Wednesday PM September 16th, 2009
by: Ed Mayberry, September 16, 2009 9:09:27 pm
The National Association of Home Builders says its housing market index rose in September, reflecting growing optimism in the industry about rising home sales. The Washington-based trade association said its index rose one point to 19, its highest reading since it hit 20 in April last year. Index readings below 50 indicate negative sentiment about the market. The last time it was above 50 was in April 2006. The report reflects a survey of 533 residential developers nationwide. The reading for current sales conditions rose two points to 18. Traffic by prospective buyers rose one point to 17. The sales expectations index over the next six months fell one point to 29.
The White House is considering extending an $8,000 tax credit for first-time homebuyers. Spokesman Robert Gibbs says the administration's economic team is evaluating the tax credit's impact on new home sales and will make a recommendation to the president. The federal tax credit covers up to ten per cent of the home price, or up to $8,000, for first-time buyers. Home sales must be complete by the end of November. The tax break is credited with helping the number of U.S. home sales rise slowly. Builders and real estate agents say that trend could be reversed if the credit isn't extended.
Consumer prices rose slightly in August due to higher gas prices, another sign the weak economy is keeping inflation in check. The Labor Department says the consumer price index rose 0.4 per cent last month, after a flat reading in July. Wall Street economists expected a 0.3 per cent increase, according to a survey by Thomson Reuters. Excluding volatile food and energy prices, the core price index rose 0.1 per cent, matching expectations. Prices fell 1.5 per cent in the past year, as gas prices dropped sharply from record levels last summer. The core CPI rose 1.4 per cent in the 12 months ending in August. Prices for new cars fell 1.3 per cent last month, the steepest drop in nearly 37 years, due to rebates under the cash for clunkers program.
Companies boosted industrial production more than expected in August, making more cars, clothing and other goods in the early stages of a broad economic recovery. The Federal Reserve says output at the nation's factories, mines and utilities rose 0.8 percent in August. Economists surveyed by Thomson Reuters expected a 0.6 percent increase. Last month's gain marked the second straight increase after the global recession dried up the appetites of customers worldwide. Factories boosted production of cars, machinery, food products, clothing and other goods in a fairly broad-based pickup in August. The fed also says industrial production jumped one per cent in July, twice as much as originally reported. Car production drove that gain.
The deficit in the broadest measure of foreign trade shrank in the spring to the lowest level in relation to the total economy in 18 years, another dramatic sign of how much the recession had reduced America's appetite for foreign goods. The Commerce Department said the deficit in the current account dropped to $98.8 billion in the April-June quarter. That represented 2.8 per cent of the total economy as measured by the gross domestic product, the smallest percentage since the first quarter of 1991. The deficit was down 5.4 per cent from the first quarter revised total of $104.5 billion. Analysts had been forecasting a second quarter deficit of $92 billion.
HP brought its Digital Assist grant competition home today, as Aaron Brooks of the Houston Rockets and HP executives delivered computers and printers to students at Project Chrysalis Middle School on Leeland. HP's Engelina Jaspers says the idea is for students to create sports or basketball-themed digital media projects to demonstrate their knowledge of math, science or reading.
"And the project can be a number of things. Perhaps they want to explain the law of gravity or physics. And maybe they look at tossing a basketball around the court and then mapping the course or direction on (an) HP tablet or PC. The competition's open until November 20th, after which we will judge, with independent judges, the submissions, and award a grant recipient in each of the six metro markets." Ed: "We hear often from the energy industry, and I guess the high-tech industry, too, about the sort of shortage of people in math and science—things that are good building blocks for maybe careers in your industries." "And that's actually what we're trying to do is promote the next level, really, of high-tech entrepreneurs and business owners, as well as employees, obviously. There is a shortage and there is a need for that in the United States."
HP and the NBA will announce six regional winners of HP mobile digital classroom grants and equipment in December 2009.
The annual hiring forecast from Challenger, Gray & Christmas finds that optimism from better-than-expected back-to-school sales may not translate into increased seasonal hiring by cautious retailers. Holiday hiring might improve slightly over last year, but only because 2008 saw the lowest seasonal employment growth in nearly 20 years. If eventually there's a need for late hiring, retailers will find a pool of qualified candidates.
Austin and San Antonio will recover from the recession next year, followed in 2011 by Houston and Dallas/Fort Worth. That's according to a national forecast by HIS Global Insight, as reported by the Houston Business Journal. The four Texas cities on the list are expected to bounce back to their pre-recession job levels. But five Northwestern and Midwestern industrial markets are expected to remain depressed for several years.
Meanwhile, the Journal reports that the number of Americas living paycheck to paycheck is on the rise, with 61 per cent reporting they are just making ends meet. That's according to a nationwide survey by CareerBuilder. The survey also found that 30 per cent of those making $100,000 or more report that they, too, live check by check.
Billionaire investor Warren Buffett says the economy appears to have leveled off at the bottom of the recession over the summer, but Berkshire Hathaway's CEO still isn't seeing much improvement. Buffett talked about the economy during an interview with CNBC. Buffett says he thinks it's extremely unlikely the economy will get much worse unless there is some new catastrophe like the September 11th terrorist attacks. Buffett keeps a close eye on the economy through all the reports he sees from Berkshire's retail, manufacturing and utility businesses. Buffett says he can't predict exactly when the economy will recover, but he believes the nation is on the mend.
A new poll suggests that Americans strongly oppose the government's efforts to save private companies by taking an ownership stake. That's even if the failure of those businesses would cost jobs and hurt the economy. The Associated Press/National Constitution Center poll of views on the constitution finds little support for the government's move to save General Motors, mortgage giants Fannie Mae and Freddie Mac, and AIG, the world's largest insurer. In fact, the poll finds just 38 per cent of Americans surveyed in favor of government intervention to keep a company in business to prevent harm to the economy. About 60 percent were opposed. On the subject of health care, the poll found the public was more split. The National Constitution Center president says the poll's results mesh with what she observed at an early health care town hall meeting in Philadelphia. She says the discussion there wasn't dominated by one side or the other, but rather with people "talking on both sides of the issues." The nonpartisan constitution center is dedicated to educating the public about the constitution.
The Federal Deposit Insurance Corporation has named the first winning bidder under a test of the government's program to back private purchases of toxic mortgage assets and get them off banks' balance sheets. Fort Worth-based Residential Credit Solutions is paying $64.2 million for a 50 per cent stake in a new company that will have about $1.3 billion in home mortgages from the failed Franklin Bank. The FDIC took over Houston-based Franklin Bank in November. Under the test sale to RCS, the new company will issue a note for $727.8 million to the FDIC. The program is part of the government's public-private partnership to guarantee private investors' purchases of toxic assets to help banks raise new capital, get credit flowing and aid the economic recovery.
The government says it's paid dealers compensation for 70 per cent of the cars sold under the cash for clunkers program. Transportation Secretary Ray LaHood told the National Automobile Dealers Association that 478,000 of the nearly 700,000 car vouchers have been paid, or about $2.4 billion. Under the program, car buyers could qualify for incentives of up to $4,500 to trade in their old gas guzzler for a new vehicle. Dealers had complained about delays in getting reimbursed. LaHood said he was grateful to dealers for "hanging in there and being patient." LaHood told dealers the government was "stunned" by the initial success of the program when 250,000 vehicles were sold in the first four days.
The Interior Department says it is ending a controversial program that allows companies to give the government in-kind payments for oil and natural gas taken from federal land and waters, instead of making cash royalty payments. The royalty-in-kind program has been criticized for lax enforcement. Critics charge it has led to the loss of tens of millions of dollars in revenue. Interior Secretary Ken Salazar said the program "has been a blemish on the department" and has "created problems and ethical lapses" among those who managed it. The decision to end the in-kind payment program--which the oil industry favors over cash payments--is part of a broader overhaul of the government's oil and gas leasing programs.
Chicken producer Pilgrim's Pride says Brazilian beef producer JBS will buy a majority stake in the company out of Chapter 11 bankruptcy in a deal valued at $2.8 billion. Pilgrim's Pride has agreed to sell 64 per cent of stock in the reorganized company to JBS for $800 million in cash. Existing shareholders will receive shares totaling 36 per cent of the company. Pittsburg, Texas-based Pilgrim's Pride was the nation's largest chicken producer before it filed for bankruptcy protection late last year. The sale gives JBS an entry in the U.S. poultry market. JBS is already one of the top producers of beef and pork in the U.S. The company says it expects the plan to be confirmed in time to emerge from bankruptcy by December.,/p>
Whole Foods Market has signed a lease to build a new store at Waugh and West Dallas, in conjunction with a proposed new luxury apartment project being developed by The Finger Companies. That will be the sixth Whole Foods location in the Houston area.
The Government Accountability Office says the U.S. Bureau of Land Management frequently misinterpreted and violated a federal law that sought to expedite oil and gas drilling. The energy policy act of 2005 established new circumstances in which detailed environmental review isn't required for new oil and gas wells. Such exceptions are called "categorical exclusions." A GAO report says the BLM approved categorical exclusions in more than a quarter of all drilling permits issued between 2006 and 2008. The report documents numerous ways in which several BLM field offices in primarily western states violated the 2005 law. The report cites concern that categorical exclusions led to more drilling than would have been allowed otherwise.
The Federal Reserve is stepping up its scrutiny of commercial real-estate lending at smaller banks, according to a Fed official. Instead of reviewing only individual banks, Fed examiners also are comparing results across the industry to better assess broader risks, the official says. The official spoke on condition of anonymity because of the sensitive and confidential nature of bank reviews. Delinquency rates on commercial loans have doubled in the past year to seven per cent as more companies downsize and retailers close, the Fed has said. Small and regional banks face the greatest risk of severe losses from commercial real-estate loans. The Fed review is focused on roughly 800 regional and community banks, the official says. The Fed's "stress" tests on the 19 biggest banks also examined commercial real-estate loans.
The Treasury Department says it will begin winding down one of the emergency programs created at the height of the financial crisis to give the government more time before it hits the national debt limit. Treasury said in a statement that it planned to trim the size of its supplementary account to $15 billion. The program is currently running around $200 billion, down from a maximum of $560 billion that it reached last year. By reducing the size of the program implemented to help fund financial rescue efforts, Treasury will buy about six weeks of maneuvering room before it hits the current debt limit of $12.1 trillion.
The government says lending by the largest banks that received government bailout money has declined for the sixth straight month. The Treasury Department's monthly report also says that the average loan balances at the top 22 recipients of bailout funds dropped by one per cent in July. The average loan balances had also fallen by one per cent in June. In dollar terms, the average loan balance at the top 22 banks that received support from the government's $700 billion financial rescue program declined by $53.9 billion in July. That's after it dropped by $45.7 billion in June. The monthly survey monitors the bailout program's impact on boosting lending to consumers and businesses. Critics have charged that the bailout program has failed at its major goal. The Obama administration argues that lending would have dropped off even more during the recession if it had not been for the government's rescue efforts.
Foreign demand for long-term U.S. financial assets fell in July, but China boosted its holdings. The Treasury Department says foreigners purchased $15.3 billion more assets than they sold in July. That's a steep decline from June, when they purchased $90.7 billion more than they sold. The Treasury is auctioning record amounts of debt to cover a budget deficit it estimates will hit $1.58 trillion this year. Some economists worry that if overseas buyers don't keep buying U.S. debt, interest rates could rise. China, the largest foreign holder of U.S. Treasury securities, boosted its holdings to $800.5 billion, from $776.4 billion in June.
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