March, according to Autodata Corp.

Some automakers reported larger gains. Hyundai's U.S. sales jumped 12 percent over last March after a big boost in incentives. Subaru's sales were up 10 percent. Toyota's (TM) sales were up 5 percent, and FCA (FCA) -- the parent of Chrysler and Fiat -- said its sales rose 2 percent.

But those gains were nearly offset by lower sales at other major automakers. General Motors' (GM) sales fell 2 percent and Ford (F) and Nissan both saw 3 percent declines. Honda's (HMC) sales were down 5 percent. Volkswagen's sales plummeted 18 percent.

For the most part, March didn't see the kind of big increases the industry has gotten used to. U.S. auto sales were up 14 percent in January, for example, and 5 percent in February.

There were several contributing factors. Last March saw a surge in sales after an unusually cold February; by contrast, this March still had lingering snow in much of the country. This March also had one less weekend than last March.

Still, March gave the industry a taste of what's to come as U.S. new-car sales reach a natural peak. Sales have been increasing by around 1 million vehicles each year since 2009, when sales fell to 10.4 million vehicles in the depths of the recession. But as sales approach the historic peak of 17 million, the pace is expected to slow. U.S. consumers bought 16.5 million new vehicles last year.

Alec Gutierrez, a senior market analyst for Kelley Blue Book, said he expects sales to increase by around 2.5 percent this year, or 400,000 cars and trucks. Gutierrez says March is usually one of the strongest months of the year, as buyers spend tax returns and Japanese automakers offer good deals so they can close out their fiscal years on a high note. Low interest rates and low gas prices are also enticing factors. But sales were still flat for the month.

"This really shows we're at a point where sales are going to grow at a much slower pace," he said.

Car Sales Slump

GM -- like other automakers -- saw big declines in car sales as consumers flocked to SUVs and trucks. Sales of the compact Sonic dropped 51 percent for the month, and Cadillac ATS sales dropped 31 percent. But Chevrolet Silverado pickup sales were up 7 percent. GM sold 249,875 cars and trucks last month.

Ford's F-Series pickup truck sales were down 5 percent as the company continues to change over to its new aluminum-bodied F-150. Ford has said it won't have normal truck inventory levels on dealers' lots until this summer. But the company also saw big declines for some of its other top sellers, including the Escape SUV, which was down 8 percent, and the Fusion sedan, which saw a 12 percent sales decline. Ford sold 235,929 cars and trucks last month.

Toyota said its car sales were flat but its truck and SUV sales jumped 12 percent. RAV4 small SUV sales were up 28 percent. Lexus SUV sales were also strong thanks to the new NX small SUV. Toyota sold 225,959 vehicles in March.

Honda's car sales also fell and its SUV sales were flat. The CR-V, a perennial best seller in the small SUV market, saw sales drop 4 percent. Honda sold 126,293 vehicles in March.

Chrysler, Jeep Sales Rise

FCA sold 197,261 vehicles for its best March since 2007. Jeep sales jumped 23 percent thanks to brisk sales of the Cherokee, Grand Cherokee and Patriot SUVs. Chrysler brand sales were also up as sales of its 200 sedan more than doubled. But sales of the Ram pickup fell 2 percent.

Nissan's truck and SUV sales were up 15 percent thanks to strong sales of its new Rogue crossover. But that wasn't enough to offset a 13 percent decline in car sales. Nissan sold 145,085 vehicles last month.

Hyundai spent an estimated 25 percent more on incentives compared with last March, according to the car-buying site TrueCar.com. That likely boosted sales. Hyundai's sales were up 12 percent to 75,019 for its best U.S. sales month ever. Sales of the newly redesigned Genesis sedan more than doubled.

Subaru also saw big gains, but with a more modest incentive increase of 6.5 percent. Subaru is benefiting from recently redesigned vehicles, including the Legacy sedan, which saw sales nearly double over last March. Subaru sales were up 10 percent to 49,111.

Volkswagen struggled in March. Sales of its new Golf more than doubled, but the rest of its lineup saw sales declines. Volkswagen's sold 30,025 cars and SUVs last month.

 

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