In Between Days

by CC December 13, 2011 12:35 am • Commentary


The Federal Reserve is likely to hold off offering the U.S. economy fresh stimulus at a meeting on Tuesday as it weighs encouraging signs on the recovery against risks coming from Europe.

Central bank officials are expected to continue discussions on how they might sharpen their communications to get more traction out of the monetary easing they have already put in place, but observers rate chances of an announcement as low.

Even less likely is the prospect of a new round of bond buying, although many analysts think that will happen eventually too.

“I don’t think this meeting lends itself to any major overhaul of policy,” said Jacob Oubina, senior U.S. economist for RBC Capital Markets in New York.

The Fed has held overnight interest rates near zero since December 2008 and has bought $2.3 trillion in bonds in a further attempt to stimulate a robust recovery.


nvestors selling on the announcement that Intel would cut its fourth-quarter revenue forecast by as much as $1.3 billion.

Sharp criticism of last week’s European sovereign-debt summit by credit-rating firms sends markets stumbling, underscoring investor worries that Europe’s crisis will last well into next year and could trigger a global recession.

The chip maker now expects sales for the quarter to be $13.7 billion, or in the company’s words, “plus or minus $300 million,” down from an earlier forecast of $14.7 billion, “plus or minus $500 million.” Read more about Intel’s lowered sales outlook.

Why Intel didn’t just give a standard revenue-range estimate — which would now be between $13.4 billion and $14 billion — is a matter for its executives to address. What does matter is that there is nothing ordinary as to why Intel cut its forecast.

It’s all about the floods.

In Thailand, where nearly 50% of the world’s hard-disk drives are made, recent flooding ravaged parts of the country and caused hard-disk drive makers such as Western Digital Corp. WDC -0.34%  to temporarily shut down or relocate production.

That Intel cut its forecast should come as no surprise. For weeks now, companies such as Western Digital, Dell Inc. DELL -2.34%  and even Apple Inc. AAPL -0.07%  have commented on the supply-chain disruptions resulting from the Thai floods, and Intel’s warning is the latest example of the disaster rippling through the tech sector.

Although it lowered its sales forecast, Intel said PC sales are likely to be up in the fourth quarter from the third quarter. The company also trimmed its gross-margin estimate to 64.5% “plus or minus a couple of percentage points” from an earlier forecast of 65%. Yet even that lowered estimate could still be higher than the 63.4% margins Intel reported in its September business quarter.


Launched in July of last year, and championed by former CEO Steve Jobs, iAd is Apple’s service for selling ads within mobile apps on iPhones, iPads and iPod touches.

But response so far has been tepid: Marketers say they have been turned off by iAd’s high price tag as well as Apple’s hard-charging sales tactics and its stringent control over the creative process.

Google’s AdMob service, on the other hand, is priced more reasonably, ad executives say, and is available on a wide array of devices—not just Apple products.

In response, Apple is making some changes. It is showing more willingness to bargain on the spending commitment it requires of advertisers.

Having originally asked marketers to commit to spend at least $1 million—an amount later dropped to $500,000—Apple is now discussing ad deals with a minimum commitment of just $400,000, according to a person familiar with the matter.

The Economist

EXPECTATIONS for India’s economic growth rate have been sliding inexorably. In the early spring there was still heady talk about 9-10% being the new natural rate of expansion, a trajectory which if maintained would make the country an economic superpower in a couple of decades. Now things look very different. The latest GDP growth figure slipped to 6.9% and industrial production numbers just released, on December 12th, showed a decline of 5.1% compared with the previous period, a miserable state of affairs. The slump looks broadly based, from mining to capital goods, and in severity compares with that experienced at the height of the financial crisis, in February 2009, when a drop of 7.2% took place. Bombast is turning to panic…

An optimistic reading of these latest numbers is that they might force India’s politicians to move beyond the rancour of recent months and agree a program of reforms that would bolster confidence at home and abroad. But given a busy electoral cycle the odds of that seem poor. The concern now is that if growth slows a whole lot of other worries come to the fore, from potential bad debts in the banking system, the government’s poor fiscal position and the challenge of funding a current-account deficit when outside investors have got cold feet. Already the rupee has slid reflecting the last of those worries. India’s finances look solid when it is motoring along at close to double digits and weak when it is expanding at half that rate.

Given all this an uncomfortable burden of expectation now sits on the shoulders of the RBI, one of the few government institutions in India that commands respect, albeit grudgingly from some business folk. It could start cutting rates. But given inflation is still quite persistent, this would involve a theological U-turn. It has other tools available to try to ease the supply of credit, such as lowering the amount of cash banks must hold as reserves, creating room on their balance sheets to lend more. Unless there is a sudden change in government policy—or those statistics are shown to be cranky—action now seems likely. But as in the rich world, India may find that central banks cannot always work short-term economic miracles, nor sustain long-term ones all on their own.


BRUSSELS — European antitrust regulators have suspended their investigation into Google’s acquisition of Motorola Mobility, a maker of smartphones, until Google provides additional evidence in the case, the European Commission said Monday.

Google needed to supply “certain documents that are essential for the evaluation of the transaction,” Amelia Torres, a spokeswoman for the commission, said. “Once we have all the documents, we’ll restart the clock.”

Ms. Torres declined to give any details about the nature of the documents at the center of the latest tussle between Google and European regulators.

Google already is trying to fend off a separate investigation by the commission into whether the company has abused its dominant position in online search and advertising.

Google filed late last month for European clearance to complete the deal with Motorola, worth $12.5 billion.