The Federal Reserve says the country sank deeper into an economic rut during the early fall. The Fed’s new snapshot of business conditions around the nation shows the economy continued to lose traction, reflecting mounting damage as financial and credit problems took a turn for the worse. Economic activity weakened across all of the Fed’s 12 regional districts, according to the report. Consumer spending slumped in most areas as did manufacturing activity.
Government data shows retail sales fell off a cliff in September, plunging by the largest amount in three years. Worried consumers shunned the malls and auto showrooms in the midst of the country’s financial meltdown. The Commerce Department reported retail sales decreased 1.2 per cent last month, nearly double the 0.7 per cent drop that had been expected. The surprise showing significantly increased the risks of a recession. Consumer spending is two-thirds of total economic activity. The weakness was led by a 3.8 per cent drop in auto sales. Sales dropped below one million units as consumers struggled to find financing.
Government data shows businesses increased their inventories in August by the smallest amount in five months, a possible indication of concerns about the slowing economy. The Commerce Department reported that inventories held by businesses on shelves and backlots rose by 0.3 per cent in August, the weakest gain since inventories were up just 0.2 per cent in March. The increase was below the 0.5 per cent rise that economists had expected and sharply lower than the 1.1 per cent jump in July.
The government says wholesale prices fell for the second straight month in September, driven by a sharp drop in energy costs. The Labor Department says the producer price index, which measures inflation pressures before they reach the consumer, fell 0.4 per cent in September. That decline matched analysts’ expectations. Core wholesale prices, which exclude volatile food and energy costs, rose by 0.4 per cent, above analysts’ expectations of a 0.2 per cent increase.
President Bush is looking to reassure anxious Americans that the economy will improve. But he’s signaling it will take time and patience for unprecedented steps to stabilize the system, induce banks to lend again, and help improve the economy. Bush, in a meeting with his cabinet, said he’s confident that “in the long run,” the economy “will come back.”
Treasury Secretary Henry Paulson says the next several months are going to be rough ones for the economy. But he also expects that over time, things will improve, and that the government’s decision to buy into nine of the nation’s biggest banks with a $250 billion investment should stabilize things. Making the rounds on the morning talk shows, Paulson admits he was against the idea of having the government intervene in the banking system. But he also says as things kept changing, he viewed it as the way to get “the maximum bang for the taxpayers.”‘ Paulson admits problems such as rising joblessness are likely to continue in the short term. But ultimately he says “we’re going to meet this challenge.”
Federal Reserve Chairman Ben Bernanke says the country’s economic health won’t snap back quickly even if confidence in the U.S. financial system returns and roiled markets finally calm. Bernanke, in prepared remarks to the Economic Club of New York says: “stabilization of the financial markets is a critical first step, but even if they stabilize as we hope they will, broader economic recovery will not happen right away.”
British Prime Minister Gordon Brown is calling for global talks this year to reform the world’s financial system. He says a global summit could be held in the next few months despite lack of agreement among international leaders that they need to hold a summit on the financial crisis. Brown said earlier Wednesday that the European Union, the United States and others should reform the International Monetary Fund and create better international rules governing financial markets. The British premier has long called for the Washington-based IMF to monitor global markets to prevent crises.
Poland’s finance minister says EU leaders have endorsed a continent-wide bailout for the banking sector. The deal came during an EU leaders summit Wednesday, which is overshadowed by how to tackle the global financial crisis. The agreement paves the way for all 27 EU nations to shore up national banks and other financial institutions. Under the plan’s broad principles, individual countries put up a total of ?1.7 trillion ($2.3 trillion) in guarantees and emergency aid to help banks.
The latest litigation trends survey from Fulbright & Jaworski forecasts a faster pace of litigation. American business is between the end of a prolonged period of prosperity and the start of a period of economic challenge, according to attorney Layne Kruse, and that could mean a sharp increase in fresh actions and government probes.
“You know, whoever wins the election, there’s going to be perhaps a greater emphasis on regulatory issues. There’s going to be a focus on more government investigations, and an attempt, frankly, to place the blame on what has happened on institutions or individuals. And so what we, what the outlook is that we believe is going to be a greater, you know, rise in regulatory issues and government investigation issues.”
The expected increase in activity follows two years of declines, and points to the possible need to hire more in-house litigation staff to help manage the expected rise in disputes.
Oil prices have slipped below $75 a barrel, reaching a new 13-month low. The move came as OPEC reduced its forecast for demand in 2009 amid signs that the global economy is headed for a severe downturn. Oil prices have now plummeted 49 per cent since peaking at $147.27 on July 11th. Auto club AAA says the national average for regular unleaded gasoline fell nearly four cents overnight to nearly $3.13.
Governor Rick Perry says he has asked state agencies to figure out where they can cut spending as the economic downturn continues. Perry, in a speech to Houston business leaders, said that agencies have ten days to let him know how they’ll trim their budgets. Within those cuts, Perry says he told agencies to reduce their taxpayer-funded travel. The Republican governor says the state’s economy is generally strong, but that Texas is not immune from the financial meltdown roiling the national economy. Texas is estimated to go into the next budget period with an $11 billion surplus, but that drops to $2 billion when already-spoken for spending is deducted.
A Rhode Island jury has convicted a Texas-based gas company of illegally storing liquid mercury without a permit. Southern Union was found guilty of storing containers of loose mercury inside a neglected building in Pawtucket. The mercury had been removed from home gas regulators, but was left in the building instead of being shipped out and recycled. A federal jury, after deliberating over two days, also found the company not guilty of a separate charge of failing to report a mercury spill and of illegally storing gas regulators that still contained the mercury. The spill occurred in 2004 after three vandals broke into the building and dumped mercury on the property and at a nearby apartment complex.
BP America has discovered oil in the deep waters of the Gulf of Mexico — its third discovery in this area. The discovery at BP’s Freedom Prospect is about 70 miles southeast of the Louisiana coast in about 6,100 feet of water. The well was drilled to a total depth of 29,280 feet. BP said an appraisal will be necessary to determine the size and commerciality of the discovery. The announcement follows discoveries by BP at its Tubular Bells and Kodiak wells. BP Exploration & Production, a subsidiary of BP America, operates the well with a 25 per cent working interest. Both are owned by London-based BP. Noble Energy has a 37.5 per cent working interest in the site, Samson offshore a 25 per cent working interest and Marathon Oil Company a 12.5 per cent working interest. Noble Energy and Samson Offshore acquired the lease for the site in March 2006.
Federal antitrust regulators say they have cleared Bank of America’s $34.9 billion purchase of Merrill Lynch. The deal, announced September 15th, is part of the rapid restructuring of the U.S. financial system in the face of the global credit crisis. Merrill agreed to be bought by Charlotte, North Carolina-based Bank of America just days after rival investment bank Lehman Brothers filed for bankruptcy protection. The federal trade commission says antitrust regulators have approved the transaction.
The Bush administration is requiring smaller school buses to be equipped with three-point, lap-and-shoulder seat belts for the first time. Under new safety rules announced Wednesday, the government also will require larger buses to have higher seatbacks. The lap-and-shoulder belts will be required on all new buses purchased in three years. Smaller buses currently are required to have lap belts. Seat belts are not required on larger school buses. Transportation Secretary Mary Peters told the Associated Press that the equipment changes were prompted by a November 2006 bus crash that killed four students near Huntsville, Alabama. Peters says the government is not requiring seat belts on larger buses because they would limit the number of student passengers.
The cruise industry has enjoyed some smooth sailing for the past year and a-half despite the possibility of financial rough seas ahead. A report by the Cruise Lines International Association says more than 12.5 million passengers took cruises worldwide last year. That’s nearly 5 per cent better than the year before. And there was an even bigger jump during the first half of this year. But nearly all the increase has been among foreign tourists. And analysts say travel agents report European demand is tapering off in a sign of economic hard times. Still, the head of the Cruise Line Association says the industry is “cautiously optimistic” it will meet its goal of 12.8 million passengers this year. It’s also hopeful about the future: 34 new cruise ships are under construction.
Nissan Motor is recalling more than 200,000 vehicles to fix a sensor system that could affect the car’s passenger side air bag. Nissan says the recall includes 140,000 Nissan Altima cars from the 2007-2008 model years. It also involves 2007-2008 model years of the Infiniti EX35, G35 sedan, G37 and the Nissan 350Z, Murano and Rogue. The Japanese automaker said an issue with an electronic component could interrupt a signal in the sensor system. That could prevent the passenger air bag from deploying under certain conditions. A Nissan spokesman says there have been no injuries or crashes. Most of the recalled vehicles are in the United States; others are in Mexico, Canada, Puerto Rico and the Persian Gulf.
Amid the tremendous volatility on Wall Street, a new survey finds that blacks continue to save and invest less than whites. The poll by Ariel Investments and Charles Schwab indicates 62 per cent of the blacks surveyed own stocks or mutual funds, compared to 82 per cent of white respondents who said they do. Chicago-based Ariel Investments is an African-American-owned investment management firm and mutual fund company. Its executives say black stock ownership remains a weak spot as it has been throughout the 11 years the company has been sponsoring the annual survey. Ariel Investments CEO John Rogers says the findings highlight the need for public schools to educate children more about investing and savings and for companies that offer retirement plans to provide more information and do more to encourage contributions.
Chances are your computer will soon be a little less clogged with junk mail. Federal officials say they have shut down a global spam operation that’s spewed out billions of nuisance e-mails in recent years. The Federal Trade Commission says the spam and its click-on Web sites generated more than 3 million complaints. The sites allegedly used false claims to peddle products ranging from weight-loss to “male enhancement.” The head of the agency’s Midwest region says the Web site servers were in China. The operation shipped drugs from India. And operatives in Cyprus and the former Soviet Republic of Georgia handled the credit cards. He says the bottom-line message is beware of spam.
The U.S. Mint’s ten-year-salute to all 50 states has finally reached the last one: Hawaii. Governor Linda Lingle led a delegation to the Denver mint for the striking of the first of the commemorative Hawaiian quarters and the last in the series. It goes into circulation November 3rd. The coin features Hawaii’s 19th century ruler, King Kamehameha, stretching a hand toward the eight major Hawaiian islands and is inscribed with the state motto, in Hawaiian: “the life of the land is perpetuated in righteousness.” Since the state quarter series began, the mint has cranked out 34 billion of the commemorative coins.
After half a century of zapping pompous politicians and Hollywood heroes with zany and biting satire, Mad magazine is preparing to auction off some of its early artwork. Several covers featuring the satire publication’s official mascot — the grinning, flap-eared Alfred E. Neuman — will be among the 36 items to go on the block November 14th in Dallas and online. According to New York-based DC Comics and Dallas-based Heritage Auction Galleries, the works include the first cover drawing of the “What, me worry?” kid by artist Norman Mingo. It’s from Mad’s issue number 30 in 1956.
The parent of American Airlines says despite higher fuel costs it earned a profit in the third quarter, helped by the sale of an investment subsidiary. The carrier reported net income of $45 million. A year ago, AMR earned $175 million. But without the one-time gain and other items — as analysts view companies — AMR would have lost $360 million. Revenue rose to $6.42 billion from $5.95 billion a year ago. Analysts expected $6.34 billion for the quarter that ended September 30th.
American Airlines is spending $8 billion to will buy 42 Boeing 787-9 jets as part of a move to improve the fuel efficiency of its fleet. American said it expects to get the planes delivered from 2012 through 2018. The airline says it has rights to buy up to 58 more of the planes later on. American is the nation’s largest airline, and about half its fleet is composed of fuel-guzzling MD-80 series jets. That became a big disadvantage when jet fuel spiked over $4 per gallon this summer.