Polish economy grows 4.3 pct on the year in Q2

By VANESSA GERA, AP

WARSAW, Poland (AP) — Poland's economy grew 4.3 percent year-on-year in the second quarter, a slight slowdown over previous quarters but still one of the strongest growth rates in Europe.

Economists, however, warned that Poland's economy is starting to be battered by new troubles in the world economy, problems not visible yet in the figures for the April-June period that were released Tuesday.

A loss of momentum is expected to be seen in third quarter figures, economists warned.

Poland's strong growth is attributed in part to the EU subsidies and massive foreign investments it has received since joining the European Union in 2004. And as the largest of the new EU members, with a population of 38 million, it also has a large consumer market that powers the economy, leaving it less dependent than neighbors like Hungary on exports to keep growing.

Still, Poland trades extensively with neighboring Germany and economists were eager to see if a recent slowdown there would take the edge off Poland's strong growth.

Growth of 4.3 percent, however, was better than the 4.2 percent that many economists had expected. The previous two quarters saw growth of 4.5 percent and 4.4 percent.

Adam Antoniak, an economist with Bank BPH, said Poland will not be immune from the "increasingly distressing news regarding prospects for the world economy" and he expects the pace of growth in the third quarter to "decline markedly."

Data released Tuesday showed that growth in individual consumption slowed for the second quarter in a row while the growth rate of public consumption fell for the first time on record, Antoniak said.

Poland was the only European nation to avoid a recession during the global financial crisis, a fact the government of Prime Minister Donald Tusk often boasts about — as Tusk did in Brussels on Tuesday.

Holding up a small map of Poland overlaid with the 4.3 percent figure, Tusk said he was happy to boast of the strong number. He credited the EU and his own government for using EU funds well.

"One source of growth, not only in Poland, are the European funds, European aid put to good use," the news agency PAP quoted him as saying.

Still, while Poland's growth figures look impressive, the country is still much poorer than its Western European neighbors. Trains and roads remain dilapidated, and many people have been unable to make the transition from a communist to market economy 22 years ago, adding to a high unemployment rate of about 11 percent.

With job prospects bleak and wages low, many Poles have left to work in Western Europe, especially Britain, in recent years. 

European stocks hurt by downbeat economic report 

By CARLO PIOVANO, AP

LONDON (AP) — European stocks were hurt Tuesday by a report showing economic sentiment in the eurozone was souring due to uncertainties about the future of the global economic recovery and the region's festering debt crisis.

The European Union's economic sentiment index fell by a greater-than-expected 4.7 points to 98.3 — the sixth consecutive decline, bringing the indicator below its long-term average of 100.

Germany, the eurozone's largest economy, saw the biggest drop. That is particularly worrying for traders because Germany had been the main motor of growth over the past year, helping Europe's economy grow despite the market turmoil spawned by the debt crisis.

"August's weak EC business and consumer survey adds to the evidence that the eurozone economy is now stagnating at best," said Jennifer McKeown, senior economist at Capital Economics.

After earlier trading higher, Germany's DAX was down 0.3 percent to 5,654.47 while France's CAC-40 was up barely 0.1 percent to 3,157.69. Britain's FTSE 100 jumped 2.1 percent to 5,239.33, catching up on global gains made Monday, when it was closed for a holiday.

Wall Street slipped on the open — the Dow fell 0.3 percent to 11,505.11 while the S&P 500 lost 0.5 percent to 1,204.52.

Adding to uncertainty in Europe, a global accounting body criticized some European banking groups for not writing down their shaky Greek bond holdings enough.

The International Accounting Standards Board said some firms only wrote down the value of their Greek bonds according to a restructuring suggested by the Greek government, which would see their value drop by about 21 percent.

However, if firms tried to sell those bonds on the open market now, they would get much less than that, IASB Chairman Hans Hoogervorst said in a letter to the European Union's market regulator, the European Securities and Markets Authority.

Earlier in Asia, markets rode strong momentum from the previous day to close higher. U.S. economic figures on Monday had shown a strong increase in consumer spending and traders were encouraged by comments from Federal Reserve Chairman Ben Bernanke.

One sign of possible help on the horizon was the Fed's decision to extend its upcoming policy meeting to two days instead of one. That raised the possibility of action, at least in the eyes of traders, to jolt the economy.

Another reason for the upbeat mood: investors were anticipating an announcement soon by President Barack Obama on a new jobs initiative.

"I think the focus is on President Obama's speech, which is related to measures that will revive the economy," said Kwong Man Bun, chief operating officer at KGI Securities in Hong Kong. "All this provides some of sort positive expectations for investors."

The Nikkei 225 index in Tokyo added 1.2 percent to 8,953.90 as investors seized on positive U.S. consumer spending figures and overlooked a rise in Japan's unemployment rate.

Hong Kong's Hang Seng gained 1.7 percent to 20,204.17 and South Korea's Kospi was 0.8 percent higher at 1,843.82. Australia's S&P/ASX 200 rose 0.1 percent to 4,269.20.

Mainland Chinese shares lost ground, however, with the benchmark Shanghai Composite Index falling 0.4 percent to 2,566.60. The Shenzhen Composite Index fell 1 percent to 1,148.29.

Looking ahead, investors will keep an eye on U.S. economic indicators that could show slowing growth. Later Tuesday, the Consumer Confidence Index for August will be released. Then on Friday, the Labor Department will release U.S. employment data for August.

In currencies, the euro dropped to $1.4433 from $1.4505 late Monday in New York. The dollar slipped to 76.70 yen from 76.95 yen.

Benchmark oil for October delivery was up 26 cents to $87.53 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.90 to end at $87.27 per barrel on the Nymex on Monday.

In London, Brent crude for October delivery was up $1.17 to $113.05 on the ICE Futures exchange.

Dollar General profit rises

By Jessica Wohl, Reuters

CHICAGO (Reuters) - Dollar General Corp posted bigger-than-expected gains in quarterly sales and profit and raised the low end of its full-year forecast on Tuesday, as shoppers visited its discount stores more often to buy food and other basic items.

Shares of Dollar General, which is carefully balancing demand for low-priced goods with manufacturers' push to raise prices, rose 2.8 percent to $34.75 in premarket trading.

"I saw a lot of encouraging signs in the results," said BB&T Capital Markets analyst Anthony Chukumba. He called the second quarter "a great rebound" from the rare shortfall the company posted for the first quarter.

Sales at stores open at least a year, or same-store sales, rose 5.9 percent, a faster clip than the first quarter's 5.4 percent rise.

Meanwhile, the gross margin decline was much narrower than in the first quarter, "admirable" given the higher commodity and fuel costs the company faces, he said.

Dollar General's customers are buying an increasing proportion of lower-margin necessities as they cut back on discretionary purchases due to higher gas prices, continued high levels of unemployment and other economic concerns.

Sales of items such as candy, snacks and other food continued to increase at a higher rate than merchandise such as home, apparel and seasonal goods during the quarter.

For Dollar General, which prices most of its merchandise below $10, the weak economy is a double-edged sword. As lower-income shoppers seek low-priced food and other basic goods, a soft economy brings new customers into its stores and those of competitors such as Family Dollar Stores Inc .

"The second half of this year is setting up quite nicely for Dollar General," said BB&T's Chukumba, who has a "buy" rating on Dollar General and a "hold" rating on Family Dollar.

"The U.S. macroeconomic environment remains challenging, so we should see a continuation of the trade down phenomenon where consumers are trading down to Dollar General from higher-priced alternatives such as supermarkets, convenience stores and drugstores," he said.

PROFIT UP

Dollar General, which has more than 9,640 stores, more than any other chain in the United States, said sales rose 11.2 percent to $3.58 billion, above the $3.54 billion analysts were expecting according to Thomson Reuters I/B/E/S.

The retailer earned $146 million, or 42 cents per share, in the fiscal second quarter that ended on July 29, up from $141 million, or 41 cents per share, a year earlier.

Earnings of 52 cents per share, excluding items, exceeded analysts' average forecast of 48 cents.

Shoppers buying more food and basic goods rather than discretionary items pressures profitability, as those items generally carry a lower gross profit rate than other goods. At the same time, the prices Dollar General paid for goods rose due to higher commodity and fuel costs.

Gross profit dipped to 32.1 percent of sales from 32.2 percent of sales a year earlier. Over the first six months of the year, gross profit fell to 31.8 percent from 32.2 percent.

Dollar General now expects to earn $2.22 to $2.30 per share for its 53-week fiscal year, versus a prior forecast of $2.20 to $2.30 per share.

It expects sales to rise 12 percent to 14 percent, up from a prior forecast of 11 percent to 13 percent. Same-store sales are now expected to increase by 4 percent to 6 percent, versus an earlier forecast of 3 percent to 5 percent.

Dollar General is majority-owned by private equity firm Kohlberg Kravis Roberts & Co LP , which brought the Goodlettsville, Tennessee-based company back to the public market in November 2009.