Monday AM January 7th, 2007
by: Ed Mayberry, January 7, 2008 5:01:00 am
The Texas economy expanded moderately last month, according to Grubb & Ellis, outperforming much of the rest of the nation, although showing signs of deceleration. Although the residential market has slowed, the construction sector remains vibrant with commercial buildings and road construction. Professional/business services and leisure and hospitality have contributed to job gains. Houston's economy posted strong gains with a 2.6 percent employment increase in 2007, or about 64,500 new jobs. Houston's expansion remains vigorous in the energy, construction and professional/business services categories. Upstream energy sectors related to oil and natural gas exploration grew, although at a slower pace. Grubb & Ellis predicts that Houston's economy will see moderation in its pace of expansion in 2008. Steady population growth will help support growth in consumer services and in construction. The opening of the Bayport Terminal has boosted container traffic through the Port of Houston. Economist Barton Smith says Houston employers will create about 55,000 new jobs this year—a 2.2 percent increase.
Marathon Oil has awarded Irving-based engineering services company Fluor Corporation a $1.6 billion contract to provide engineering, procurement and construction services for their Detroit refinery expansion. Construction on the $1.9 billion refinery project begins this year, scheduled for completion in late 2010.
The Greater Houston Convention & Visitors Bureau is welcoming 22 conventions, trade shows, events and other meetings in February. More than 32,189 attendees will spend an estimated $31.3 million in Houston during the month. Meetings Professionals International will hold their Professional Education Conference North America February 2nd through the 5th at the Hilton Americas and George R. Brown Convention Center. More than 2,400 delegates are expected. The American Association of Professional Landmen's North American Prospect Expo is set for February 6th through the 8th at the George R. Brown Convention Center, with more than 5,000 delegates expected. Helicopter Assocation International holds its HELI EXPO February 24th through the 26th at the convention center, expecting some 15,000 delegates.
The chairman of Lone Star Funds plans to testify this week at the trial of the Dallas based buyout group's South Korean chief. Paul Yoo is charged in Seoul, South Korea, with stock price manipulation. Lone Star spokesman Michael Breen says Chairman John Grayken has agreed to testify for Yoo's defense. He had no other details. Yoo's attorney, Hwang Ju-Myung, says Grayken's scheduled to testify on January 11th. Lone Star took over Korea Exchange Bank in 2003. A Seoul court is investigating allegations that the fund manipulated the price of shares in the nation's sixth-largest lender's credit card unit that same year. Lone Star has been mired in a series of legal and tax disputes in South Korea that have so far prevented it from selling its controlling stake in KEB. The fund has consistently denied any wrongdoing.
The Bush administration is going ahead with a controversial pilot program giving Mexican trucks greater access to U.S. highways. Language in a recently signed catchall spending bill is aimed at blocking the four-month-old program. But the government says the new rules don't apply to the current program since it was started in September. The program is opposed by labor, independent truck owners and environmental groups. Opponents say the measure--part of the 1994 North American Free Trade Agreement--will erode highway safety and eliminate U.S. jobs. Supporters say letting more Mexican trucks on U.S. highways will save American consumers hundreds of millions of dollars. The Teamsters Union, Sierra Club and Public Citizen sued last August to block the program. A hearing is scheduled February 12th before a federal appeals court in San Francisco.
The city has opened the 675-vehicle underground Convention District Parking Garage off of Avenida de las Americas near the George R. Brown Convention Center. It replaces two surface lots razed to make room for Discovery Green Park, which opens in April. The garage beneath the park is owned and operated by the City of Houston Convention & Entertainment Facilities Department.
A subsidiary of Houston-based Atwood Oceanics has been awarded a three-year contract by Chevron Australia to provide a newly constructed mobile offshore semisubmersible drilling unit, according to the Houston Business Journal. Atwood Oceanics Pacific estimates the total cost of the rig at $570 million to $590 million.
Netherlands-based Chicago Bridge & Iron, which has an administrative office in The Woodlands, has been awarded a $60 million construction contract by Star Petroleum Refining, according to the Houston Business Journal. CB&I will build a new jet fuel processing plant and storage and shipping systems for Star in Thailand, with completion set for 2009.
Rising fuel costs will be the main culprit cutting into U.S. airlines' profits this year. That's at a time when credit market turmoil and slowing passenger demand are also expected to hamper the industry worldwide. The Air Transport Association says that high jet-fuel prices will limit U.S. airlines' combined profitability to between $3.5 billion and $4.5 billion this year. Last year, they had an estimated combined profit of $5 billion. Meantime, the International Air Transport Association called signs of weakening passenger demand a "warning bell'' for 2008. It anticipates profits for domestic and foreign carriers to fall from $5.6 billion to $5 billion. ATA chief economist John Heimlich says U.S.-based carriers must continue to improve fuel and other efficiencies while increasing their share of business and international travel. That's to bolster their finances in the face of a slowing American economy, more expensive fuel and higher borrowing costs. Higher fares also seem likely.
Southwest Airlines says its December traffic increased, but its flights were less full as the low-cost carrier operated more flights than a year ago. Dallas-based Southwest said traffic rose four percent from the previous December, but capacity increased 5.2 percent. As a result, the average flight operated at 68.2 percent occupancy. That was down from 68.9 percent in December 2006. Traffic rose 6.8 percent for all of 2007, but that wasn't enough to keep up with the airline's expansion. Capacity grew 7.5 percent from 2006. Southwest has twice trimmed its planned growth in 2008 as it braces for slower travel demand and higher fuel costs. The airline holds options to buy much of its fuel for 2008 at below-market rates, but the benefit of those hedges will diminish in future years. The report from Southwest followed news that December domestic traffic slipped at Fort Worth-based AMR Corporation's American Airlines, the nation's largest carrier.
American Airlines says it's equipping as many as three of its jets with anti-missile technology this spring. The move is the latest phase of testing technology to protect commercial planes from attack. A spokesman for the Fort Worth-based airline says the test will determine how well the anti-missile system holds up under the rigors of flight. The first Boeing 767-200 will be equipped in April or later. American operates that model mostly between New York and San Francisco and Los Angeles. American said it's "not in favor'' of putting anti-missile systems on commercial planes. It says it agreed to participate in the tests to understand technologies that might be available in the future. The technology is intended to stop a missile attack by detecting heat from a surface-to-air rocket, then firing a laser beam to jam the missile's guidance system. American says the device on the belly of the Boeing 767-200 aircraft will be operational but won't be tested on regular flights. The use of a signal to mimic a missile attack has already been tested in the air.
Late payments on a number of consumer loans, including those for autos, home improvement and certain home equity loans, climbed in the summer to their highest point since the country's last recession in 2001. The American Bankers Association says the delinquency rate on a composite of consumer loans increased to 2.44 percent in the July-to-September quarter. That was up sharply from 2.27 percent in the previous quarter and was the highest late-payment rate since the second quarter of 2001, when the economy was suffering through a recession. Payments are considered delinquent if 30 or more days past due. The survey is based on information supplied by more than 300 banks nationwide. Late payments on credit cards, meanwhile, dipped during summer. The delinquency rate on credit cards dropped to 4.18 percent in the third quarter, down from 4.39 percent in the second quarter. The association's quarterly survey of consumer loans painted a mixed picture of how people are managing their debt.
U.S. personal bankruptcy filings jumped 40 percent in 2007, reflecting rising mortgage payments, job losses and other financial stresses. The 2007 increase follows a sharp decline from a year earlier, when a new law made it more difficult for consumers to seek bankruptcy-court protection from creditors. More than 800,000 personal bankruptcy filings were made in 2007, compared with more than 573,000 in 2006--the lowest level since 1998. That's according to data collected by the National Bankruptcy Research Center and published by the American Bankruptcy Institute, a research group in Alexandria, Virginia. The executive director of the American Bankruptcy Institute, says in a statement that the trend is likely to worsen this year as consumers' high debt loads are "made worse by the home mortgage crisis.'' Personal bankruptcy filings for most of this decade had been much higher--around 1.5 million a year.
Additional help is coming from the Federal Reserve to address the credit crisis. The central bank is increasing the amount of money available to banks through a new auction process. The Fed again pledges to continue the auctions "for as long as necessary.'' The Fed says it will increase the amount offered at each of the next two auctions from $20 billion to $30 billion--a 50 percent jump. Those two auctions are to be held on the 14th and 28th of this month. The Fed announcement indicates that the auction process begun last month has been successful in providing a source of loans for banks. The first two auctions offered $20 billion each and attracted bids for about three times that amount. Federal Reserve Chairman Ben Bernanke and his colleagues decided to try the auction approach because their efforts to inject funds into the banking system through direct loans to banks had not been as successful as hoped.