Monday PM August 3rd, 2009
by: Ed Mayberry, August 3, 2009 4:08:41 pm
A private-sector index measuring the health of U.S. manufacturing declined last month at the slowest pace since August, as companies boost production to restock bare shelves. The Institute for Supply Management, a trade group of purchasing executives, says its manufacturing index read 48.9, up from 44.8 in June. That's better than the 46.2 reading analysts polled by Thomson Reuters expected. July was the 18th consecutive month of deterioration in Manufacturing--a reading below 50 indicates contraction. But the pace of decline has been slowing since the index hit a 28-year low of 32.9 in December. The moderating decline in U.S. manufacturing mirrors improvements in the industrial sectors in China, Britain and Europe.
Construction spending rose for the second time in three months in June as residential building increased, fresh evidence that the housing sector may be recovering. The Commerce Department says construction spending increased by a seasonally adjusted annual rate of 0.3 per cent in June, defying analysts' estimates of a 0.5 per cent drop. Still, construction spending of $965.7 billion is 10.2 per cent below the year-ago level. Residential construction rose at a 0.5 per cent rate after dropping 3.1 per cent in May. The data follow reports earlier this month that new and existing home sales each rose in June, and new home construction jumped by the largest amount in eight years.
President Barack Obama's chief spokesman says the popular cash for clunkers rebate program may not survive beyond Friday if the Senate doesn't provide a $2 billion cash infusion. The program ran out of money last week. White House spokesman Robert Gibbs says the rebate program is up and running. He says anyone who wants to trade in a less fuel-efficient vehicle for a higher-mileage one should do so. Transportation Secretary Ray LaHood is predicting the Senate will pass legislation adding $2 billion to save the financially strapped car-buying program. LaHood said that the program has been “wildly popular” and argued that it is good for the economy as well as the environment. In an interview broadcast on MSNBC, LaHood declined to discuss administration options if the Senate does not act before it goes on its summer recess at the end of the week. Some Senators who voted for it earlier this year believe this funding should require consumers to buy much more fuel efficient vehicles than the program requires. And some say used fuel efficient vehicles should also be in the mix. LaHood said, “we're encouraging Senators to listen to their car dealers and the people they represent. If they do that, it will pass the Senate.” LaHood tells C-Span that any car purchase made today or tomorrow should still qualify.
Ford says July sales rose nearly 1.6 per cent over the same month last year as the government's cash-for-clunkers program gave the automaker a significant boost. The Dearborn, Michigan-based company says it sold 158,354 light vehicles in July, compared with 155,866 vehicles in July 2008. Ford attributed its July sales rise to the clunkers program, which offers owners of old cars and trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle, if they scrap their old vehicle. And while it wasn't in the black, Chrysler posted a smaller year-over-year sales drop compared to recent months. Chrysler, which emerged from bankruptcy protection earlier this year, said that heavy incentives and the clunkers program helped keep its decline in sales to 9.4 per cent. Also, Subaru of America said its U.S. sales leaped 34 per cent in July on sizable sales improvements for most of its models.
Few drivers may have benefited, but attorneys were paid millions of dollars thanks to a costly lawsuit stemming from the Ford Explorer rollover scandal of the 1990s. A judge has now closed out the case that clogged the Sacramento County Superior Court's calendar for more than seven years. Everyone seemingly got some tangible benefit--except perhaps for nearly all of the one million consumers covered by the class action lawsuit. None of the consumers got money, just discount coupons toward new Ford purchases. Few used them. The practice of settling such lawsuits by doling out discount coupons has come under fire from tort reform activists and others. They complain that these cases mainly benefit the lawyers--and even the companies being sued--at the expense of consumers.
General Motors says about 6,000 blue-collar workers have taken the latest round of early retirement and buyout offers. But that is apparently not enough to prevent thousands of layoffs. GM now has about 54,000 factory workers and wants to end the year with 40,500, a cut of about 13,500. That means the offers fell about 7,500 short of the company's goal. The automaker announced in June that it would close 15 factories employing 22,000 workers by the end of 2012. Spokeswoman Sherrie Childers-Arb says the number of layoffs has yet to be determined because some workers at closed plants could take open jobs at other factories. One of the closed factories in Michigan will be reopened to make a new subcompact car. GM emerged from bankruptcy protection on July 10th.
The Postal Service is considering closing as many as 1,000 local offices as it battles staggering financial problems. The post office has been struggling with a sharp decline in mail volume as people and businesses switch to e-mail both for personal contact and bill paying. The agency is facing a nearly $7 billion potential loss this fiscal year, despite a two-cent increase in the price of stamps in May, cuts in staff and removal of collection boxes. Also on the block are branch offices across the country. Postal officials sent a list of nearly 700 potential candidates to the Independent Postal Regulatory Commission. More may be added, the Postal Service says. Those the current list of potential candidates can be viewed online.
The wife of a former chemical company executive says he has been “haunted” for years by the world's worst industrial disaster--a gas leak that killed thousands in India 25 years ago. An Indian court issued a warrant Friday for the arrest of Warren Anderson, the former head of Union Carbide, for the 1984 gas leak that killed 10,000 people in the city of Bhopal. Anderson was arrested just after the disaster but left the country. Anderson has a home in Bridgehampton on New York's Long Island. His wife, Lillian, said Saturday he has “been haunted for many years” by the accident. She called the charges against her 89-year-old husband “25 years of unfair treatment.” State Department officials weren't aware of a formal request from India to extradite Anderson.
Bank of America has agreed to pay a $33 million penalty to settle government charges that it misled investors about Merrill Lynch's plans to pay bonuses to its employees. In seeking approval to buy Merrill, Bank of America told its shareholders that Berrill agreed not to pay year-end bonuses without Bank of America's consent. But the Securities and Exchange Commission says Bank of America had authorized New York-based Merrill to pay $5.8 billion in bonuses. The bonuses amount to nearly 12 per cent of the $50 billion Charlotte, North Carolina-based Bank of America paid for Merrill. The SEC says Bank of America agreed to pay $33 million to settle the charges without admitting or denying the allegations.
National Health Investors has acquired Houston-based Legend Oaks Healthcare & Rehabilitation Center on Wallisville Road and Legend Oaks Northwest Houston on West Road, according to the Houston Business Journal. Two other skilled nursing facilities in San Antonio and Paris, Texas, were also purchased from Legend Healthcare in the $55.5 million agreement, which requires them to be leased back to Legend for 15 years with a purchase option after seven.
Douglas-Westwood says the offshore wind industry is now showing the growth and market development long-promised. DWL’s latest World Offshore Wind Report expects to see €21.6 billion of capital expenditure in the next five years. Some 6.6 GW of new capacity is predicted before 2013. The UK dominates, with 3 GW of new capacity forecast by then.
Aberdeen, Scotland-based Triton Group has moved its subsea equipment production capacity to West Little York in Houston, according to the Houston Business Journal. Productnio headquarters had been at Triton’s subsidiary Perry Slingsby Systems in Florida.
President Barack Obama's top economic advisers say the administration will work with Congress to extend unemployment benefits for millions of Americans. The head of the President's Council of Economic Advisers, Christina Romer, said Sunday that the administration is already looking ahead at an extension of benefits as that money runs out. Democratic Representative Charlie Rangel of New York says people who soon will lose their unemployment benefits deserve an extension. He says they are “the true victims” of the nation's financial disaster. Republican Senator Jim Demint of South Carolina says he also supports an extension of benefits. Romer appeared on CNN's State of the Union while Rangel and Demint spoke to Fox News Sunday.
As the Obama administration grapples with a growing deficit, two of President Barack Obama's top economic aides are refusing to rule out future tax increases to deal with it. On the Sunday TV talk shows, both Treasury Secretary Timothy Geithner and National Economic Council Director Larry Summers sidestepped questions about the possibility. Geithner says for the economy to grow over the long-term, the administration will have to “bring those deficits down.” He says that will be difficult, but pointed to health care reform as a key element. Summers says funding for a health care overhaul will have to come from somewhere. He adds, “it is never a good idea to absolutely rule things out.” Meanwhile, Alan Greenspan tells ABC he's “pretty sure” the Economic recession has already hit bottom and he's optimistic about the future. However, that's a qualified optimism. The former Federal Reserve chairman cites the huge government deficit and a concern that home prices may not have stabilized enough.
The White House spokesman says President Barack Obama is committed to not raising taxes on U.S. families earning less than $250,000. Robert Gibbs restated that assurance after those two top White House officials suggested over the weekend that they could not rule out tax increases as the administration struggles to cut the budget deficit in half in the coming years. Gibbs said the president “has made a very clear commitment to not raise taxes on the middle class.”
The Treasury Department says it will need to borrow $406 billion in the current July-September quarter, down from its April estimate of $515 billion. The projected borrowing, while significant, also is below the $530 billion it borrowed in the same period in 2008. Treasury officials say the reduced estimate is due to several factors, including large banks repaying $70 billion in bailout money in June. The department also says it expects to provide less assistance to the financial sector and to mortgage giants Fannie Mae and Freddie Mac than previously forecast. The Treasury says it expects to borrow $486 billion in the October-December quarter, down from $569 billion in the same period last year.
Craft brewing is doing well in Texas. Saint Arnold Brewing Company reports record production of nearly 13,000 barrels during the first half of 2009. Saint Arnold credits a distributor switch last February that gave the oldest craft brewery in the state access to more retailers within existing markets. Saint Arnold was established in northwest Houston on Fairway Park Drive in 1994, but is reconstructing a historic building near downtown on Lyons Avenue for use by the end of the year, doubling the company’s brewing capacity. Craft beer has a four per cent share of the U.S. beer market.
This week brings some key economic reports for Wall Street and Main Street. On Friday, the Labor Department releases the monthly report on unemployment. Analysts think the jobless rate rose 0.1% to 9.6% in July. Payrolls are seen falling by more than 300,000 jobs. That's something of an improvement over the loss of 467,000 jobs in June. Tomorrow, the Commerce Department reports on personal incomes and spending.Earnings
Anadarko Petroleum is reporting a second-quarter loss of $226 million during a period in which revenues plunged with oil prices. A year ago, Anadarko reported net income of $23 million. Anadarko's revenue fell to $1.74 billion compared with $2.78 billion in the second quarter of 2008. Analysts surveyed by Thomson Reuters had forecast, on average, a revenue of $1.76 billion. Analyst estimates typically exclude one-time items. The quarterly results were released after the market closed Monday.
Centex says it posted a profit in its first-quarter, thanks to a $407 million tax gain. The Dallas-based homebuilder said net income totaled $85 million for the three months ended June 30th. Excluding the one-time tax gain, the builder lost $322.2 million. In the year-ago period, Centex lost $150 million. Revenue declined by nearly half from a year earlier to $573.9 million. Analysts polled by Thomson Reuters were expecting revenue of about $563.4 million.