A monthly poll shows consumer confidence took a surprisingly sharp fall in February amid rising job worries. The decline ends three straight months of improvement and raises concerns about the economic recovery. The Conference Board says its consumer confidence index fell almost 11 points to 46 in February, down from a revised 56.5 in January. Analysts were expecting only a slight decrease to 55. One gauge measuring consumers' assessment of current conditions, dropped further to 19.4 from 25.2. The other barometer, which measures their outlook over the next six months and had been rising, fell to 63.8 from 77.3. Economists watch the numbers closely because consumer spending accounts for about 70 percent of U.S. economic activity.
A fleet of the nation's biggest merchants report mostly better fourth-quarter profits. The improvements at Target, Sears and Macy's are mostly a results of stocking holiday shelves cautiously and managing markdowns. But the rosier results mask a tough reality. To keep up that momentum retailers need shoppers to spend more. Merchants may have to keep waiting if Tuesday's surprisingly steep drop in consumer confidence figures offers any insight. That likely means that shoppers will remain cautious until the nation's economy and job outlook is rosier. While they wait, retailers are trying everything they can to make their stores and their products more inviting and appealing to customers.
Interest rates are falling in the bond market as investors move into safer investments after a disappointing report on consumer confidence. A downgrade of Greece's biggest banks by Fitch ratings is also feeding worries about the economy. The yield on the ten-year Treasury note maturing in February 2020, which is a basis for rates on mortgages and other consumer loans, has fallen to 3.70 percent from 3.80 percent late Monday. Its price is down 5/32 at 98 18/32.
Home prices rose nationally for the seventh straight month in December as the U.S. housing market continues its bumpy road to recovery. The Standard & Poor's/Case-Shiller 20-city home price index rose 0.3 percent from November to December, to a seasonally adjusted reading of 145.87. The index was off 3.1 percent from December last year, nearly matching analysts' estimates that it would fall by 3.2 percent. Only five of 20 cities in the index showed declines from November to December. The index is now up more than three percent from its bottom in May, but still 30 percent below its May 2006 peak. On a quarterly basis, U.S. home prices fell 2.5 percent compared with the fourth quarter of 2008.
Toyota's president says the automaker compromised quality by growing too quickly in the U.S., but it will take steps to improve quality control. Toyota President Akio Toyoda will deliver the remarks Wednesday to the House Oversight and Government Reform Committee. The prepared testimony was released ahead of time. The head of Toyota's U.S. sales arm, as well as outside safety experts and Transportation Secretary Ray LaHood, have testified before Congress. Toyota's president will tell Congress that the automaker grew too quickly in recent years, at times pursuing sales volume over safety and quality. He said the company plans to establish a quality center in the U.S. and hire an executive focused on product safety.
Toyota's top U.S. official says the company's massive recalls may "not totally" solve the company's problems with unintended acceleration of some of its most popular cars and trucks. Testifying before a House committee, Jim Lentz says the company is still investigating the issue, including whether electronics of the gas pedal system may be at fault. Toyota has not found any evidence of that yet, he says. Toyota has already recalled 8.5 million vehicles because of sticky gas pedals and floor mats that can trap pedals. Lentz has said before that he was confident the fixes Toyota was installing for those issues would correct the problem. Lentz also says that Toyota is putting in new brakes that can override the gas pedal on almost all of its new vehicles and a majority of its vehicles already on the road.
The Supreme Court says a corporation's headquarters is where the company's executives work, not where the company's products are sold. Hertz was sued in California state court. The company is headquartered in New Jersey and wanted the trial in federal court because it involved two different states. Lower courts said Hertz was headquartered in California, because most of its business activity was there, and said the trial should be in California. But the high court, agreeing with Hertz, said unanimously that Hertz is headquartered in New Jersey, because that is where high-level officers work. The case goes to federal court for trial.
A new report by Congressional economists says the economic stimulus law produced jobs for one million to 2.1 million people by the end of last year. The nonpartisan Congressional Budget Office study says the $862 billion stimulus added between 1.5 to 3.5 percentage points to the growth of the economy. The controversial stimulus law combined tax breaks for individuals and businesses with lots of government spending. The report reflects agreement among economists that the measure boosted the economy. But the wide range of estimates means it won't resolve the debate over how effective the stimulus has been.
The top Democrat in the Senate is pressing to continue unemployment and health-insurance benefits for laid off workers through the end of the year. Majority Leader Harry Reid of Nevada also hopes to keep helping cash-strapped states with their Medicaid budgets. Reid is in talks with GOP leaders over what to include in catch-all legislation to help the unemployed, extend several expired tax breaks and prevent doctors from absorbing a big cut in their Medicare reimbursements. The measure would cost more the so-called jobs bill the senate is voting on Wednesday. It mostly clears up business left unfinished because of last year's health care debate.
A new report says that states again saw big drops in tax collections in the last quarter of 2009--the fifth straight quarterly decline. The Rockefeller Institute of Government says that tax collections across the country dropped about four percent overall last quarter, when measured against the same quarter in the previous year. The report shows that seven states--Montana, Alaska, Wyoming, Arizona, Oklahoma, Texas and Georgia--experienced tax revenue drops of more than ten percent. The institute notes that states that already have slashed spending or raised taxes will need to do more. Beleaguered state governments are cutting back on schools, social programs and prison costs--such as by releasing inmates early.
The Treasury Department says now that the government's debt ceiling has been increased, it will once again expand an emergency program created at the height of the financial crisis to help the Federal Reserve manage its books. The Treasury said it will expand borrowing in the supplementary financing program from $5 billion to $200 billion. During the financial crisis, the borrowing program hit a peak of $560 billion in 2008 but it was trimmed last fall to keep the government from breaching the debt limit. The increase planned over the next two months will be accomplished by selling $25 billion in 56-day bills at weekly auctions which will be held every Wednesday.
A new document shows that a push to bump up the interest rate banks pay the Federal Reserve for emergency loans started in mid-January. The Fed's regional banks in St. Louis and Kansas City were the first to call for the rate increase on January 14th. In a surprise move last week, the Fed boosted the emergency lending rate by one-quarter percentage point to 0.75 percent. By that time, all 12 regional Fed banks were on board. Details of the discussions over the emergency lending rate were contained in minutes of a January 25th closed-door meeting.
A new UN report says more than half of the people in the developing world are now cell phone subscribers. The world body's International Telecommunication Union says there were an estimated 4.6 billion mobile phone subscriptions at the end of last year, compared with about 1 billion in 2002. Internet use has grown as well, but at a slower pace. An estimated 1.7 billion people, or about a quarter of the world's population, were online last year. That's up from 11 percent in 2002. Still, four out of five people living in poor countries have no access to the Internet. The report that tallied usage in 159 nations also ranked countries according to how frequently and well their populations use newer technology. Sweden tops the list, followed by Luxembourg, South Korea, Denmark, Iceland and Switzerland. The United States is 19th.