Thursday PM July 16th, 2009
by: Ed Mayberry, July 16, 2009 9:07:09 pm
Retail gasoline prices continue to fall across Texas. The weekly AAA Texas survey of 11 cities finds that regular self-serve gasoline is selling for an average of $2.34 per gallon. That's eight cents less than last week and $1.64 less than the record price a year ago. Auto club spokesman Sarah Schimmer says falling crude oil prices and demand for petroleum products lie behind the price drop.
"This week last year, Texas motorists were seeing gas prices about $1.60 more than they are today. Last year, Texans were paying $3.98 for a gallon of regular unleaded. This week, statewide we're looking at $2.34."
Ed: "How does Houston look?"
"Houston, we are seeing prices at $2.30. Last year, we were seeing record prices on July 17th at $3.96."
Ed: "Now, these are average, right? Because in a neighborhood store you might find like $2.19 or up to $2.39."
"Right, you might see some neighborhood prices up or just a little bit lower, but these are just the average."
Ed: "Do the blends change once again at the end of summer?"
"They do, and if historical trends are any indication, July has usually been the month where gasoline prices peaked, and then fell throughout the summer and autumn as demand drops."
Nationally, regular self-serve averages $2.49 per gallon, nine cents less than last week and $1.62 less than the record set July 17th, 2008. Fort Worth featured the cheapest gas at $2.28, ten cents less than last week. The most expensive gas is selling in El Paso, where it's selling for $2.49 per gallon, five cents less than last week.
The number of newly laid off Americans signing up for unemployment benefits for the first time fell sharply last week. But the layoffs figures were clouded by difficulties adjusting for temporary shutdowns at auto plants. The Labor Department says new applications for unemployment insurance plunged by a seasonally adjusted 47,000 to 522,000, the lowest level since early January. Economists expected claims to rise to around 575,000. The department's seasonal adjustment process expected a large increase in claims from auto workers and some other manufacturers. Since that didn't happen, seasonally-adjusted claims fell. Additionally, the number of people overall collecting benefits fell by a seasonally adjusted 642,000 to nearly 6.3 million. Continuing claims are at the lowest level since mid-April.
The state unemployment insurance trust fund will run out of money next week, forcing the Texas Workforce Commission to borrow $643 million from the federal government to cover claims. State officials also said they are overwhelmed by people applying for assistance and that 82,000 unemployed Texans whose benefits ran out will not receive the 13-week extensions they expected. Officials say that once unemployment payments are restored to those needing extensions, they will be retroactive to the date they were cut off. State Democratic party Chairman Boyd Richie told the Dallas Morning News that Governor Rick Perry should have accepted $556 million of federal stimulus funds. Perry said the funds would have been burdensome to small business owners.
The National Association of Home Builders says its housing market index climbed in July to the highest level in nearly a year, as low interest rates and other incentives helped builders woo homebuyers. The Washington-based trade association said the index rose two points to 17, its highest reading since it was 17 in September. Index readings lower than 50 indicate negative sentiment about the market. The last time it was above 50 was in April 2006. The report reflects a survey of 484 residential developers nationwide, tracking builders' perceptions of market conditions. The reading for current sales conditions rose three points to 17, while traffic by prospective buyers rose one point to 14. The sales expectations index over the next six months was unchanged at 26.
Lawmakers are venting about the government's inability to fix the nation's housing woes as new data shows foreclosure filings on the rise. Senate Banking Committee Chief Christopher Dodd calls the overall lack of progress by the government "disgraceful." He noted that borrowers are facing long delays as they try to get help. In March, the Obama administration launched a $50 billion plan to give the lending industry financial incentives to modify mortgages to lower payments for struggling borrowers. As of mid-July, about 160,000 borrowers were enrolled in three-month trial modifications under the plan. Officials say that number is growing. Herbert Allison, the Treasury Department's Assistant Secretary for Financial Stability, says the administration is prodding mortgage companies to add more staff and beef up training as part of an effort to "improve the execution quality of loan modifications." In written remarks prepared for delivery at a hearing of the committee, Allison says 27 companies are participating in the $50 billion program, which President Barack Obama launched in March. Last week, top officials also summoned mortgage executives to a July 28th meeting to discuss their results. RealtyTrac reports that the foreclosure crisis affected more than 1.5 million homes in the first six months of the year.
Mortgage interest rates for 30-year home loans have dropped for a third-straight week. Freddie Mac says they are inching toward a record low reached earlier this year. The average rate for 30-year fixed mortgages was 5.14 per cent this week, down from 5.2 per cent last week. Last year at this time, the average rate for a 30-year mortgage averaged 6.26 per cent. Falling mortgage rates can spur refinance activity, which increased as rates on 30-year mortgages fell to a record low of nearly 4.8 per cent in April. The average rate on a 15-year fixed-rate mortgage fell to 4.63 per cent. And average rates on five-year, adjustable-rate mortgages stood at 4.83 per cent.
A big boost is coming to an obscure federal program that weatherizes homes to make them more energy-efficient. It's distributing $4.7 billion in stimulus funds--dwarfing the $447 million originally planned by Congress this year and the $227 million spent in 2008. That's enough to weatherize one million homes, instead of the 140,000 normally done each year. But some worry states won't be able to keep track of the money. Leslie Paige of the Council for Citizens Against Government Waste says the program is prey to fraud because of how oversight is divided. The federal government passes the money to states, then states pass it to community action agencies, and the agencies pass it to contractors who work with customers. In Texas, the state's share is increasing nearly 60 times, from $5.6 million to $327 million. To spend the money efficiently and on time, state officials decided to go beyond the community organizations that normally distribute it and route $100 million to large cities.
Wal-Mart's top executive says the world's largest retailer hopes efforts to develop eco-ratings for products the company sells can result in international environmental standards that all retailers can apply to all suppliers. Wal-Mart Chairman and CEO Mike Duke told a gathering at company headquarters in Bentonville, Arkansas, that it sees the ratings as a potential global standard. The meeting was intended to provide some details of Wal-Mart's sustainability efforts, starting with the ratings that company officials hope to develop in the next few years.
Long-delayed efforts to build an experimental coal-fired plant in Illinois--called FutureGen--have passed a crucial milestone. President Barack Obama's administration formally has signed off on the proposed site as environmentally fit. DOE issued its "record of decision" giving its stamp of approval to Mattoon, the eastern Illinois city tapped in late 2007 as the place for the next-generation plant. Two West Texas sites had been in the running for the original project, which was put on hold last year due to increasing costs. The Energy Department says it will decide early next year whether to go ahead with FutureGen. The department now can negotiate with FutureGen developers, moving toward construction of a plant to burn coal for power, but store--or sequester--emissions of carbon dioxide underground.
Continental Airlines says it will record a $31 million charge against the value of its Boeing 737s in its fiscal second-quarter results because of the falling market value of those planes. The write-down covers 737-300 and 737-500 planes as well as spare parts. Continental is phasing out the 737-300 and many of its 737-500s by January. The airline already reported a $58 million special charge on those planes last July. Continental also says it will book an $8 million non-cash charge for disposing of three 737-300s, and a $4 million charge to write off obsolete spare parts. All together it is taking $44 million in special charges in the quarter ended June 30th, almost all of it for planes and parts. Continental is due to report second-quarter results on July 21st.
Southwest Airlines expects to disclose next week how many of its 35,000 employees accepted an early-out offer. Dallas-based Southwest has lost money the past three quarters, and first-quarter revenue fell below the same period last year. The deadline for Southwest employees who expressed interest to revoke their application for severance benefits, including cash and travel benefits, was this week. Southwest spokeswoman Beth Harbin says the carrier expects to announce the results of the offer when it releases second-quarter earnings on Tuesday.
Bell Helicopter and the union representing 2,500 manufacturing workers remain at an impasse during the fifth week of the strike in Texas. Both sides ended a long day of negotiations without reaching an agreement. United Auto Workers local 218 went on strike in mid-June at several Dallas-Fort Worth area plants. Members had rejected a three-year contract because of proposed increases in medical costs and plans to outsource janitors' work. Union officials said that the company has repeatedly shown its unwillingness to hear their members' concerns. But Bell says it's committed to reaching a mutually agreeable solution that will get everyone back to work and will meet the company's and employees' needs. No more talks have been scheduled.
Dish Network is paying nearly $6 million to settle charges that it improperly marketed, promoted and sold its products and services. The satellite TV provider isn't admitting any wrongdoing in settling with attorneys generals in 46 states. But Dish Network said it agreed to pay restitution to affected customers. It also agreed to make fuller disclosures in advertising and written contracts of all terms of service, fees and other information. State officials say Dish failed to disclose all the terms of service to customers, including rebates, credits and free offers. The states say that when retailers that resold Dish services and installers misled customers, Dish refused to take responsibility.
U.S. Treasury Secretary Timothy Geithner is in Paris for discussions on U.S. and French economic stimulus plans with the French prime minister. The office of Prime Minister Francois Fillon says the two men met and reviewed the size and efficiency of the economic plans during the downturn. It says they also discussed the scheduled G20 meeting in September in Pittsburgh. Fillon's office says the two also reviewed "the question of sanctions against Iran" but did not elaborate. Before arriving in Paris, Geithner visited Saudi Arabia and the United Arab Emirates where he stressed the U.S. commitment to a strong dollar and promoting sustainable growth.
Former Treasury Secretary Henry Paulson says he pressured Bank of America last year to go through with its plans to buy Merrill Lynch but didn't tell the bank's chief to hide losses from shareholders. In testimony before the House Oversight and Government Reform Committee, Paulson said he told Bank of America CEO Kenneth Lewis that the Federal Reserve could fire him if he backed out on the deal. Paulson said that had the deal collapsed, it would have hurt the bank's stockholders as well as the broader financial system. The government ultimately gave $20 billion to the bank to blunt losses tied to the acquisition.
Foreign demand for long-term U.S. financial assets plummeted in May as Japan and Russia trimmed their holdings of treasury securities. Foreigners actually sold $19.8 billion more long-term U.S. securities than they purchased in May. That compared with net purchases of $11.5 billion in April. China, the largest foreign holder of U.S. treasury securities, bucked that trend. Its holdings rose to $801.5 billion, from $763.5 billion in April.