No matter how amazing your accomplishments, it’s always nice to try to set your goals even higher. I was pretty impressed when General Motors managed to lose $1.2 billion on its North American operations in the second quarter of this year. But yesterday GM announced it had outdone even this, losing $1.6 billion on its North American operations in the third quarter.
For GM stockholders, this was lightened with the news that the company has reached an agreement with the United Auto Workers union that could cut health costs by $3 billion per year. How did the market react to this good-news-bad-news? The price of GM stock rose 7.5% yesterday, largely undoing the damage from the plunge that the stock experienced in the first part of this month.
If capital saw the news as overall positive, what about labor? In addition to losing benefits, GM reaffirmed its intention to eliminate 25,000 jobs. So perhaps the ongoing slide in consumer confidence may be warranted. For those of us who have worried about the short-run macroeconomic implications of developments in the auto industry, yesterday’s news adds to the concerns, even if the market has hopes that over the long run, GM can dig out of the hole it’s in right now.
What picture is emerging elsewhere in the economy? Calculated Risk, who follows housing more closely than anybody, expects the housing decline to begin shortly; here is some of his latest evidence for southern California. Macroblog sees last week’s news of 0.2% gains in retail sales in September (1.1% ex-autos) as a positive, but is worried by the 1.3% drop in industrial production. Altig also reports that the fed funds futures reflect a market expectation of 25-basis-point rate hikes at each of the next three FOMC meetings, which would leave us at 4.50% by January. Prospects for relief from that dimmed even further with today’s release of the producer price index, whose 1.9% rise in September was the fastest growth in 15 years.
Oh, and by the way, there’s a new possibility of yet another hurricane that could threaten the Gulf.
Other than that, the news is great.