U.S. Consumer Sentiment Slides to Lowest in One Year



Confidence of American consumers about the economy showed an unexpected drop in October, slumping to the lowest level seen in the past one year as the country prepares for presidential election next month.

A report released by the University of Michigan on Friday showed its preliminary index of sentiment shed more than three points from a month ago to 87.9 in the early part of this month.

The reading of consumer confidence was the lowest seen in 13 months, according to the Wall Street Journal. It was also the second-lowest reading in two years. The preliminary October index was lower than what had been predicted by analysts.

Economists had forecast an improvement on the reading of 91.2 seen in the previous month.

Political uncertainty arising from the ongoing presidential election campaign appears to be affecting consumer confidence. The unexpected decline indicates Americans are not convinced on how the economy will fare in the future.

The slump in confidence was especially greater among households that make less than $75,000 per annum.

“It is likely that the uncertainty surrounding the presidential election had a negative impact, especially on low-income consumers, and without that added uncertainty, the confidence measures may not have weakened,” Richard Curtin, the chief economist of the University of Michigan consumer survey, said in a statement.

The University of Michigan report showed consumers’ expectation of the state of the economy six months from now fell to 76.6, declining by about 6 points. It was the lowest level recorded since September 2014.

The proportion of respondents in the consumer survey who expected the economy to perform very well in the coming year stood at 37 percent, the lowest in more than two years. The report also showed that consumers’ outlook for the economy over the next five years dropped.

However, the view on Americans of current economic conditions improved to 105.5, up from 104.2 in the previous month. This shows they do not believe their personal finances have been adversely affected by the present economy.

Spending by American consumers is the main driver of the economy, with this accounting for around 70 percent of total output. It means there is likely to be problems in the economy if there is a significant drop in consumer confidence. This could make households to be more careful about how they spend money.

Retail sales grew by the highest level seen in three months in September, as shown in another report released by the Commerce Department on Friday. This was an indication that consumers are beginning to spend more freely.

The University of Michigan survey showed American consumers expect price to rise more slowly in the coming months. Expectation of future inflation lowered to an average of 2.4 percent over the next five to 10 years – this is the lowest ever recorded in the survey. The expected rate of inflation stood at 2.6 percent last month.

The Federal Reserve has been making efforts to push inflation up to 2 percent to facilitate economy growth at a steady pace. Inflation has slowly risen in 2016, but it still remains at historically-low levels.

The fall in consumers’ inflation expectations is expected to weigh on the Fed’s plan to raise interest rates.

Shocker, Payday Loan Critics Continue to be Unhappy


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The period to submit comments to the Consumer Financial Protection Bureau (CFPB) pertaining to its payday loan proposal, which was unveiled back in June, is closed. The CFPB received an estimated one million remarks. This would be a record set for the five-year-old federal consumer watchdog agency.

The final tally has yet to be confirmed, but already payday loan critics are upset by the amount of comments in support of the short-term, high-interest loan business model. More than 200,000 comments have already been published online, and a large sum are actually in favor of payday loans.

Ostensibly, this has upset a lot of those who are against payday loans, particularly the Stop the Debt Trap campaign, a coalition of consumer groups that supports more stringent payday loan regulations. This group has attempted to generate more than 400,000 negative comments towards the business.

According to Stop the Debt Trap, they want to counter the large number of pro-payday loan comments. They argue that the supportive comments have been made by the industry and customers who have been coerced into making such remarks, though the latter has yet to be proven by anyone.

Jeff Merkley, Oregon Democratic Senator and a member of the Senate Banking Committee, stated in a conference call that many of the comments defending the industry have been started by lenders who offer payday loans for bad credit. His proof is what happened in Oregon, where he was Speaker of the House. Merkley noted that when the state passed payday loan regulations, the industry pushed back with false information and coercion.

The CFPB is expected to release a finalized version of its payday loan proposal. It could be enacted as early as next year. However, some members of Congress are pushing back, requesting that any federal regulatory framework be delayed by at least two years. Democrats are attempting to combat this plan.

More than 100 House Democrats penned a letter to CFPB director Richard Cordray, making the argument that payday loan rules are a necessity at this point because households are becoming too indebted.

“Though we applaud the CFPB for taking the necessary first steps to address predatory practices in the small-dollar credit market, we urge you to adopt a final rule with additional protections that will ensure responsible lending,” the Democrats wrote. “Only a comprehensive federal framework, free of harmful loopholes, can supplement existing state protections and help stop consumers from becoming trapped.”

Payday loan companies have been open with their criticism of the CFPB proposal. Lenders warn that the new rules would actually eliminate the industry altogether. This, lenders say, will force the most vulnerable consumers with urgent borrowing needs to access costly forms of credit, citing bouncing checks. Oftentimes a payday loan can serve as a lifeboat for those in financial destitute.

Opponents of the payday loan industry counter that by referring to the fact that a lot of these products come with 300 percent interest rates. The industry notes that this is essential because the funds are lent out for a short period of time to high-risk borrowers.

Right now, the CFPB rule is 1,200 pages long, and impacts the entire payday loan industry. Some say it goes too far, while others say it doesn’t go far enough.

Twitter Shares Plummet As Salesforce Withdraws from Acquisition Deal



Shares of Twitter took a dive Friday following announcement by Salesforce that it would not place a bid for the company, effectively putting paid to attempts by the social networking site to find a buyer for now.

Twitter shares slumped by around 5 percent following the announcement that the only remaining major contender for its acquisition has ruled out making an offer. They were down to $16.88 in afternoon trading on Friday, as reported by the New York Times.

“In this case, we’ve walked away,” Salesforce Chief Executive Marc Benioff told the Financial Times. “It wasn’t the right fit for us.”

The remarks by the cloud computing company’s boss effectively put paid to Twitter’s ambition of closing a deal for its takeover by the end of October.

Salesforce was considered the leading serious contender to buy the social media company last week, following withdrawals of other major potential bidders. Other suitors, such as Google and Walt Disney, had indicated that they would not make an offer.

Benioff, who has not concealed his interest in Twitter, finally bowed to pressure from investors not to proceed with an acquisition deal, especially considering the withdrawals of other potential bidders.

Salesforce shareholders had questioned the justification for the company to buy an Internet company that was in need of serious fixing. Investors which sent in messages to the company’s executives expressing their disapproval of a deal they considered rather steep included leading mutual fund Fidelity Investments.

At an analyst meeting last week, Benioff attempted to allay investors’ fears saying he has always been quite careful when making any deal.

It would have been catastrophic for Salesforce had it decided to go ahead with making a bid for Twitter, considering how greatly it relies on its shareholders to get things done. The business software company depends on stock to pay its employees and make deals. Its shares would have suffered badly if Benioff had proceeded with the acquisition, hurting its ability to get deals done and pay employees.

The Salesforce CEO explained his interest in acquiring Twitter during a customer conference this month. He said he saw it as a great medium for companies to receive and address complaints from their customers while also promoting their services. Interest in learning more about the tech market was also partly responsible.

Salesforce shares were up by more than 5 percent to $74.27 at the end of trading in New York on Friday.

With the only serious potential bidder left out of the race, sources told the Financial Times that a Twitter sale is practically off, although its advisers are still looking for more potential bidders.

Salesforce withdrawal should now allow Jack Dorsey devote more attention to ways to improve Twitter’s fortunes. The social network’s co-founder and chief executive was initially opposed to a sale, but has become more open to such an outcome in recent weeks.

Twitter has been finding competition quite tough against both old and relatively new rivals. Some of its users are leaving and it is finding hard to convince more people to join its platform. This has hurt its ability to compete for advertising dollars.

Hershey Says Bilbrey to Retire, Starts Search for New CEO



Chocolate company Hershey Co. has announced that Chief Executive John Bilbrey will step down from his position next summer and search for a replacement has already commenced.

Hershey revealed on Friday that Bilbrey will retire as its chief executive on July 1, 2017, but will continue as a non-executive chairman. It also said a committee has been set up to begin the search for a successor immediately.

Explaining his decision to retire Friday, Bilbrey said he wanted to spend more time with his family.

“All of the decisions in my career have been made in consultation with my wife, Teresa, with the impact to our children and our family being paramount,” the 60-year-old said in a note to the chocolate maker’s employees. “And so it is with that in mind that I have shared with our board, and now you, my decision to retire next year in order to spend more time with family and wonderful grandchildren who have faithfully and selflessly supported me for so long.”

Bilbrey, who is also Hershey’s president, became the CEO of the company in 2011, having served in different senior positions since 2003. He was named the chairman of the Kisses chocolate maker last year.

Since becoming the chief executive, Bilbrey has managed to double the market value of Hershey to $20 billion. He expanded the company’s share of the U.S. market to 31.3 percent, up from 28.3 percent, and improved profit margins.

The news of Hershey CEO’s impending retirement comes weeks after a takeover bid by Mondelez was turned down by the chocolate maker. The Oreo cookie maker’s CEO Irene Rosenfeld made a fresh bid in August after having one turned down earlier in June, but the offer was again rejected.

Reuters reported that Hershey rebuffed Rosenfeld’s offer of $115 billion per share, or approximately $24.5 billion in total. A source revealed at the time that the company wanted at least $125 a share to enter into any deal negotiations.

A takeover deal would require the approval of the Hershey trust, which controls 81 percent of the chocolate company’s voting stock. The charitable trust has around two-thirds of its $12 billion worth of assets in Hershey.

The committee set up to find a successor for Bilbrey will be headed by Pamela Arway, chairperson of the governance committee of Hershey’s board. She will be assisted by global executive search firm Egon Zehnder.

Both internal and external candidates will be considered for the chief executive position. People who are familiar with the matter said the chocolate maker’s Chief Operating Officer Michele Buck is one of those in the race.

The new CEO, among other things, will need to determine whether the Hershey trust, which was established by the company’s founder to manage school for underprivileged children, should continue to have a large chunk of its funds in the Reese’s peanut butter cups maker.

Less than three months ago, the Hershey trust agreed to a major reform following a disagreement with the Pennsylvania attorney general’s office. It increased the number of its board members to 13 in July, up from 10.