Samsung boosted by smartphone sales; After Brexit, negative interest rate looms; Facebook user numbers grow

1 Samsung boosted by smartphone sales (BBC) Strong smartphone sales have helped Samsung Electronics post its best quarterly results in more than two years. Second-quarter operating profit jumped 18% to 8.1tn Korean won ($7.17bn), in line with the company’s guidance issued in July. That is mainly driven by strong sales of its Galaxy S7 and Galaxy S7 Edge smartphone models.

But the company also indicated that “market competition is expected to strengthen as other companies release new mobile devices”. Samsung is confident that the release of a new large-screen flagship smartphone in the third quarter will help maintain the track record of its smartphone sales.

Samsung’s results are in contrast to rival Apple. Earlier this week, the US company reported a 15% drop in iPhone sales for the April-to-June quarter. And it also said it expected sales to fall again in the current quarter. As for other divisions in the Samsung conglomerate, the company is forecasting a decline in TV demand for the second half of the year, citing “weakened demand in Europe and a prolonged economic slowdown in emerging markets”.

2 After Brexit, negative interest rate looms (David Blanchflower in The Guardian) Since the leave vote in the EU referendum, the bad economic news has continued to roll in. A survey by the Royal Institution of Chartered Surveyors shows a sharp fall in inquiries from homebuyers. Markit’s flash purchasing managers index (PMI) surveys taken after the vote for both manufacturing and services were especially grim. They exclude retail and construction which may well be even harder hit.

A week ago two external monetary policy committee (MPC) members both said that the case for a cut in interest rates was unclear. On 20 July Kristin Forbes argued that the MPC should “wait for the Brexit fog to clear before an interest rate cut” and it was “a good time to keep calm and carry on”.

To this point the MPC haven’t cut below 0.5%, whereas other central banks went to zero, because of their concerns that this would constrain the ability of banks and building societies to extend new credit. But that is set to change at the 4 August meeting as the MPC is going to put those fears aside and is likely to cut rates to 0.25% and maybe even to zero.

The MPC has hinted it will put in place a “package” of measures, which will likely include a further round of quantitative easing although we don’t know yet what assets they will buy. But they may not stop at zero and may eventually go lower. I don’t see this happening in August, but there is a distinct possibility down the road, if the data worsens further, as it well might, that rates will have to go negative.

This is not pie-in-the-sky economics; it is a real possibility and banks are already preparing. NatWest wrote to its 850,000 business customers this week, changing the terms and conditions of their accounts and warning of the possibility that negative interest rates may be coming.

Everyone else is doing it. Negative rates are already being charged by the European Central Bank; along with the central banks of Japan; Denmark, Switzerland, Sweden and Hungary. Lower rates encourage business investment and consumer spending and the hope is that there is a nice continuum from positive rates to small negatives.

Economists used to think that zero was the lower limit for interest rates, but it seems rates can go below zero. The vote to leave the EU has been a nasty negative shock to the UK economy that is going to lower living standards and cause much pain and suffering. A self-inflicted wound. The Brexiters were warned.

3 Facebook user numbers grow (San Francisco Chronicle) Facebook’s stock is trading higher after the world’s biggest social media company handily surpassed Wall Street’s expectations for the second quarter, barrelling ahead on mobile advertisements, user growth and the next frontier — video.

Chief Operating Officer Sheryl Sandberg said that people are spending more time each day on Facebook, on average. The company’s focus on video is attracting more attention from users, she said. Facebook has been working to get users to create and watch more videos, from each other, from businesses and from celebrities.

Facebook had 1.71 billion monthly users as of June 30, up 15 percent year-over-year. Mobile accounted for 84 percent of the quarter’s ad revenue. Overall, Facebook Inc. said its second-quarter net income nearly tripled, to $2.06 billion, or 71 cents per share.

Menlo Park, California-based Facebook’s revenue grew 59 percent, to $6.44 billion. Eleven analysts surveyed by Zacks expected $6.01 billion. Facebook has a long tradition of surpassing analysts’ expectations with its quarterly earnings.


About joesnewspicks

This blog captures interesting news items from around the world for those strained by information overload and yet need to stay updated on global events of significance. The news items displayed are not in order of merit. (The blog takes a weekly off — normally on Sundays — and does not appear when I am on vacation or busy.) I am a journalist for nearly three decades.
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