Consumer prices were unchanged in April as both food and energy costs declined to offset gains elsewhere. Prices over the past year fell by the largest amount in more than a half-century. The Labor Department says its consumer price index was flat last month, meeting economists' expectations. The docile inflation performance reflected a second monthly drop in energy costs and a third straight decline in food prices. Over the past year, consumer prices have fallen 0.7 per cent, the largest 12-month decline since a similar drop for the 12 months ending in June 1957.
Houstonians paid about one per cent more for goods and services in March and April. Cheryl Abbot is an economist with the Southwest Regional Office of the Bureau of Labor Statistics.
"Consumer prices were up nine-tenths of one per cent during March and April. And that comes after a 1.12 per cent increase during the first two months of the year."
The biggest factor in the past two months is higher clothing prices. But over the year, the cost of apparel is still down 3.8 per cent. Gasoline prices have been creeping back up.
Energy prices stalled this week amid a steady stream of financial news suggesting that even if the global economy has bottomed out, it could be some time before demand for crude rebounds. Since the start of May, oil prices have jumped by nearly $8 a barrel as it appeared the worst of the recession was over. Retail gas prices continue to rise, as they have every day this month. AAA says gas is 24 cents a gallon more expensive than last month, but $1.48 cheaper than last year. Prices are rising just before the Memorial Day weekend and the start of the traditional summer driving season.
The Federal Reserve says the nation's industrial production fell in April by the smallest amount in six months, evidence that the pace of the economy's decline is slowing. The Fed says output by the nation's factories, mines and utilities fell 0.5 per cent last month, after revised declines of 1.7 per cent in March and one per cent in February. Analysts expected a drop of 0.6 per cent last month. Still, the report shows U.S. industry remains weak. Industrial production has fallen in 15 of the 17 months since the recession began in December 2007, and is down 16 per cent since then.
A trade group for U.S. airlines says the number of passengers will drop 6.7 per cent this summer because of the recession. The Air Transport Association said it expects the number of passengers to drop by 14 million, to 195 million between June 1st and August 31st, compared with the same period last year. It expects domestic travel to drop seven per cent to 171 million passengers, and international travel to fall six per cent to 24 million passengers. Airlines have been reducing capacity, either cutting routes or using smaller planes. ATA President and CEO James May says the result is that even with traffic down, the airplanes that are still flying are nearly full. Several airlines have also sharply reduced their Mexico schedules this summer.
Hundreds of Chrysler dealers are learning they are on the automaker's hit list. Chrysler says it needs to eliminate about a quarter of its dealerships nationwide--nearly 800 of them. That was revealed in bankruptcy court. The strategy could save the company, but will wipe out thousands of jobs. Fedex letters bearing the bad news began arriving today, saying dealers were judged on sales, customer service scores, and the location and condition of facilities. But, the letters say the decision isn't finalized, giving dealers to the end of the month to submit information that may change the automaker's mind. GM also plans to provide updates to about 470 Saturn, Hummer and Saab dealerships on the status of those brands, which it plans to sell. It says it expects some dealers will shut themselves down. GM's action comes just a day after crosstown rival Chrysler announced it will drop 789 of its roughly 3,200 dealerships. Both companies have too many dealerships for too few sales and are slashing costs as they restructure.
GM says it likely would sell most of its assets to a new company and liquidate the rest if it has to seek bankruptcy protection. The company made the disclosure in a filing with the Securities and Exchange Commission. It has said bankruptcy is possible if it doesn't get enough takers on an offer to swap $27 billion in bond debt for stock. The automaker also says it could seek court approval of its reorganization plan even if creditors vote against it. GM offered last month to give bondholders 225 shares for every $1,000 worth of bonds. The company would issue 62 billion new shares and then do a 100-for-1 reverse stock split.
Relations between President Barack Obama and U.S. corporate leaders have grown tense in recent weeks. Business groups are bristling over his sharp rebukes of lenders and multinational companies in particular. They're troubled by his acid critiques of certain sectors, including large companies that keep some profits overseas to reduce their U.S. tax burden. One lobbyist, Jade West of the National Association of Wholesaler Distributors, says it's "traditional class-warfare rhetoric" that she describes as "a little bit frightening." And this week in New Mexico, Obama rebuked the credit card industry for sharply raising interest rates or fees with hard-to-find notice. But he did temper his comments by saying that Americans must be responsible for the debt they incur. The administration defends its record of outreach to business.
Energy Secretary Steven Chu says he will provide $2.4 billion from the economic recovery package to speed up development of technology to reduce greenhouse gas emissions from power plants and factories that burn coal. Chu told a meeting of the National Coal Council that it's essential that ways are found to capture carbon dioxide from coal-burning power plants and industrial sources. Carbon dioxide from burning fossil fuels is the leading greenhouse gas blamed for global warming. Chu said coal will remain an essential energy source. He said even if coal plants in the United States were shut down, as some environmentalists want, China and India will not turn their back on coal.
A Federal Reserve official is predicting a "slow slog" back to economic health. Richard Fisher, president of the Federal Reserve Bank of Dallas, says he expects the "pace of decline will moderate" in the current quarter. After that, he says, the economy is "likely to bounce along the bottom for a while." He says there could be a return to positive growth early next year. In remarks prepared for a banking convention in Texas, Fisher says there have been some hopeful signs lately: job losses may be slowing, retail sales aren't quite as bad as they were and purchasing managers see the decline in new orders abating. But he says consumers still fear losing their jobs or homes and likely will remain cautious spenders. He says that means "we are not out of the woods," and in fact have "miles to go before we sleep."
The Treasury Department has agreed to extend billions in bailout funds to six major life insurers. The deal follows a months-long quest by some in the sector for government help in shoring up capital positions in the wake of major investment losses. The Hartford Financial Services Group was the first to disclose that it had been notified by the Treasury Department that it was eligible for $3.4 billion from the Troubled Asset Relief Program, or TARP. The Wall Street Journal reports the total capital injection into six companies will be less than $22 billion. Life insurers had worried that their balance sheets had became clogged by illiquid assets and escalating liabilities to policy holders who bought in to this decade's explosion in the variable annuities market. The $700 billion TARP bailout fund, approved by Congress last year, was originally intended to purchase toxic loans on the books of banks that were inhibiting their ability to make loans.
The Caribbean offshore bank at the center of an alleged fraud scheme by Texas billionaire R. Allen Stanford apparently has nowhere near enough money to repay depositors from around the world. A court-appointed accounting firm reviewing the bank's books has found that Stanford International Bank in Antigua owes depositors $7.2 billion including interest. In all, there were nearly 28,000 depositors from 113 countries. But the firm finds SIB has only about $1 billion in assets, including $46 million in cash at the bank. Vantis said in a statement it's too early to say how much investors will get back. Authorities have accused Stanford of operating a huge ponzi scheme but have not filed criminal charges.
The government says loans held by the 21 largest institutions getting federal bailout support fell in March--the fourth drop in the past five months. The Treasury Department says the average loan balances at the largest bailout recipients dropped to $4.38 trillion--down 0.9 per cent from February. The average total of loans had fallen 0.4 per cent in February. The administration has argued that the decline in lending at banks that have received billions of dollars in bailout support was not an indictment of the program. Officials say lending would have contracted even more without the rescue program.
The 6th annual HEB Houston Black Expo is at the George R. Brown Convention Center this weekend. Some 20,000 attendees are expected over both days. The event includes a "Strong Careers" Community Breakfast, featuring a panel of professionals who will discuss finding jobs and hiring practices in a slow economy. The event is sponsored by the non-profit Texas Black Expo, which fosters business growth and development and educates young people about entrepreneurship.
A market research group says U.S. video game retail sales declined for the second month in a row in April. A big culprit is last year's launch of the blockbuster "Grand Theft Auto IV," which hit store shelves on April 29th, 2008 and raked in more than $500 million within a week. That and the launch of Nintendo's "Mario Kart Wii," another very popular game, were hard to follow up this year. NPD says total game sales slumped 17 per cent to $1.03 billion. Software sales declined 23 per cent to $510.7 million. That's more than some analysts had expected.
Baker Hughes in Houston says the number of rigs actively exploring for oil and natural gas in the U.S. fell by 10 this week--to hit 918. One year ago the rig count stood at 1,862. Texas lost 13 rigs this week. Baker Hughes says the count peaked at 4,530 in 1981, during the height of the oil boom. The industry posted several record lows in 1999, bottoming out at 488.
Blockbuster reports that its first-quarter profit declined, with fewer people coming into stores to rent videos. The slumping company revealed that it is responding by cutting stores and reducing other expenses. The latest results serve to confirm the many challenges facing Blockbuster. More people are getting their videos through the mail or high-speed Internet connections. The company ended the quarter with 7,267 stores worldwide, 138 fewer than at the beginning of the year.
J.C. Penney says first-quarter profit tumbled 79 per cent due to a hefty pension expense and that it will miss analysts' earnings estimates for the full year. The Plano-based retailer earned $25 million. That compares with $120 million a year ago. Analysts polled by Thomson Reuters forecast profit of ten cents per share. Results were hurt by a pension expense of $114 million. Sales dropped six per cent to $3.88 billion from $4.13 billion, but met Wall Street's expectations.
Dillard's is reporting a $7.7 million profit for its first quarter because of a one-time gain, though its sales fell sharply. Sales for the Little Rock-based chain fell 12 per cent to $1.47 billion. A year ago, the company earned $2.7 million in its first quarter on revenue of $1.67 billion.