Economix Blog: Why Labor’s Share of Income Is Falling

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Nestlé Posts Rise in Profit, and Warns of Falling Sales

GENEVA — The Swiss food and drinks giant Nestlé posted a 3.7 percent rise in first-half profits Thursday, but warned it would not be easy sticking to its sales targets as it tackled slowing markets around the world and “value-conscious” consumers.

Investors sent shares down 2.2 percent, to 63.30 Swiss francs on Thursday, after Nestlé released its first-half statement showing that underlying sales growth was at its lowest in four years.

Based in Vevey, Switzerland, Nestlé is the world’s biggest food and drink company by revenue and the maker of dozens of household name brands like Nescafé, Haagen Dazs, Jenny Craig and KitKat. It also is a major buyer of food commodities, and its results can serve as an indicator of the entire food industry, worldwide consumer demand and health of the global economy.

Nestlé said it had first-half profits of 5.1 billion Swiss francs ($5.5 billion) in the January-to-June period, up from a restated 4.9 billion francs in the same period last year.

Underlying sales growth fell to 4.1 percent for the first six months of the year, down from 6.6 percent in the comparable period a year earlier. In 2011, its first-half rate was 4.8 percent; in 2010, it was 6.1 percent. But midway through 2009, amid a global financial crisis, its growth rate fell to 3.5 percent.

The company said it expected first-half momentum in so-called organic growth to continue in the second half, however, increasing to about 5 percent. The Nestlé model calls for the company to sustain a 5 to 6 percent rate of organic revenue growth.

“It’s not going to be easy. It’s going to be a stretch,” the chief financial officer, Wan Ling Martello, said in a teleconference.

With consumers struggling in both Europe and emerging markets, Nestlé said its growth in developing markets slowed to 8.2 percent, down from 12.9 percent during the comparable period a year ago, while growth in developed markets fell to 1 percent, down from 2.6 percent last year.

Monitor Finds Mortgage Lenders Still Falling Short of Settlement’s Terms

The nation’s five biggest mortgage lenders have largely satisfied their financial obligations under last year’s $25 billion settlement over mortgage abuses, helping hundreds of thousands of families keep their homes. But four of the five have yet to meet their commitment to end the maze of frustrations that borrowers must navigate to modify their loans, according to a report on Wednesday by the settlement’s independent monitor.

The most common failure involved a requirement that borrowers be notified in a timely manner of any documents missing from their applications. Banks also failed to meet strict timelines for approving applications. The settlement requires that borrowers be notified of missing documents within five days and given 30 days to supply the missing paperwork and that decisions be rendered at most 30 days after an application is completed.

“I think what you see is there’s still a communication problem,” said Joseph A. Smith Jr., the monitor. “If there’s a unifying feature, it’s that the servicers who failed these things are not yet communicating effectively.”

The mortgage settlement came after the housing crash led to a wave of foreclosures across the country and after widespread improprieties in mortgage lending and in the foreclosure process were uncovered.

The banks report their own performance on 29 loan servicing criteria, and their findings are then tested in a random sampling by outside consultants overseen by the monitor.

Citibank failed three metrics, two of which involve notifying borrowers of missing documents in a timely fashion and one that requires that a letter containing accurate information be sent to a homeowner before foreclosure.

Bank of America failed two metrics, one regarding missing documents and the other regarding the pre-foreclosure letter. Wells Fargo also flunked on the missing documents.

JPMorgan Chase failed to adhere to the prescribed timeline for reviewing loan modification requests and notifying customers of its decision. It also failed to remove home insurance policies, known as forced-place insurance, within two weeks of a homeowner’s submitting proof that he or she had insurance.

The fifth lender, ResCap, formerly the mortgage subsidiary of Ally Financial, whose mortgage servicing is now handled by other companies, was not found to have failed on any of the metrics.

The banks are required to submit a corrective action plan and compensate affected borrowers. Chase, for example, has already refunded insurance premiums charged to 2,000 borrowers. “We quickly fixed the issue,” said Amy Bonitatibus, a spokeswoman for Chase, adding that the timeline problem had been remedied as well.

Wells Fargo said that its internal reviews showed that it had already fixed its problem. Citi said it had fixed one of its issues and was working on the other two.

Dan Frahm, a spokesman for Bank of America, which is responsible for about 60 percent of the total financial obligation under the settlement, said, “While neither area of noncompliance resulted in inaccurate foreclosures or improper loan modification denials, we took immediate action and resolved one area and will soon return to compliance in the other.”

The servicers also submitted to the monitor almost 60,000 complaints received from elected officials on behalf of their constituents. The most common complaints, the monitor’s report said, were related to the bank’s obligation to provide a single point of contact to borrowers seeking modification of their loans. There were also complaints about “dual tracking,” in which the foreclosure process is begun before a borrower’s request for a loan modification is resolved.

Despite the volume of complaints, none of the banks failed the requirement to provide a single point of contact, leading Mr. Smith to conclude that he needed to add more criteria in that area. He said at least three new metrics measuring the efficacy of the single point of contact would be added.

This article has been revised to reflect the following correction:

Correction: June 19, 2013

An earlier version of this article referred imprecisely to a lender that was not found to have failed on any of the metrics. It is ResCap, the mortgage subsidiary of Ally Financial, not Ally Financial itself.

TV Networks Face Falling Ratings and New Rivals

Prime-time ratings for the Big Four broadcasters — ABC, CBS, NBC and Fox — together are dropping more precipitously than ever. Even their biggest hits, like “American Idol” and “Dancing With the Stars,” are fading fast. Advertisers are moving more cash to cable, cutting into the networks’ quarterly profits. New technologies are making it easier to skip those ads, anyway.

That’s not all: there are more outlets for programming than ever, with Netflix and Amazon and dozens of cable channels competing for actors, producers and, most important, viewers. Government regulators want to take back some of the spectrum allotted to local television stations. And start-ups like Aereo are threatening to deprive the stations of subscription revenue, causing some broadcasters to talk of options that were unthinkable a few short years ago. Some have warned they might go off the air entirely.

The many pressures bearing down on the industry are casting a shadow over this week’s upfronts, an annual tradition in New York in which the new sitcoms, dramas and reality shows are previewed at splashy, open-bar events and the networks try to capture their portion of an estimated $9 billion in advertising commitments.

“The networks are getting picked at from every direction,” said Jessica Reif Cohen, the senior media analyst at Bank of America Merrill Lynch. “This year was the tipping point,” she said, “when the television ratings really fell apart.”

The broadcast networks have managed declining viewership for years, but executives by and large said they believed that they had escaped the punishing losses that digital media exacted on the music industry and newspapers.

Now, though, they say they are not sure; even the industry’s biggest boosters concede that the business is under assault, though many express confidence that the networks will adapt. While the challenges before them are numerous, said Gary Carr, who oversees ad-buying at TargetCast, “the networks are far from dead.”

They are certainly smaller. Historically the broadcasters have had outsize cultural and civic importance in the country; their owners pledged long ago to uphold the public interest and provide news programming in exchange for valuable access to the airwaves.

These days the public has mostly forgotten about those commitments. The major network news divisions as a group have suffered hundreds of layoffs in recent years, though they have added staff members to supply news for their Web sites.

No matter how confident the Big Four networks may feel about their new seasons — TV executives are masters at forgetting last year’s failures and staying on message about the future — the stress factors are enough to make them long for the days of “I Love Lucy,” when 50 million Americans would watch the same show at the same time.

Now NBC and ABC are lucky to get five million to tune in. Goldman Sachs found last month that broadcast ratings in the 18-to-49-year-old demographic, the one most coveted by advertisers, fell by 17 percent in the winter months compared with last winter. Goldman Sachs called it “the sharpest pace on record.”

While broadcast networks were setting record lows, cable channels were setting record highs; AMC’s “The Walking Dead” and the History mini-series “The Bible” regularly beat almost all the shows on network television while they were on.

At ABC, the lowest-rated of the four broadcasters, first-quarter profit fell 40 percent compared with the same quarter last year, but the network still made $138 million. NBC, on the other hand, lost $35 million in the quarter, because of lower advertising revenues. NBC’s parent, Comcast, said the network would have fared better if its biggest hit, “The Voice,” had been on in the quarter.

Ad revenue slipped at Fox too, partly because “Idol” has lost nearly a quarter of its viewers this season, on top of a 50 percent decline over the previous five years.

Wider Asia Is Seen as Falling Prey to Slowdown

HONG KONG — A diminished forecast from the Asian Development Bank and another weak economic number from China on Wednesday emphasized that the days of double-digit growth in Asia are a thing of the past as global economic turmoil and slowing momentum hobble the region’s economies.

Emerging Asia — which includes countries like China, India, Indonesia and Thailand, but not developed Japan — is likely to grow just 6.1 percent in 2012, little more than in 2009, when the world was still reeling from the global financial crisis, the development bank said in its latest economic update for the region. Next year, it said, growth is expected to edge up to 6.7 percent.

Both numbers represented sharp cuts from the bank’s previous forecasts, made in April, of 6.9 percent for 2012 and 7.3 percent for 2013, highlighting the deterioration in global conditions this year.

“Growth is slowing down much more rapidly than expected,” the bank’s chief economist, Changyong Rhee, said at a news conference in Hong Kong.

Moreover, the slowdown was particularly marked in the region’s economic heavyweights, China and India, where growth is expected to reach 7.7 percent and 5.6 percent, respectively, this year.

Again, both figures were well below both the Asian Development Bank’s previous projections and the rates of expansion recorded last year; India has been hit especially hard by homegrown issues like the slow pace of change.

China, which depends more on exports than India, has slowed rapidly during the past year, though policy makers appear comfortable with a growth rate of about 7.5 percent, rather than the double-digit jumps in the years before the financial crisis.

Data from the Chinese service sector Wednesday showed expansion at its weakest pace in many months in September: A purchasing managers’ index released by the statistics office slumped to 53.7 for the month, from 56.3 in August. Figures higher than 50 indicate expansion.

The service sector accounts for about 40 percent of China’s overall growth and about one-third of employment, according to the development bank, and analysts commented that the weak September figure showed that domestic demand, not just exports, was suffering.

“We still see growth in Asia bottoming out” in the third quarter, Klaus Baader, an economist at Société Générale in Hong Kong, wrote in a note, “but the degree of uncertainty has risen.”

The Asian Development Bank stressed that growth in Asia — even at the slower pace it now projects — remained “enviable.”

“There is no need to panic,” said Mr. Rhee, the chief economist, adding that China’s wait-and-see approach on measures to prop up growth appeared to be “the right approach right now.”

Analysts have long argued that China and other emerging economies must focus more on the quality rather than the pure speed of expansion, reduce their economies’ reliance on exports and manufacturing for growth and shift the focus toward fostering domestic demand, improving productivity and encouraging the services sector.

The service sector in the region is already much larger than widely believed, Mr. Rhee said, but poor infrastructure and a lack of qualified staff hamper development, while poorly designed and inconsistently executed regulations often stifle the business environment .

“A slew of regulations restrict competition and hamper development of the services sector, affecting everything from the corner shop to mobile telephones,” Mr. Rhee said. “These barriers need to be dismantled.”