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Outside View: Fresh evidence spring swoon grips U.S. economy
by Peter Morici
College Park, Md. (UPI) Apr 19, 2013

India's Wipro Q4 profit up 17%, gives weak outlook
Bangalore, India (AFP) April 19, 2013 - India's third-largest software firm Wipro on Friday said net profit in January-March rose nearly 17 percent, beating forecasts, but projected weak revenue growth due to global uncertainty.

Consolidated net profit rose 16.7 percent to 17.29 billion rupees ($318 million) in the fiscal fourth quarter, from 14.81 billion rupees in the same period last year, based on international accounting norms.

Analysts had forecast net profit of 16.9 billion rupees in a poll by Dow Jones Newswires.

Revenue roses 12 percent to 110.26 billion rupees ($2.02 billion) in the quarter, of which IT revenues totalled $1.59 billion.

Wipro forecast revenues from IT services of $1.57 billion to $1.61 billion in the next quarter ending June which suggested relatively flat growth amid tough business conditions.

Wipro's chief financial officer Suresh Senapaty said currency volatility had "impacted" the March quarterly financial performance.

On the weak projected revenues, Senapaty said, "Typically the first fiscal quarter (April-June) is generally and historically weak, declining sequentially after a good growth in the fourth quarter."

He said that deals were expected to be finalised in the current quarter.

"That is why our confidence is little higher as to what we will deliver in the second fiscal quarter rather than in the first quarter," Senapaty told AFP.

The firm added 52 clients and 2,907 people to its staff in Jan-March.

Wipro said Friday it has secured a contract from a large unnamed Europe-based bank to build a testing unit to help it achieve higher production stability.

"The company disappointed, both in terms of margins and sales growth," Ankita Somani, IT analyst with Mumbai's Angel Broking, told television channels.

Earlier this week, industry leader Tata Consultancy Services posted a 22 percent jump in quarterly net profit to $661 million. But rival Infosys disappointed, announcing a small net profit gain and a lower-than-expected revenue outlook.

TCS, Infosys and Wipro lead India's flagship IT outsourcing industry, which carries out a wide range of jobs for Western firms such as answering calls from bank customers, processing insurance claims and software development.

Wipro has this month demerged its non-technology operations -- including consumer care, lighting, furniture, infrastructure and medical businesses -- into a separate, unlisted firm called Wipro Enterprises.

Earning from the April-June quarter will be released by Wipro as a standalone IT company, which chairman Azim Premji said Friday "will provide fresh momentum for growth".

IT services contributed 87 percent of Wipro's revenues in the financial year to March 2013, data showed Friday.

Analysts see the demerger as a positive step that will help the Bangalore-based firm focus on its core IT business and make it more competitive.

Wipro shares did not trade on Friday as Indian stock markets were closed for a public holiday.

Fresh evidence is emerging that the U.S. economy is slowing in the second quarter. Stock prices continued to slide as earnings disappointed and the Conference Board's index of leading economic indicators pointed down.

Next week the U.S. Commerce Department will likely report that gross domestic product growth rebounded from 0.4 percent in the fourth quarter to more than 3 percent in the first quarter.

However, this was caused by a recovery in inventory and defense purchases, which were uncharacteristically weak last fall, and a surge in consumer spending in January and February, resulting from extraordinarily large yearend bonuses.

Those factors won't repeat in the second quarter and Jan. 1 tax increases are starting to bite -- consumers appear to have tightened down on spending and their confidence in the outlook for the economy wanes.

Among the Conference Board's leading indicator components that pointed south were a shorter average work week, rising initial unemployment claims, fewer manufacturing orders (as measured by the Institute for Supply Chain Management) and fewer building permits. Moreover, the Philadelphia Fed index of manufacturing activity slipped, in line with the weakening suggested by the most recent ISM manufacturing indicators.

I wrote Thursday that structural factors -- inadequately addressed by the Obama administration's response to the financial crisis -- continue to hamper the economy. Growth should slip to less than 2 percent in the second quarter, and the job market will remain difficult.


In a nutshell, without more business-sensitive regulatory policies, fewer and less expensive health care mandates, more assertive international trade policies, and more aggressive development of domestic oil reserves, the U.S. economy will continue to grow in fits and starts at best and constantly face the danger of a double-dip recession.

Almost four years into the economic recovery, the Fed continues to purchase $85 billion in long-term Treasury and mortgage-backed securities each month, indicating some considerable level of desperation.

Those easy money policies have created asset bubbles in urban real estate, corporate equity and bonds, and agricultural land markets -- if those burst the economy could easily head south.

Without radical changes in national economic policies, Americans face slow growth, higher taxes and stagnant or falling wages.

(Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and widely published columnist. Follow him on Twitter: @pmorici1)

(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)


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Outside View: Anti-growth policies slowing U.S. economy
College Park, Md. (UPI) Apr 18, 2013
Anti-growth policies continue to frustrate the aspirations of working Americans. The U.S. economy is likely growing at less than 2 percent in the second quarter, making prospects for a better job market remote. Higher payroll taxes and income taxes paid by the wealthy took away $165 billion in purchasing power. Consumers reacted, but with a lag, because they need to keep driving to work ... read more

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