Financial life in a big town

Uganda’s economy may grow 6.6 percent in the 2011-12 fiscal year, boosted by spending on the country’s energy infrastructure, the Finance Ministry said.

Growth may accelerate from 6.4 percent in the current financial year that ends on June 30, the ministry said in a budget document handed to Bloomberg News today in Kampala, the capital. The East African nation’s government is scheduled to present its annual budget on June 8.

Uganda, East Africa’s third-biggest economy, is on the cusp of an oil boom with Tullow Oil Plc (TLW), the U.K.-based energy company, expected to start pumping crude and gas from the Lake Albert Basin in 2012. The country has an estimated 2.5 billion barrels of oil, with about 1 billion barrels in proven reserves, according to Tullow.

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European confidence in the economic outlook weakened for a third straight month in May as the region’s worsening debt crisis and surging commodity costs clouded growth prospects.

An index of executive and consumer sentiment in the 17- member euro region slipped to 105.5 from 106.1 in April, the European Commission in Brussels said today. Economists had forecast a drop to 105.7, the median of 27 estimates in a Bloomberg survey showed.

The euro-area economy is showing signs of a slowdown as governments toughen austerity measures to lower budget gaps as investors grow increasingly concerned that Greece may default, while oil-driven inflation squeezes household incomes. European manufacturing growth slowed this month and money supply expanded at a weaker pace in April, easing pressure on the European Central Bank to raise borrowing costs further.

“Greek restructuring fears, high oil prices, fiscal tightening and slower external demand are damping the economic mood,” said Martin van Vliet, an economist at ING Group in Amsterdam. “The ECB is likely to stay in a gradual tightening mood.”

The euro declined after the data were released, dipping to $1.4199 at 11:00 a.m. in Brussels before rebounding to $1.4215, up 0.5 percent.

‘Major Risk’

A gauge of sentiment among euro-region manufacturers fell to 3.9 in May from 5.6 in the previous month, today’s report showed. An indicator of services confidence slipped to 9.2 from 10.4, while a measure of consumer confidence rose to minus 9.8 from minus 11.6 in April. Sentiment among builders and retailers also worsened this month.

Euro-region growth may lag behind an expansion in the U.S. this year, the Organization for Economic Cooperation and Development said on May 25, when calling the debt crisis a “major risk” to the outlook. In the currency union, gross domestic product may rise 2 percent this year, while U.S. GDP is seen increasing 2.6 percent. Japan may contract in 2011, the Paris-based group said.

“The pace of recovery is likely to be dampened by required fiscal consolidation” as well as rising energy costs, the OECD said. “Risks around the pace of the recovery in domestic demand remain substantial but broadly balanced.”

European governments are seeking ways to fight the debt crisis from spreading as investors grow increasingly concerned that Greece won’t be able to repay its debt after last year’s 110 billion-euro ($157 billion) bailout. Andrew Bosomworth, a fund manager at Pacific Investment Management Co., said on May 25 that a default “might be inevitable.”

‘Growth Moderation’

“So far, the tensions in the periphery didn’t have implications for the growth performance of the region’s core countries,” said Silvio Peruzzo, an economist at Royal Bank of Scotland Plc in London. Still, “we expect to see some growth moderation starting from the second quarter.”

Euro-growth is cooling after the economy expanded 0.8 percent in the first quarter. European manufacturing and services growth weakened in May, French business confidence fell and German executives grew less pessimistic about the outlook. M3 growth, which the ECB uses as a gauge for future inflation, slowed to 2 percent in April from 2.3 percent in March, central bank data showed today.

The German economy, Europe’s largest, may continue to drive the region’s expansion this year as companies step up output and hiring to meet export demand, encouraging consumer spending. The European Commission on May 13 forecast German GDP to rise 2.6 percent this year after increasing a record 3.6 percent in 2010.

‘Good Start’

Schaeffler Group, the roller-bearing maker that owns 60 percent of Continental AG, on May 17 reported a return to profit in the first quarter and Chief Executive Officer Juergen Geissinger said that “following a good start to 2011, we are looking forward to the remainder of the year with confidence.”

An indicator of manufacturers’ order books slipped to minus 2.5 in May from 0.1 in the previous month, today’s report showed. An indicator of employment expectations fell to 6.3 from 7.3 and a gauge measuring the assessment of the development in selling prices dropped to 19.8 from 21.3.

With governments toughening austerity measures and the recovery faltering, companies may struggle to pass on higher costs. Crude oil prices have increased 35 percent over the past year, pushing euro-region inflation to 2.8 percent in April.

A gauge measuring households’ confidence in their ability to save money over the coming year rose to minus 7.4 from minus 8.1 in April. An indicator of expectations in unemployment dropped to 13.7 from 16.6 and a gauge of price developments over the coming 12 months fell to 27.4 from 30.7. Consumers also were less willing to purchase big-ticket items over the coming year, according to the report.

‘Uncertain’ Outlook

Hermes International (RMS) SCA, the Paris-based maker of Birkin handbags, said on May 11 that the forecast for 2011 is “clouded by geopolitical and economic uncertainties.”

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Medtronic, the world’s largest medical device maker, says its fourth-quarter net income dropped 19 percent on expenses related to its recent layoffs.

The Minneapolis-based company earned $776 million, or 72 cents per share, down from $954 million, or 86 cents per share, a year ago. Excluding $198 million in restructuring and other costs, the company earned 90 cents per share.

Sales rose 2 percent to $4.3 billion from $4.2 billion.

Analysts polled by FactSet expected earnings of 93 cents per share for the quarter on sales of $4.29 billion.

Medtronic has struggled to maintain earnings growth amid sluggish sales of its two leading products: heart defibrillators and spinal implants. In February the company announced 2,000 layoffs to bolster its financial position.

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The average U.S. price of a gallon of gasoline has dropped about 9 cents over the past two weeks.

The Lundberg Survey of fuel prices puts the average price for a gallon of regular at $3.91.

Analyst Trilby Lundberg said Sunday that the national average for a gallon of mid-grade is $4.05. For premium it’s $4.16 a gallon.

Lundberg says diesel prices fell about 8 cents a gallon over the past two weeks, to $4 payday loans in 1 hour.14.

Jackson, Miss., had the nation’s lowest average price for gas at $3.60. Chicago had the highest at $4.38.

In California, the lowest average price was $4.03 in Fresno, while San Franciscans paid the highest price at $4.17.

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Most of the factory where Lava Soap was invented in the 1890s will be razed as part of a multimillion-dollar project by Procter & Gamble Co. to renovate and expand its home-products plant in north St. Louis.

The city’s Cultural Resources Office expressed some regret over the demolition but said the benefits of Procter & Gamble’s expansion outweighed preservation of some structures. The city’s Preservation Board voted 3-2 late last month to approve P&G’s demolition plan.

In its report to the board, Bradley’s office said the buildings are “particularly handsome examples” of old factories but “are just in the wrong place for reuse, and it seems that the public good is served by their demolition and the continued presence of a modern manufacturing operation.”

P&G will tear down 16 connected buildings at the 33-acre site, but the primary demolition involves three large red-brick buildings clearly visible from Interstate 70 north of downtown. Work is under way to remove windows and asbestos from the old buildings. John Long, the company’s human resources manager in St. Louis, said the structures are obsolete and don’t meet modern seismic codes.

“They’re not safe for our employees, and that’s the bottom line,” he said.

A four-story building at the south end of the complex will be retained as the plant’s office. Long said the building will get a new employee cafeteria and a fitness center.

P&G weighed three options for the four buildings, the earliest dating to the late 19th century. One option was a $44 million ’seismic retrofit” of the four buildings, which involves extensive bracing of their aging structures. Another was a $13 million plan to demolish all four. The company chose a middle path: a $20 million plan to rehab one building and tear down the rest.

“The critical aspect was the extremely high cost of seismic retrofitting of the buildings and adapting them for modern manufacturing processes,” Betsy Bradley, the Cultural Resources Office’s director, said.

Despite retention of one building, P&G’s plan is not sitting well with some preservationists. The Landmarks Association of St. Louis, in a statement on its website, said “historic industrial architecture falls to the wrecking ball,” the city is signaling that future applicants for demolition permits “will have the opportunity to argue that their historic buildings . . . are just in the wrong place for reuse.”

Michael Allen, director of Preservation Research Office, noted that P&G has no immediate plan to construct new buildings on the site.

The biggest Internet IPO since Google combined with a drop in oil prices to send the broad stock market higher.

Shares of social networking company LinkedIn jumped 109 percent to $94.25 on the first day they began trading on the New York Stock Exchange under the ticker symbol “LNKD.” The debut is seen as a preview of other social networking sites that are expected to start trading during the next year. The list of candidates includes the online messaging service Twitter, game maker Zynga, and the biggest social network of all, Facebook.

“LinkedIn represents the first opportunity for the average investor to participate in what looks like a lasting, powerful trend of social media,” said Lawrence Creatura, a portfolio manager at Federated Investors. “They’re frothy with excitement, and that’s being imputed into the share price.”

LinkedIn finished the day with a gigantic price-to-earnings ratio of 554, a valuation reminiscent of Internet stocks during the late 1990s tech bubble. By comparison, the average price-to-earnings ratio of technology companies in the S&P 500 index like Apple Inc. and Google Inc. is 15.

Sumeet Jain, a principal with venture investing firm CMEA Capital, said LinkedIn’s IPO suggests that the number of mergers and acquisitions will increase this year as social networking companies grow, a potential boon for the stock market.

LinkedIn is “going to have to be quite aggressive” to meet investors’ lofty expectations, Jain said. “All the rest of the companies in the pipeline, when they’re all public companies they will be extraordinarily active acquirers as well.”

The Dow Jones industrial average rose 45.14, or 0.4 percent, to close at 12,605.32. The S&P 500 gained 2.92, or 0.2 percent, to 1,343.60. The Nasdaq composite index rose 8.31, or 0.3 percent, to 2,823.31.

Oil prices fell back below $100 a barrel after an international agency said there is an “urgent need” for refineries to produce more gasoline and bring down pump prices in order to prevent a downturn in the global economy. Delta Air Lines Inc. rose 4.1 percent and JetBlue Airways Corp. rose 1.4 percent on expectations that their fuel costs would decrease.

Oil prices have fallen about 13 percent since the beginning of May as part of a broad-sell off in commodities due to fears that the economy is slowing. Despite LinkedIn’s gains, concerns about the economy weighed on the market again Thursday.

The National Association of Realtors said fewer people purchased previously occupied homes in April. The Conference Board’s outlook for future economic activity decreased for the first time since June 2010. And the Philadelphia Federal Reserve said that its measure of manufacturing activity slumped to its lowest reading since October.

The mixed news confirmed investors’ belief that economic growth could be slow in the coming months. The yield on the benchmark 10-year Treasury note had risen as high as 3.24 percent following the positive jobs news but was back down to 3.17 percent, just below the rate it was trading at late Wednesday. Bond yields tend to rise when investors anticipate stronger economic growth.

“The fact that yields are still up today, even after this relatively weak set of data, tells me that people have factored in” expectations that the economy will grow more slowly this quarter, said Paul Zemsky, chief investment officer of multi-asset strategies for ING Investment Management.

With little fresh economic or corporate data expected in the next two weeks, the market will be “pretty much trading sideways unless something happens to throw people for a loop again,” Zemsky said.

Stocks opened higher after the Department of Labor reported that applications for unemployment dropped more than expected. Indexes gave up those early gains after three negative reports on the economy came out at midmorning.

In a sign that the U.S. consumer recovery remains uneven, Big Lots Inc. fell nearly 11 percent after news reports that it decided not to sell itself. The Wall Street Journal said late Wednesday that the company received bids from two private-equity groups that were lower than it had hoped.

Sears Holding Corp. reported softer sales at its Kmart and Sears stores, causing a first-quarter loss of $1.58 per share, worse than analysts expected. The stock fell 2.6 percent.

Two stocks rose for every one that fell on the New York Stock Exchange. Consolidated volume came to 3.3 billion shares.

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The big news these days is who isn’t running for president. Without Mike Huckabee and Donald Trump, the Republican contest will be less colorful, of course, but also even more unsettled than it has been for the last few months. That leaves room for another Mormon governor and businessman.

Last week I had a chat with Jon Huntsman, the former Utah governor who resigned as the Obama administration’s ambassador to China last month. It was one of only a couple of conversations he’s had with a reporter since he dipped his toe in the water. And it left me convinced that, though not yet registering in polls, he may be the big new Republican face of 2012.

Huckabee’s departure leaves a big “likeability gap” in the Republican field. It sure isn’t going to be filled by Newt Gingrich, whose smiles for David Gregory on “Meet the Press” last week hardly erased his “Gingrich who stole Christmas” impression with voters. The other candidate waiting offstage is Indiana governor Mitch Daniels, the latest crush of establishment Republicans and deficit hawks, despite his record presiding over the most profligate spending in the history of the Republic as George W. Bush’s budget director.

The two other plausible nominees, Mitt Romney and Tim Pawlenty, are hardly running away with the likeability primary. Huckabee memorably noted in 2008 that Romney would remind voters of the boss who laid them off. Pawlenty isn’t actively unlikeable, but his charm seems written in invisible ink. Discounting the nerd-chic of Ron Paul, Huntsman will be the coolest guy in the race.

Mormon Rock

Huntsman played the keyboard in a rock band as a teenager, speaks fluent Mandarin (learned while on his Mormon mission), loves Motocross and has adopted children from China and India. He wears his Mormonism lightly (a daughter is about to be married outside the faith), looks sharp in his bomber jacket and has an attractive wife. He has executive experience at his family’s chemical company. It doesn’t hurt that he seems smart, has millions in the bank (his father invented the “clamshell” container that Big Macs were once packaged in) and has already hired top-flight political operatives like John Weaver, who ran John McCain’s 2000 presidential campaign. Most important, from Huntsman’s perspective, is that he boasts a conservatism-that- works record in Utah.

Line of Attack

Huntsman intends to directly attack the health-care law that Romney passed in Massachusetts, which later became a model for President Obama’s efforts in Washington. He will try to sell the health-insurance plan he implemented in Utah, without any mandates, as the right plan at the right time for the American right. The idea is to use health care against Romney the way Obama used the Iraq war against Hillary Clinton in the 2008 Democratic primaries: as a way of convincing the base that he’s closer to them on their No. 1 issue. Repeal of Obamacare is the only stance that unites all Republicans, and the candidate who masters that message has an inside track to the nomination.

Huntsman’s liabilities are also considerable fast cash. As a Mormon, he won’t have much appeal among the evangelicals who make up about a third of Republican primary voters (whose support is likely to be split between Pawlenty and Michele Bachmann). He was receptive to federal stimulus dollars as governor, and once supported a cap-and-trade plan to reduce greenhouse gases in Western states (which he has since distanced himself from). Reporters haven’t yet begun to pore over his personal life in detail.

Working for Obama

Huntsman’s biggest stumbling block, of course, is that he served in the Obama administration, which for the birthers, haters and assorted nasties who make up a sizeable chunk of the Republican base will be a deal-breaker. When I asked Huntsman about the effusive letters of praise he wrote to Obama and to former President Bill Clinton — he called Obama “a remarkable leader” and praised Clinton’s “brilliant analysis of world events” — he dismissed them as “thank you notes.”

Aides say that Huntsman’s tie to the Obama administration is only a problem until people hear that he also served as an ambassador under George H. W. Bush (to Singapore) and worked for the second President Bush and for Ronald Reagan. They think that his foreign policy credentials will serve him well through the debates.

We’ll see. Huntsman will have to walk a fine line between criticizing Obama’s foreign policy and seeming ungrateful for his appointment (though that might not be a problem with primary voters). He will give a speech soon laying out his worldview, but he hinted to me that he didn’t think Obama had been tough enough in stressing “values” over “perceived interests.”

China Question

On the question of China’s rise, he thinks that while the Chinese will pass the U.S. in “sheer output” in the next couple of decades to become the largest economy in the world, it will be 75 to 100 years before they catch up technologically and beat the U.S. on what he considers the more relevant economic statistic of per-capita GDP.

My sense is that in the cattle calls to come Huntsman will get the blue ribbon from the press and from Republicans looking for the strongest candidate in a general election against Obama. In the past, neither of these factors have had much impact on Republican primary voters. But it’s worth remembering that just a few years before becoming the 2008 Republican nominee, John McCain had a voting record so Democratic that he nearly accepted entreaties to switch parties. And being the press’s darling certainly never hurt McCain.

Huntsman’s fate, then, may be less tied to his personal image than to how Republicans make sense of what may be the most wide-open field since Wendell Willkie won their nomination in 1940.

(Jonathan Alter, author of “The Promise: President Obama, Year One,” is a Bloomberg News columnist. The opinions expressed are his own.)

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India’s inflation was faster than estimated in April, adding pressure on the central bank to extend interest-rate increases as the biggest rise in gasoline tariffs in three years threatens to intensify price gains.

The wholesale-price index rose 8.66 percent in April from a year earlier, the commerce ministry said in a statement in New Delhi today. The median of 19 estimates in a Bloomberg News survey was for an 8.5 percent climb. Prices advanced a revised 9.1 percent in March, according to data compiled by Bloomberg.

The Reserve Bank of India pledged to maintain the fight against inflation after boosting borrowing costs this month for the ninth time since mid-March 2010, the fastest pace of rate rises among major Asian economies. The nation increased the cost of gasoline as much as 8.5 percent yesterday, triggering protests by the main opposition party.

“Inflation will further accelerate after hikes in oil prices, meaning the central bank’s focus will have to be on tightening to control inflation,” said Rupa Rege Nitsure, a Mumbai-based economist at Bank of Baroda. “There is going to be no respite from inflation this year.”

The Bombay Stock Exchange’s Sensitive Index fell 0.9 percent as of 1:42 p.m. in Mumbai after the inflation report. The rupee weakened 0.4 percent to 45.07 against the dollar, while the yield on the 7.8 percent note due April 2021 was up five basis points from 8.25 percent before the report.

‘Elevated’ Inflation

The ministry announced March’s revision after the release, saying the wholesale-price index has been adjusted from April 2004 after errors were discovered.

Governor Duvvuri Subbarao said on May 3 inflation will stay at an “elevated level” until September as he raised the central bank’s repurchase rate by half a percentage point to 7.25 percent. Counterparts from China to South Korea have also extended rate increases as Asia fights prices pressures spurred by elevated oil and food costs.

Monetary tightening in India will slow growth this year and help ease inflation to 6 percent “with an upward bias” by March 31, 2012, Subbarao said. India’s economy may expand “around 8 percent” in the year through March from 8.6 percent in the previous 12 months, he estimated.

For now, indicators such as industrial production and credit expansion show that consumer demand is holding up.

Industrial Output

Industrial output grew 7.3 percent in March from a year earlier, the fastest pace in five months, the commerce ministry said May 12. Commercial credit given by lenders including ICICI Bank Ltd., the nation’s biggest private bank, rose 22 percent from the previous year as of April 22, more than the 19 percent rate prescribed by the Reserve Bank.

Stronger consumer demand is giving companies scope to charge more for their products.

Maruti Suzuki India Ltd. (MSIL), India’s largest carmaker, boosted the prices of its vehicles by as much as 9,000 rupees ($200) last month, Mayank Pareek, the automaker’s head of sales, said April 5.

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