Tuesday PM January 26th, 2010
by: Ed Mayberry, January 26, 2010 10:01:30 pm
A preliminary report says consumer confidence rose past expectations in January. The third straight monthly increase comes as Americans are beginning to feel slightly better about business conditions and the job picture. The Conference Board's consumer confidence index increased to 55.9--the highest in more than a year. That compares with 53.6 in December. January's index was better than the expected 53.5 forecast by economists. Economists watch confidence numbers closely because consumer spending accounts for about 70 percent of U.S. economic activity. It takes a reading of 90 to indicate an economy on solid footing and 100 or more to indicate growth. The figures are based on a survey of 5,000 households.
A closely watched index shows that home prices rose nationally for the sixth straight month in November, with 14 of 20 metro areas tracked showing improvements. The Standard & Poor's/Case-Shiller home price index inched up 0.2 percent to a seasonally adjusted reading of 145.49. The index was off 5.3 percent from November last year. Economists estimated the index fell 5.1 percent compared to November last year. Phoenix and San Francisco posted the highest month-to-month gains. New York and Chicago had the largest declines. The index is now up 3.4 percent from its bottom in May, but still 30 percent below its peak in April 2006. Recent price gains have been fueled by a federal tax credit for first-time homebuyers.
A forecast by the world's largest retail trade group says the nation's retailers are likely to see sales rise moderately this year after a rare decline in 2009. The National Retail Federation expects sales to rise 2.5 percent in 2010, still well below the four percent average annual gain from 2000 through 2008. But the outlook, which excludes automobile, gas station and restaurant sales, is in line with other economists' estimates. The group's chief economist says an improving employment picture and housing market should help boost consumer confidence—and sales--but 2010 will bring continued store closings and other challenges.
A senior Congressional aide says the latest estimates put this year's federal budget deficit at $1.35 trillion. The Congressional Budget Office figures confirm the massive problem facing President Barack Obama just days before his February 1st budget submission. The White House says Obama will propose freezing domestic agency budgets, though the savings would barely make a dent. The deficit would slide to $480 billion by 2015, CBO says, but only if tax cuts on income, investments and large estates are allowed to expire at the end of this year. Most budget experts see deficits as far higher once tax cuts and other policies are factored in. The 2010 deficit figure is in line with previous estimates.
President Obama is expected to ask for a three-year freeze on part of the federal budget when he gives his State of the Union address tomorrow night. The freeze would affect about $477 billion in money available for domestic agencies whose budgets are approved by Congress each year. It's a relatively small portion of the federal budget and is considered discretionary spending. The Pentagon, veterans programs, foreign aid and homeland security would be exempt from the freeze, which would have only a modest impact on a deficit expected to match last year's $1.4 trillion. Steps needed to really tackle the deficit include tax increases and curbs on benefit programs like Medicare, Medicaid and social security. That's why Obama is backing a plan to create a task force to address the problem. But Senate sponsors of the plan say it's attracted too much opposition from the right and left to prevail.
Last year's $787 billion economic stimulus bill is going to be even more expensive--$75 billion more. That's the finding in a Congressional Budget Office estimate of the costs of the economic stimulus bill, which mixed tax cuts and lots of spending in an effort to jump-start the economy. The reason for the higher estimate of the recovery bill's price tag is chiefly that unemployment benefits are costing more. Plus, stimulus-subsidized bonds to pay for infrastructure projects are more popular than expected with state and local governments. Republicans have long blasted the stimulus for being long on spending and short on creating jobs as promised. Democrats say it has helped keep the economy going and has produced up to two million jobs.
The International Monetary Fund says the world economy is recovering at a healthy pace but still needs government stimulus efforts to keep it going. The IMF raised its forecast for world economic growth in 2010 to nearly four per cent, up from an estimate of 3.1 percent last October. It expects the U.S. economy to grow by 2.7 percent this year, significantly higher than its previous forecast of 1.5 percent. But the IMF says that with unemployment high in many countries and credit tight, the recovery in advanced economies like the United States "is still expected to be weak by historical standards." And the IMF says "a key risk is that a premature and incoherent exit" from the low interest rates set by many central banks and other stimulus programs "may undermine global growth."
Workers in yellow jumpsuits on shore and aboard ships and boats are using high-tech gear and old-fashioned elbow grease to clean up the worst Texas oil spill in more than 15 years. The vessels are stationed along the Sabine-Neches waterway next to Port Arthur. That's where 462,000 gallons of light crude oil spilled this weekend after an 800-foot tanker collided with a towboat pushing two barges. The ships utilized a variety of equipment to collect the thousands of gallons of oil still floating on the surface. They included conveyor belts, metal drums and brushes that gather the oil, bring it back into their vessels' hulls and separate the oil from the water. Officials aren't sure when the cleanup will be finished.
Major U.S. airlines have dropped an effort to raise fares by up to $16 a roundtrip after some carriers resisted the increase. American Airlines confirmed that it had dropped a price hike from last week. American spokesman Tim Smith said Delta had pulled the increase even before American did, and Continental and United also retreated. Air fare increases can be tricky. They can fall apart if one or two airlines refuse to go along or don't match on every route, because other carriers don't want to risk losing customers by charging more for the same trip.
Minneapolis-based Travel Leaders says 67 percent of their agents are forecasting that business travel for 2010 will match or exceed their total bookings for last year. The travel company says about 28 percent say that booking levels will increase in 2010, and only about 12 percent expect a further decline. About 38 percent say business booking levels will remain on par with 2009. The survey notes that more business travel clients are starting to loosen their travel policies and are starting to fly in business and first class.
The University of Texas is developing a plan to cut about $29 million from the state-funded portion of its two-year budget. President William Powers, Jr., said the "sizable amount of money" adds up to a five percent cut as required by state leaders. Meanwhile, a public forum was scheduled in Austin to discuss a proposed nearly four percent tuition increase in each of the next two school years. Governor Rick Perry, Lieutenant Governor David Dewhurst and House Speaker Joe Straus last week told state agencies, including higher education institutions, to submit budget-reduction plans by February 15th.
More than half of the nearly 2,800 dealers General Motors and Chrysler want to close are appealing those decisions. The American Arbitration association, which is handling the appeals, says 1,550 dealers filed paperwork to contest the closures by the midnight Tuesday deadline. The group says that number could go higher. Chrysler shut down 789 dealers in June in an effort to make the remaining dealers more profitable. GM has told 2,000 dealers it will revoke their franchises in October. Congress passed a law last month requiring an appeals process for dealers.
The Internal Revenue Service plans to start requiring large corporations to disclose on their tax returns whether they are taking tax breaks that might be unacceptable to the IRS. Large corporate tax filings are often complex, with some firms taking tax breaks that fall into a gray area of tax law. IRS Commissioner Douglas Shulman said that requiring firms to flag those "uncertain tax positions" for IRS examiners would improve enforcement. Firms must already set aside money to pay additional taxes when they take such positions. The new requirement would be limited to firms with assets of at least $10 million.
Halliburton is asking the U.S. Supreme Court to block a Texas woman's lawsuit alleging she was raped by military contractor co-workers in Iraq. The Houston-based company wants the justices to reverse a lower court ruling that Jamie Leigh Jones' case can go to trial. Jones sued Halliburton and its Houston-based former subsidiary KBR, saying she was raped while working for KBR at Camp Hope, Baghdad, in 2005. The trial is set to begin in February 2011. Halliburton says the contract signed by Jones and other workers requires claims to be settled through arbitration, not trial. The 5th U.S. Circuit Court of Appeals in New Orleans ruled in Jones' favor in September. The Associated Press usually doesn't identify people alleging sexual assault, but Jones' face and name have been broadcast in media reports and on her own Web site.
A hangman's noose has been discovered at a BP refinery in Texas City and the company is offering a $10,000 reward to find the person responsible. Refinery manager Keith Casey says the noose was found last month at a unit that refines low-grade crude oil into fuel. The Galveston County Daily News reports that a memo was sent to employees Friday, saying hangman's nooses are "symbols of hatred, intimidation and violence." Casey says such acts have no place at BP and are an insult and an embarrassment to workers. He says BP's internal security force is investigating and that law enforcement has been notified. Casey says any BP employee determined responsible for the noose will be fired. He says contractors found to be involved run the risk of losing BP's business.
Texas Instruments says its fourth-quarter profit soared on a rebound for its chips that run a wide range of consumer gadgets and industrial products. The Dallas-based semiconductor maker reports a profit of $655 million. That compares with a profit of $107 million during the same period of 2008. Revenue rose 21 percent to $3.01 billion from $2.49 billion. Analysts polled by Thomson Reuters have expected Texas Instruments to earn revenue of $2.98 billion during the latest period.