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Friday PM August 14th, 2009

Industrial production rises slightly; consumer prices remain flat…Retail gasoline prices continue rising…Texas sales tax revenue down 11.6 per cent compared to same period last year…

Production from the nation’s factories, mines and utilities rose more than expected in July, with the first gain in nine months driven by increased output from auto companies. The Fed says industrial production rose 0.5 per cent in July, after falling in 17 of the previous 18 months. It marks only the second increase since the recession began in December 2007. Economists expected a 0.3 per cent rise, according to Thomson Reuters. Automakers led the rebound, as the production of motor vehicles and parts rose 20.1 per cent, after falling for three straight months. General Motors and Chrysler last month reopened many plants that had been closed in May and June as the companies restructured and emerged from bankruptcy protection.

Consumer prices were flat in July as energy costs retreated following a big surge in June. Over the past 12 months, prices dropped the most in nearly six decades as the recession and lower energy costs kept a lid on inflation. The Commerce Department says consumer prices showed no changed in July, in line with analysts’ expectations and far below the 0.7 per cent jump in June. Prices fell 2.1 per cent over the past 12 months, the biggest annual decline since a similar drop in the period ending in January 1950. Most of the past year’s decline reflects energy prices falling 28.1 percent since peaking in July 2008.

Retail gasoline prices across Texas rose an average five cents this week, reaching $2.54 a gallon. AAA Texas reported the most expensive gasoline statewide was in El Paso, at $2.61 a gallon. Amarillo and Houston had the least costly gasoline, averaging $2.50 a gallon. Nationally, gasoline is selling for an average $2.64–up two cents from last week. A statement from AAA Texas says the increasing costs for gasoline are following the same trends in the oil market. The increases over the last month have added about the cost of an extra gallon to every 14-gallon fill-up.

Texas collected $1.65 billion in sales tax revenue in July—down 11.6 per cent from the same month last year. Comptroller Susan Combs sent sales tax payments of $367.4 million to Texas cities—down 6.5 per cent compared to last August. Sales tax receipts of $33.8 million went to Texas counties—4.2 per cent below last year. Combs blames the drop on continued weakness in major economic sectors, such as retail trade, oil and natural gas and construction. She also says the July 2008 collections with which they’re compared were unusually strong.

The drought that’s dried up parts of Texas for two years is now the worst in recorded history for the hardest-hit counties. Texas state climatologist John Nielsen-Gammon says at least nine counties in south central Texas are in their worst drought conditions since modern record-keeping began in 1895. Nielsen-Gammon says the hardest-hit counties include Bastrop, Caldwell and Lee in central Texas and Victoria, Bee, San Patricio, Live Oak, Jim Wells and Duval in south central Texas. He says conditions have worsened in those areas by one of the hottest summers ever. Even with the severe drought in part of the state, about half of Texas isn’t under any kind of drought.

Drought has damaged crops across Texas, but another weather problem earlier this year added to the trouble for wine growers. Freezing temperatures devastated some grapes at the Driftwood Vineyards, about 20 miles southwest of Austin. Owner Gary Elliott told KXAN-TV that he started 2009 with an estimated 60 tons of fruit, but in early April the temperature dropped below freezing and “pretty much wiped out all the fruit.” Elliott, who says he can buy grapes from New Mexico or California, is focusing on next year’s crop and watering as needed. Elliott says the vines “don’t take any where as much water when they don’t have fruit.” The Harvest Wine Trails Event, at Driftwood and more than 20 other Hill Country wineries, runs through Sunday.

The Texas Public Utility Commission is allowing Oncor to charge customers $115 million more each year, which is about $2.50 to $3 a month for the average residential electric user. The amount includes $7.8 million that consumers will pay for Oncor’s first round of smart meters, which were replaced because they didn’t meet the standards the commission wrote later. That amount will result in customers paying about 35 cents more a month for the meters. The PUC in Austin decided to allow the charge. The Dallas Morning News reported that those charges are in addition to $2.21 a month consumers already pay on their electricity bills for the second round of high-tech meters. Those meters were designed to give people more information about their consumption to help them conserve.

Seniors enrolled in Medicare can expect to see a $2 increase in their monthly payment for prescription drug coverage next year. Medicare officials announced that the average monthly premium for the government’s drug plan will be $30 next year, up from $28 this year. Officials made the projection based on bids from private insurers that get the premiums along with a federal subsidy to administer the benefit. Companies that offer the so-called Medicare Part D plans include Humana, WellPoint and UnitedHealth. Full details of the benefits and premiums for Medicare drug coverage will be announced in September.

Republic Airways Holdings won the bankruptcy court auction for Frontier Airlines–after a bid from Dallas-based Southwest Airlines was rejected. Republic bought Denver-based Frontier for almost $108.8 million. Southwest says its $170 million bid lost out because it wouldn’t back down from requiring that its pilots and Frontier’s work out integration before the deal would close. A leader of the Southwest Airlines Pilots Association says Southwest pilots wanted the Frontier aviators put at the bottom of the seniority list. Southwest CEO Gary Kelly called the potential Frontier deal a great opportunity. But Southwest insisted that pilots agree first on how they would integrate the seniority list–the ranking that determines pilot scheduling and layoff order. The approved plan calls for Frontier and regional unit Lynx to be run as a stand-alone Republic subsidiary.

U.S. air travel in May was down 9.3 per cent from the previous year, according to the Department of Transportation. That’s the 14th consecutive monthly year-to-year decline in domestic air passenger totals. There were 6.2 million fewer passengers flying in May, compared to the same month in 2008, when 65.9 million passengers flew. That’s an 8.6 per cent decrease. International flights by U.S.-based carriers dropped 14.8 per cent. Houston-based Continental Airlines was the sixth-busiest airline in May, but it flew 11.8 per cent fewer passengers. Southwest Airlines was the busiest airline, but was down 6.7 per cent from 9.3 million passengers in May 2008.

Government air traffic controllers and the Obama administration have reached a tentative contract agreement that both sides say they hope will end years of severely strained relations. Arbitrators recently decided a handful of remaining issues involving pay and vacation time, clearing the way for the agreement between the Federal Aviation Administration and the National Air Traffic Controllers Association. Union members have 45 days to ratify the contract. President Barack Obama told controllers when he was running for the White House that he would address their problems with FAA. Earlier this year, he appointed former FAA administrator Jane Garvey, who is popular with controllers, to oversee negotiations. The nation’s more than 15,000 controllers have been working without a contract since 2005.

A college textbook publisher says it will be the first in the industry to rent books directly to students. Stamford, Connecticut-based Cengage Learning says it will cost 40 per cent to 70 per cent less than the suggested retail price. Students will immediately get the first chapter in electronic format, then will be shipped the book. Students can already rent secondhand textbooks through third-party Web sites, but publishers complain they’re cut out of that market. They say the reason textbooks sometimes cost $100 or more is that they get one chance to collect revenue–the first time the book is sold. By renting directly to students, Cengage could collect revenue several times from each book. The company says it will offer several hundred rental titles starting in December.

Verizon Wireless says it has completed the first calls using a brand-new network that’s planned to go live next year, offering faster Internet speeds. The calls were made in Boston and earlier in Seattle, using cell-tower equipment from Alcatel-Lucent and LM Ericsson. Prototype tablet-style handheld devices from LG Electronics and Samsung Electronics dialed in. The calls used the 700 megahertz frequency band, just recently freed up for cellular use after being assigned to TV stations. Verizon Wireless’ chief technology officer, Tony Melone, says the trials gave confidence that the commercial launch would yield average download speeds of seven to 12 megabits per second, faster than current wireless broadband.

Twitter’s been having a rough couple of weeks. A researcher looking into the attacks that knocked twitter offline last week discovered another, unrelated security problem. At least one criminal was using a Twitter account to control a network of a couple hundred infected personal computers, mostly in Brazil. Networks of infected PCs are referred to as “botnets” and are responsible for so much of the mayhem online, from identity theft to spamming to the types of attacks that crippled Twitter. The discovery was made by Jose Nazario with Arbor Networks. The affected Twitter account was taken down. Twitter didn’t immediately respond to e-mails from the Associated Press.

Talento Bilingüe de Houston holds its annual gala Saturday evening at Talento Bilingüe de Houston on South Jensen, bringing together area cultural business leaders. Mayor Bill White is receiving a humanitarian award. Carlos de Aldecoa Bueno from Maximus Coffee is receiving a corporate leadership award. And Gilda Ramirez from the Port of Houston Authority is receiving the corporate executive award.

The number of rigs actively exploring for oil and natural gas in the United States went up by two this week to 968. Houston-based Baker Hughes reported that of the rigs running nationwide, 688 were exploring for natural gas and 272 for oil. Eight were listed as miscellaneous. A year ago, when oil and gas prices were much higher, the rig count stood at 1,990. Texas lost six rigs. The rig count tally peaked at 4,530 in 1981, during the height of the oil boom. The industry posted a record low of 488 in 1999.


J.C. Penney is reporting second-quarter results that roughly broke even from a year ago, beating Wall Street expectations as the department store retailer reaps benefits from cost-cutting moves. The retailer also is boosting its profit outlook. The Plano-based retailer says it lost $1 million, or break-even per share, in the quarter. That compares with a profit of $117 million in the year-ago period. Revenue was $3.94 billion, down from $4.28 billion in the year-ago period.

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