Focus: Business Economics Survey
>> welcome back. a survey by the national association for business economics shows more u.s. companies were able to pass along higher costs. 41% of executives polled said their prices rose during the first quarter compared to 34% when the survey was last taken in january.
>> number one, the economy is strong, both in terms of our respondents’ own firm with consistent results with what we’ve seen for two or three years now, with where the economy is going and that yellow signal that comes from the prices our respondent companies are charging downstream and the costs they’re seeing in their pipelines on both materials and wages. so it’s confirmatory it really didn’t break new ground, but the things we think about, which is the economy is strong, yellow light signal on inflation, all part of the report.
>> companies are passing along higher materials and labor costs and majority of executives say they expect costs to continue to rise this quarter. that won’t necessarily mean higher prices for consumers. most executives are not planning to raise prices this quarter. shares of oil and metal producers have surged this year because global economic expansion is driving up demand. another commodity also increasing in price is paper. specifically, the kind of paper used to make boxes. bloomberg’s pimm fox is here with more on the trend and a look at one company that might be overlooked.
>> we’ve been talking about energy and metals prices and that’s grabbed investor attention but the cost of boxes and paper that goes into making boxes is also on the increase. it’s called liner board and liner board prices are up about 10% since the end of last year and could go higher according to edings teabaugh with morgan stanley. he said prices could rise 10%. what’s happening is a combination of events, global demand for boxes tends to move in lock step with economic growth. the international monetary fund this week said the global economy ought to expand 5% this year. at the same time, box makers such as smurfit-stone container, they’ve been closing unprofitable plants and consolidating operations. about 3% of north american box-making capacity was cut last year and that’s pushed down inventories to their lowest levels in more than a decade. analyst rick skidmore at goldman sachs told me that smurfit-stone container could benefit from the demand for boxes and rising prices and from actions the company is taking that may be a catalyst to drive up the stock. smurfit whose balance sheet is weighed dunn by $3 billion in debt, wants to sell its consumer packaging unit that represents about 20% of sales. several analysts said the business could fetch around $1.1 billion. in addition, smurfit wants to cut another $600 million in operating costs in the next two years and has redrafted its bank covenants on more favorable terms. the stock has underperformed peers mainly because of a disappointing fourth quarter. shares are up 5% this year. but weyerhaeuser, rayonier, up 12%. smurfit is scheduled to report earnings next tuesday and analysts estimate they will lose 19 cents in the march quarter compared to a loss of last year. investors will have to be patient to profit from any turnaround.
>> wasn’t 2005, if we’re not mistaken, supposed to be the year box makers started to turn a profit?
>> that’s exactly what was suppose to happen but higher energy prices interceded in the scenario and wrecked their plans. they couldn’t pass along the price increases. but right now with factories at full steam and low inventories, there’s a chance they’ll be able to make the price increases stick.
>> thank you very much, pimm fox. we have some breaking news on the nasdaq―they are offering a secondary stock offering. let me see if i can bring up more details on the story. i’m sorry, i’m not getting the headlines clearly. nadsq. it’s not coming up for me, i apologize. all right, let’s take a quick break and we can return and hopefully have more on that with the secondary offering from the nasdaq.
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Listen Focus: World News Update
>> i’m mark crumpton with a world news update. nepal’s king says he’ll give power to the people. king kingseized―gyanendra seized control of the himalayan country 14 months ago and set off a crisis. his opponents have filled the streets with tens of thousands of protestors for days. more than two weeks of often violent protests and general strike against palace rule have paralyzed the himalayan country, leading cities short of food and fuel and nepal at its most volatile since gyanendra seized power.
>> this action by his majesty, the king of nepal, who has reaffirmed his commitment to multiparty democracy and constitutional monarchy, should now pave the way for the restoration of political stability and economic recovery of the country.
