Tuesday PM August 19th, 2008
by: Ed Mayberry, August 19, 2008 4:08:05 pm
The government says wholesale inflation surged in July, leaving prices for the past year rising at the fastest pace in 27 years. The Labor Department reported that wholesale prices shot up 1.2 per cent in July, pushed higher by rising costs for energy, motor vehicles and other products. The increase was more than twice the 0.5 per cent gain that economists expected. Core prices, which exclude food and energy, rose 0.7 per cent. That increase was the biggest since November 2006, and more than triple the 0.2 per cent rise in core prices that had been expected.
Construction of homes and apartments fell in July to the lowest level in more than 17 years. The Commerce Department report says that builders in July broke ground on 965,000 housing units on an annualized basis. That was down from a pace of 1.08 million in June and the weakest showing since March 1991. However, July's performance was better than analysts expected. Wall Street economists forecast that housing starts would drop to a pace of 950,000.
Two of the largest auto insurers in Texas are raising their rates. Allstate and State Farm say the boost is needed to offset a rising number of claims. In filings with the Texas Department of Insurance, State Farm filed for increases of 2.4 percent and 7.3 percent, respectively, for its two auto insurance subsidiaries, State Farm Mutual and State Farm County Mutual. The State Farm increases would kick in October 27th. A State Farm spokesman says the increases are the first in nearly five years for State Farm Mutual. Allstate filed for increases of 3.6 percent for Allstate Indemnity and 5.5 percent for Allstate County Mutual. Allstate Indemnity insures 694,000 drivers in Texas, while Allstate County Mutual covers 435,000 drivers. Those rates rose in July. Allstate says it needed to hike rates to account for a greater frequency of collisions and the rising costs of bodily injury claims. State insurance officials said the market has been stable for some time. But consumer groups criticize the hikes, saying the companies are earning adequate profits with their current premiums.
Venezuela says it's prepared to propose an oil production cut at the next OPEC meeting if crude prices decline further. Oil minister Rafael Ramirez says if there's a tendency for prices to decline, "Venezuela would have to analyze the possibility of a production cut." He says Venezuela will take that stance at the September meeting of the Organization of Petroleum Exporting Countries in Vienna, Austria. Ramirez said in a statement on his ministry's Web site that the recent fall in oil prices "is the clearest evidence" that speculation has been affecting the market. He said Venezuela believes prices should remain "at a level near $100" a barrel.
Newfoundland's premier says he's given the final go-ahead to a long-delayed agreement with a consortium of oil companies to proceed with the Hebron offshore oil project. Newfoundland and Labrador Premier Danny Williams says that a final agreement has been signed to proceed with the $4.7 billion project. Last August, the two sides signed an agreement-in-principle, which gave the province a 4.9 percent equity stake in the project. The deal came after a lengthy feud between Williams and the oil companies over the province's share. The major players in the project are ExxonMobil Oil Canada, Chevron Canada Resources, Petro-Canada and Norsk Hydro. The wells are expected to pump about 200,000 barrels of crude oil a day over the next 25 years.
Here are two reasons for people in Alaska to smile: their annual oil royalty dividend will likely be bigger than ever and the checks will go out earlier than ever before. Nearly every man, woman and child received $1,654 last year. This year's payout is expected to be higher, but it hasn't been calculated yet. Residents could see their checks as soon as next month. There will be an extra $1,200 this year to help offset high energy prices. The first winter-like temperatures and snowfall are just a month away in some areas. And a recent Lundberg Survey said Anchorage had the highest gas prices in the country, at $4.37 a gallon. The dividend checks come from the state's oil royalty investment program and are distributed each year to eligible residents — just for living in Alaska for a full calendar year.
Federal regulators say Tropical Storm Fay has not caused any production shutdowns of oil and natural gas drilling in the Gulf Mexico. The storm's center crossed over Key West on Monday and was moving north along Florida's southwestern coast. Minerals Management Service spokesperson Caryl Fagot says some non-essential personnel have been evacuated from rigs in the eastern Gulf but there were no reports of evacuations that would halt production. Shell Oil says it evacuated 425 workers but there were no production interruptions. If the storm stays on its current track to make landfall in Florida, no more evacuations are expected.
Chinese steel pipe maker WSP Holdings plans a $35 to $40 million facility in Houston, according to Bloomberg News. The plant will employ about 300. WSP of Wuxi, China, created Houston OCTG Group last April to sell pipes through ten U.S. distributors. Pipes will be partially built in China and shipped to the Houston facility, where they will be completed. WSP produces pipe for the natural gas industry that won't buckle or melt in wells bored more than four miles into the earth.
Members of Congress say the system created nearly 20 years ago to monitor the real estate appraisal industry is broken and must be fixed to protect consumers from fraud. Congressman Paul Kanjorski says he's concerned the system is harming consumers by allowing rogue appraisers to fraudulently inflate home values without consequence. The Pennsylvania Democrat chairs a house subcommittee whose oversight includes the real estate appraisal industry. His comments came in the wake of a six-month Associated Press investigation that identified key failings in the regulation of appraisers. Kanjorski sponsored legislation aimed at reforming the system that passed the House in November. The reforms are stalled in the Senate. Democratic Senator Bob Casey of Pennsylvania tells the AT he plans a renewed effort to move it forward.
Treasury Secretary Henry Paulson says the next round of high-level talks with China will focus on energy and environmental issues, and efforts to agree on an investment treaty. Paulson says the discussions, which will take place at the end of the year in China, will advance efforts by the two countries to work on a ten-year cooperative agreement aimed at addressing energy security and environmental pollution issues. The talks also will seek to make progress in negotiating an investment treaty between the two nations. The two countries announced the launch of the investment negotiations in June at the last round of high-level talks in Annapolis, Maryland. The negotiations are not expected to be concluded until the next administration is in office.
Iraq's oil minister has left for China to revive a $1.2 billion Saddam-era oil deal. The oil ministry said that Hussein al-Shahristani will be in China later this month to complete an agreement on developing the Ahdab oil field south of Baghdad. The minister left Iraq on Saturday, first stopping in Poland. Iraq and China's state-owned China National Petroleum signed the agreement in 1997, despite United Nations sanctions that barred direct dealings with Iraq's oil industry. The deal was canceled after the 2003 U.S.-led invasion that toppled Saddam Hussein's regime. The two countries restarted talks in October 2006.
Representatives from Google and General Electric say that widespread use of renewable energy in United States would be possible—if it were cheaper. Dan Reicher, director for climate change and energy initiatives at Google.org, told a group of politicians and energy experts meeting in Las Vegas that renewable energy options will remain "boutique" industries unless their costs are cut to make them competitive to coal and other widely used power sources. General Electric Chief Executive Jeff Immelt said in a video presentation that the business community needs "a call to action—not a call to go to another conference." The comments came at the National Clean Energy Summit hosted by the University of Nevada, Las Vegas and others.
Citigroup will buy as much $30 million in small enterprise loans under a five-year contract with Accion Texas. That's a development organization that makes loans to startup and existing businesses in Texas. New York-based Citigroup said that it's the first transaction of this type in the so-called microfinance industry. That provides small loans to people struggling to start their own businesses and has grown in developing countries around the world. The nation's largest financial institution by assets says its deal with Accion Texas will change the perception of microfinance in the United States. It also says it'll give San Antonio-based Accion Texas the capital it needs to expand. Accion Texas will handle underwriting, servicing and collections for the loans and will share the revenue and risks from the loans with Citigroup under the deal. Accion Texas is said to be the nation's largest microenterprise loan fund with an active microloan portfolio of more than $19 million.
General Motors says it is offering employee pricing to everyone on nearly all 2008 and some 2009 vehicles. The Detroit automaker says the deal includes all 2008 vehicles except medium-duty trucks. Eligible 2009 vehicles are the Chevrolet Cobalt and HHR, the Pontiac Vibe and G5 and the Cadillac CTS. GM says the promotion will run from Aug. 20th through Sept. 2nd. Employee discounts generally are ten percent below the invoice price but vary by model. GM in the past has used incentives across most of its model lineup to clear out inventory to make way for new models. The 2009 models will make their way to showrooms in late summer and early fall.
A recent survey shows domestic cars are losing ground to Asian and European competitors when it comes to customer satisfaction. Lexus and BMW are tied for first place on the University of Michigan's American customer satisfaction index. Toyota and Honda follow. Buick and Cadillac brands, and Ford's Lincoln and Mercury lines, fell from their number two spot. The ratings come at a time when U.S. firms are struggling to reverse their shrinking sales and market share. The lead author of the report calls it an unsettling sign and a "double whammy'' for domestic automakers. Traditionally, U.S. brands improve their customer satisfaction scores each year, just not as much as their overseas counterparts. Now, the domestic companies' ratings are declining while their competitors' scores continue to climb. The auto industry's customer satisfaction has increased steadily over time and its overall score of 82 is unchanged from the high set a year ago.
High gas prices are forcing many Americans to tighten their belts, dump their SUVs and eat more dinners at home. But in oil-rich west Texas, many folks are living large. Drillers and energy companies in the region are raking in the cash from the run-up in oil prices this summer. The most recent oil boom has brought in hundreds of millions of dollars to the area and more than 26,000 new jobs. West Texas towns are posting some of the lowest unemployment rates in the state. The housing market is also seeing a boost. In Midland County, homes stay on the market for only a month. And home prices are up 16.5 per cent. Worldwide demand for oil and improved drilling technology could keep the west Texas boom alive for at least another decade.
Hewlett-Packard says its third-quarter profit jumped 14 percent, beating Wall Street's expectations. Strong laptop sales and a robust international presence continue to lift HP. The Palo Alto, California-based company's fourth-quarter outlook was also slightly better than investors expected. HP says it earned $2.03 billion in the May to July period. That's up from $1.78 billion a year earlier. Sales were $28.0 billion, a 10 percent increase over last year and higher than the $27.4 billion analysts were expecting.
A casualty of the housing crisis, Home Depot says its second-quarter profit was down 24 percent from a year ago. And it is repeating a sour outlook for the rest of the year as the slump continues. The Atlanta-based home improvement giant says net income fell to $1.2 billion. The results topped analyst forecasts by ten cents a share. Chairman and CEO Frank Blake says despite the tough environment, Home Depot saw improvement in its merchandising and operations initiatives during the quarter. It expects full-year sales will decline five percent.
Target says financially-stressed consumers were focusing on basics like milk and paper towels in the latest quarter, sending its profit down nearly eight percent. In addition, Target customers were having increasing trouble keeping up with their monthly credit card payments. As a result, it had a higher bad debt expense linked to increased write-offs in the quarter, adding to its reserve for the future. Target had earnings of 634 million—six cents above analyst forecasts. Sales were down nearly six percent from a year ago.