Belt-tightening by consumers and a "pronounced weakness'' in housing-related industries leads the Federal Reserve to conclude that the economy lost momentum heading into the new year. In its "Beige Book'' snapshot of business conditions around the country, the central bank says consumers and businesses alike are more cautious because of the persistent housing slump and harder-to-get credit. The report comes as a recent string of economic reports--ranging from a plunge in retail sales to a big jump in the unemployment rate--raises fears that the nation is heading for its first recession since 2001. The Fed report notes that the economy, in fact, did grow during the survey period, "but at a slower pace'' than the previous survey taken during the late fall.
The Federal Reserve says industrial output showed no growth in December. That's the poorest showing since October, when output at the nation's factories, mines and utilities actually fell by half a percent. In November it was up by three-tenths of a percent. The December weakness reflected flat output at U.S. factories, a tiny one-tenth-percent rise in the mining industry and a two-tenths-percent drop at the nation's utilities.
Higher costs for energy and food in 2007 have pushed inflation up by the largest amount in 17 years. Consumer prices rose by 4.1 percent for all of last year. That's up sharply from a 2.5 percent increase in 2006. Prices for both energy and food shot up by the largest amount since 1990. But outside of food and energy, inflation was more moderate. The so-called core rate rose by 2.4 percent for all of 2007, down slightly from a 2.6 percent increase in 2006. For December, the Consumer Price Index rose by three-tenths of a percent. With food and energy excluded, it was up two-tenths of a percent. The Federal Reserve is closely watching to see whether the jump in food and energy becomes more widespread and starts pushing core inflation higher.
Former Treasury Secretary Lawrence Summers is suggesting a $150 billion one-two punch to fight off the economy's growing problems. Summers is telling Congress to start with billions of dollars worth of tax cuts. And he recommends putting in a "trigger'' that would release more money if the economy gets worse. He says having the extra cash easily accessible would avoid economically costly delays. Summers warns the risks of "too little, too late" are far, far, far greater than the risk of "too much too soon." Congress is looking for a legislative solution to mounting economic woes, and several hearings are scheduled to discuss the problem. Consensus seems to be developing in favor of a tax rebate.
Mortgage lender Indymac Bancorp is taking action to weather the worsening housing slump and sagging demand for home loans. It is slashing its work force by 24 percent, laying off 2,400 employees in a bid to cut costs. Indymac Chief Executive Mike Perry calls the action "clearly painful'' but "necessary to return Indymac to profitability soon.'' The latest round of layoffs follows a reduction of 1,600 workers last year through voluntary resignations. The lender posted a loss of nearly $202 million during the third quarter ending September 30th.
Houston-based Saint Arnold Brewing Company says 2007 was another record year, with annual production growing more than 30 percent over the record set in 2006. It's the fourth consecutive year of production increases of 20 percent or more. Saint Arnold's production last year totaled 17,811 31-gallon barrels. The northwest Houston brewery says it's making additional investments to further increase capacity. The company's ten varieties of beer are made and sold by a staff of 21 employees. Saint Arnold's founder Brock Wagner says he's in negotiations for a new larger brewery location in Houston.
Several Houston energy companies have joined the Advanced Energy Consortium, which is being led by Rice University and the University of Texas at Austin. The privately-funded consortium includes BP America, Baker Hughes, ConocoPhillips, Halliburton Energy Services, Marathon Oil and Schlumberger, all based in Houston. California-based Occidental Oil and Gas is also a member. The multimillion-dollar research consortium is for development of micro and nanotechnology applications to increase oil and gas production.
Houston has been named the "Easiest City to Work With" by ConferenceDirect at the Professional Convention Management Association's annual convention in Seattle. ConferenceDirect is a meeting resources company that provides expertise to more than 800 corporations and associations worldwide.
Delta and Northwest Airlines are in formal merger talks, according to the chairman of the House Transportation Committee. Congressman James Oberstar tells the Minneapolis Star-Tribune he met with two northwest executives in his Washington office. Although Northwest is talking with Delta, it will look for another partner if Delta tries to merge with United Airlines instead. Oberstar says the Northwest executives told him there would be little route overlap and therefore no significant effect on competition. He strongly disagrees and wants both the Justice and Transportation Departments to study the effect of large airline mergers on the flying public. If Northwest merges with another carrier, Continental Airlines can buy back Northwest's power to nix any possible Continental mergers.
An analyst who follows Boeing says management has lost credibility with the latest delay in the 787 Dreamliner jet. The first plane won't be delivered until next year. Peter Jacobs of Ragen MacKenzie estimates the delay probably will cost Boeing $1 or $2 million a plane in penalties on late deliveries in the first year or two. Continental Airlines has 25 on order, set for delivery between 2009 and 2013. The long-range aircraft will enable non-stop flights from Houston to places like Dubai, Rome, Milan or Madrid.
AMR Corporation says high fuel prices and weather disruptions were at play as it swung to a fourth-quarter loss. That's after posting profits in each of the preceding six quarters. The Fort Worth-based parent of American Airlines posted a loss of 69 million. That compares with a profit of $17 million during the same period last year at the nation's largest air carrier. The latest results include one-time gains totaling $115 million, with the biggest part coming from the sale of communications and engineering firm Arinc. Revenue edged higher during the quarter, increasing about five percent to $5.68 billion. The analysts predicted revenue of $5.67 billion. For the full year, AMR's profit grew almost 12 percent to 504 million. Revenue grew almost two percent to $22.94 billion.
South Korean prosecutors are seeking a ten-year prison sentence for the man who heads the U.S. buyout group Lone Star Funds in that nation. Prosecutors also say they're asking for a $4.5 million fine against Paul Woo, who's on trial for alleged stock price manipulation. Yoo was indicted last year, along with Dallas-based Lone Star, for allegedly manipulating the stock price of the credit card unit of the Lone Star-owned Korea Exchange Bank. Lone Star Chairman John Grayken denied the allegations last week when he testified at Yoo's trial. Lone Star's efforts to sell its interest in KEB have been hampered by Yoo's trial and a series of other legal and tax disputes. The fund has battled accusations that it conspired with government officials to understate the financial health of KEB to facilitate its acquisition. Lone Star has consistently denied wrongdoing.
Asarco says it needs two more months to file its bankruptcy-exit plan. The Tucson, Arizona-based copper-miner says its parent company, a unit of Mexican mining company Grupo Mexico, is behind the delay. Asarco wants a federal bankruptcy judge in Corpus Christi to extend the deadline for filing its reorganization plan to April 11th. The current deadline is February 11th. In court papers, Asarco says it can't meet that deadline because it has to spend time defending a move by its parent company to appoint an examiner to investigate Asarco's reorganization. Asarco, has been in bankruptcy since August 2005. It says it's making progress in the case, working to resolve its environmental and asbestos-related liabilities.
AT&T is replacing backup batteries in 17,000 street-side cabinets. The San Antonio-based telecom says the move comes after four of the batteries exploded or burst into flames. The batteries provide backup power for U-verse. That's the digital broadband TV service AT&T is rolling out in its 22-state local-service territory. The telecom trade Web site Light Reading first reported the replacement program on Monday. It reports the first cabinet to explode was in Houston in 2006. Another cabinet caught fire in Houston, while two other incidents were in Cleveland and Wauwatosa, Wisconsin. AT&T says no one was hurt by the malfunctioning lithium-metal-polymer batteries, but there was some property damage. The batteries came from Avestor, a Canadian company that went bankrupt in October 2006. AT&T says it stopped installing those batteries in early 2007 after the first incident. AT&T also hired a consultant to investigate their safety, but was told the batteries posed no greater risk than alternative batteries from other suppliers.
Apple has launched a movie rental service through its online iTunes store. It's an effort to gain a foothold in a promising but unproven business that could give a boost to other core products. Apple has scored alliances with all six major movie studios to supply content. Terms are similar to those of other online movie providers: older releases cost $2.99, new movies are $3.99 and it's a dollar extra for high-definition. The movies are ready to watch almost instantly over a high-speed Internet connection, and users have a 24-hour period to watch a movie once they start it. The service will work on Macs, Windows-based machines, iPhones, iPods or the Apple TV set-top box.
The Grammys could become the latest awards show casualty of the Hollywood writers strike. A spokesman for the Writers Guild of America says it will likely bar its members from participating in the Grammys telecast next month, even if Grammy organizers ask for a waiver allowing writers to work on the show. Meanwhile, the guild says it won't picket the NAACP Image Awards on February 14th, and that writers will be allowed to work for that show. The Image Awards honor those who promote diversity in the arts. Awards in 44 categories, including movies, TV and literature, will be presented in the ceremony broadcast live on Fox.