The Labor Department says inflation at the wholesale level rose by a larger-than-expected amount last month. The increase of 1.8 percent shows inflation has risen over the past year at the fastest pace in more than a quarter-century. Over the past 12 months, wholesale prices are up more than nine percent. It is the largest year-over-year surge since June 1981, another period when soaring energy costs were giving the country inflation pains. Core inflation, which excludes energy and food, rose just 0.2 percent, slightly below expectations. Wholesale energy prices shot up six percent, while the price of unleaded regular gasoline surged by nine percent following an even bigger 9.6 percent increase in May.
Retail sales edged up by a weaker amount than expected in June as sales at auto dealerships plunged. The Commerce Department reported that retail sales increased by just 0.1 percent last month, even weaker than the 0.4 percent gain that analysts had been expecting. That small rise reflected a 3.3 percent drop in sales at auto dealerships, reflecting the troubles the U.S. auto industry is facing with a weak economy and soaring gasoline prices. Overall retail sales were supported by a big 4.6 percent jump in sales at gasoline stations, an increase that largely reflected the huge jump in pump prices.
Business inventories rose at a slower-than-expected pace in May, a possible indication that the weakening economy is making companies cautious on their restocking plans. The Commerce Department reported that inventories held on shelves and backlots edged up 0.3 percent in May, smaller than the 0.5 percent gain that many economists had been expecting. It was the smallest monthly increase since inventories had risen just 0.2 percent in April. Many economists are worried that a host of problems from a lengthy slump in housing to a severe credit crunch could push the country into a recession. But so far, the overall economy, as measured by the gross domestic product, has managed to stay in positive territory, helped in part by companies rebuilding their inventories.
The Houston area remains the second-largest exporting market, exporting $29.9 billion in goods in the first half of last year, according to the U.S. Department of Commerce. First place belongs to the New York area, which recorded nearly $40 billion in exports. Chemicals lead Houston's exports, followed by machinery, petroleum and coal products. Houston's leading export destination is Mexico.
Federal Reserve Chairman Ben Bernanke tells Congress that the economy is facing "numerous difficulties." Those include financial market strains, rising joblessness and housing problems--despite the Fed's aggressive interest rate reductions and other measures over the past year. Testifying before the Senate Banking Committee, Bernanke says rising prices for energy and food are fanning inflation risks. He says the problems pose "significant challenges" for Fed policymakers. Looking through the end of the year, Bernanke says the economy will grow "appreciably below its trend rate." Be warns that inflation "seems likely to move temporarily higher in the near term."
Treasury Secretary Henry Paulson says that the administration had no immediate plans to extend emergency loans to mortgage giants Fannie Mae and Freddie Mac or to purchase the stock of the two companies. Paulson told the Senate Banking Committee that the assistance plan put together by the administration and the Federal Reserve over the weekend was intended to serve as a backup if needed. He said that if the government extends any financial backing to the two institutions it will be done "under terms and conditions that protect the U.S. taxpayer." In his comments, Paulson said that it was essential for the government to put together a backup assistance package, given the important role the two companies play in supporting the housing market.
Historically high oil prices that are expected to contribute to massive second quarter profits for oil companies--are dragging on their refining operations. Plummeting stock prices for many refiners reflect the difficult operating environment. The Associated Press reports major oil companies and refiners next week begin reporting earnings for the April-June period. Chevron, ConocoPhillips and Marathon Oil already have said margins associated with refining and selling gasoline—their so-called "downstream" operations--were lower than one year ago. AP reports the problem lies on a couple of fronts: companies like Chevron don't produce enough oil themselves to meet their refining needs. So those companies have to buy oil on the spot market, where prices have roughly doubled from a year ago. Demand for gasoline has fallen in recent months, so the companies can't raise wholesale and retail prices fast enough to keep up with rising crude prices and other escalating expenses. Standard & Poor's analyst Paul Harvey says the summer drive season just hasn't helped things. Harvey says crude is still going up, and demand for gasoline is flat to going down.
It appears that a high profile push to double the number of college degrees in science, math and engineering has not made the grade. Three years ago a coalition of business interests, including the Chamber of Commerce and National Defense Industrial Association, said 400,000 new graduates would be needed in the fields by 2015. Last year, the "America Competes Act" was passed. It promotes both math and science education. In a just completed study, the coalition reports that the number of degrees did increase slightly early in this decade, but they have since leveled off at about 225,000 each year. William Green, the chief executive officer at Accenture, says he wants to see more "federal leadership" on the issue. He says companies and governments in other countries have "a laser focus" on developing work forces.
Some lawmakers are taking steps to end the Federal Aviation Administration's sometimes cozy relationship with the U.S. airline industry. Several U.S. House Democrats and Republicans are rolling out legislation to prod the FAA to step up its oversight of airlines. The Transportation Department last month launched an investigation into FAA practices--including how the agency reviews flight risk, its air carrier compliance measures and its oversight of maintenance practices. In April, FAA inspectors testified at a Congressional hearing that their jobs were threatened when they reported maintenance and inspection problems with some airlines. The hearing came after revelations of lax FAA supervision over Dallas-based Southwest Airlines.
The city of Edmond, Oklahoma has joined a growing list of cities and towns that have endorsed a plan to expand passenger rail service from Oklahoma City to Kansas. Members of the Edmond City Council approved a resolution supporting expansion of the existing Heartland Flyer service between Oklahoma City and Fort Worth, through Edmond and on to Kansas City, Missouri. Edmond joins Norman and Oklahoma City in support of the expansion plan. Several Kansas cities, including Wichita and Newton, also have endorsed the plan. The Northern Flyer Alliance, a grassroots organization seeking support from cities along the route, is encouraging support for launching passenger rail service between Oklahoma City and Kansas. Supporters say it would make the heartland flyer a more effective transportation option.
Some lawmakers and environmentalists want regulators to build transmission lines to transport the maximum amount of wind power from rural west Texas. Others cautioned that a more measured approach should be adopted rather than placing too much reliance on the fickle energy source. The Texas Public Utility Commission is expected to discuss options later this week, including a range of proposals to transmit varying amounts of wind power to the state's population hubs. Adoption of a final plan to increase wind power transmission, which is expected later this summer, was mandated by the legislature. Backers say the most ambitious plan, dubbed the "renewable energy superhighway," would spur construction of more wind energy projects, create jobs, reduce energy costs and cut pollution.
The Environmental Protection Agency wants to make sure that curbing global warming doesn't contaminate drinking water. In its first regulations on the burial of carbon dioxide underground, the EPA seeks to protect drinking water from the gas behind the bubbles in carbonated beverages. The fledgling technology is critical to reducing carbon dioxide released into the air from power plants. The EPA's proposal upgrades the 1974 Safe Drinking Water Act to include a new category of injection wells solely for carbon dioxide storage, and creates extensive requirements to prevent leaks. While carbon dioxide in water itself isn't a problem, too much of the benign bubbles can make water acidic and leach contaminants out of surrounding rock into water supplies.
Hamilton Sundstrand has protested NASA's selection of a Texas company to supply the space agency's next-generation space suit. Hamilton Sundstrand, which is a subsidiary of United Technologies, and a partner company filed the protest with the U.S. Government Accountability Office. Connecticut-based Hamilton Sundstrand says officials don't believe they received adequate information from NASA about why the company lost out. The contract was awarded to Houston-based Oceaneering International, best known for providing deep water services and products to the oil and gas industry. Hamilton Sundstrand and its partner, ILC Dover of Frederica, Delaware, have supplied the space suits since the 1960s.
Fargo, North Dakota, officials say they want a Texas company to show it can protect the area's area water and soil if it operates a 50-year-old petroleum pipeline. San Antonio-based Nustar Pipeline Operating Partnership recently acquired the line that runs from the Tesoro refinery in Mandan, North Dakota. Nustar's asked the North Dakota Public Service Commission to approve an operating certificate. But Fargo officials say the want Nustar to show it can protect the area from possible leaks. The pipeline crosses the Sheyenne and Red Rivers, which provide Fargo's drinking water. Nustar says it regularly checks its pipelines and it has more than 9,000 miles of them. Public Service Commissioner Kevin Cramer says Nustar may not need a PSC certificate because it already is a federally approved common carrier. But he says the PSC will act on the company's request. He hopes a public hearing can be held in Fargo. Tesoro also is headquartered in San Antonio.