Economic News Mixed, Toyota (TM) Announces Big Recall, and RIMM’s new BlackBerry’s (finally) arrive

Markets were sinking on Wednesday morning as the economy surprisingly contracted for the first time in over three years. The big economic news of the day was from the Commerce Department, who announced that gross domestic product sank 0.1% for the fourth-quarter, after the previous 3.1% gain in the third-quarter. This has been the biggest drop since the second-quarter of 2009. Economists were expecting a rise of 1.1%; no one had predicted a contraction. Economists are warning against reading too deeply into the drop. Nigel Gault, chief economist at HIS Global Insight, said “You got a combination of inventories and defense which are taking more than 2 percentage points off the growth rate. This is not an indicator of recession.”

Toyota (TM) announced that they would be recalling 1.29 million vehicles due to malfunctioning air bags and wipers. There will be 907,000 Corolla models recalled for faulty air bags and 385,000 Lexus IS cars recalled for defective wipers. There were two crashes reported in the U.S. that were attributed to the air bag problems. Toyota has had massive recalls in the past few years that have undermined the company’s long standing reputation for quality cars. In December, Toyota agreed to a $1 billion settlement lawsuit brought upon them by owners of Toyota cars and SUVs that said the value of their vehicles dropped after the recalls.

Research In Motion (RIMM) has revealed its first two new Blackberry phones. The Q10 will house a physical keyboard and the Z10 will have a touch-screen keyboard. The main unveiling event is being held in New York and being hosted by RIM CEO Thorsten Heins. Video of this is being shown at RIM events all over the world including Toronto, London and Paris. The original launch date of the release was set to be early in 2012. However, the date was eventually pushed back to early 2013 and missed the holiday season launch. This delay attributed to more than a $70 billion loss in shareholder finances and more than 5,000 jobs. Today they will announce pricing and a full showing of the new product.

Finally, we wrap up the day with some positive economic news. The ADP National Employment Report announced that private-sector employers added 192,000 new jobs in January. This was above the original economist expectations of 165,000. Small businesses, with less than 50 employees, added the most hiring this month with 115,000 jobs, while large businesses, with more than 500 workers, cut 2,000 jobs. Professional and business services firms had the most gains by industry with an addition of 40,000 new positions.

That’s all for the day! We’ll see you back here tomorrow, loyal readers.

All the best,

Jack Aubrey