Business

Wednesday PM March 3rd, 2010

ISM says service sector experiencing fastest growth rate in more than two years…Credit card defaults surge to over 11 percent…Radisson launches $1.5 billion rebranding plan…

A private trade group says growth in the U.S. service sector accelerated in February to its fastest rate in more than two years. The Institute for Supply Management said its index measuring service industries rose to 53 in February from 50.5 in January. Economists polled by Thomson Reuters had expected a smaller increase to 51. Any level above 50 signals growth. The 53 reading is the highest since January 2008. The service-sector gauge is closely watched because service jobs comprise more than 80 percent of non-farm U.S. employment in areas such as health care, retailing and financial services. ISM says new orders grew for sixth straight month, while the decline in employment moderated.


The economy is growing even though harsh snowstorms crimped activity in some parts of the country. A new survey by the Federal Reserve also showed that the recovery is managing to plod ahead but not at a strong enough pace to persuade companies to ramp up hiring. The Fed says that “economic conditions continued to expand…although severe snowstorms in early February held back activity” in some places. Of the Fed’s 12 regions surveyed, the Richmond district, which includes Maryland, Virginia and the Carolinas, was hurt the most by the bad winter. That region reported economic activity had “slackened or remained soft across most sectors” because of the weather.


There’s a new report that says the number of credit card defaults surged to 11.37 percent in January. That’s the highest level since a record 11.52 percent in September. Fitch ratings says the number of cardholders 60 or more days late on payments fell for the second straight month to 4.16 percent. Those 30 days late declined 5.38 percent. Managing Director Michael Dean says until there is “some meaningful improvement in employment numbers,” delinquencies and defaults will remain elevated at or near those levels. Fitch expects unemployment to peak at 10.4 percent in the second quarter of this year and remain above ten percent throughout the year. The Labor Department is expected to report on Friday that the unemployment rate edged up to 9.8 percent last month and that employers cut 50,000 jobs.


The chairman of the House Oversight Committee has told Defense Secretary Robert gates he’s upset that KBR was awarded a contract potentially worth $2.8 billion for work in Iraq. The contract was awarded last Friday, a day after the company told shareholders it lost about $25 million in award fees because of flawed electrical work in Iraq. Representative Edolphus Towns has asked Gates in a letter to deliver to his committee by March 17th documents related to the new contract for logistics support and in other areas. The contract is for one year, with the option of four more. KBR was tasked with maintaining the barracks where Staff Sgt. Ryan Maseth, a 24-year-old Green Beret, was electrocuted in 2008 while showering.


Royal Dutch Shell says unknown gunmen have attacked an oil flow station in the restive Niger delta. Tony Okonedo, a spokesman for the company said that explosives planted at the Kokori flow station in the western half of the delta detonated, damaging the unused station. Okonedo said no employees were in the area at the time of the detonation on Tuesday. A previously unknown group later issued a statement to Nigerian newspapers claiming responsibility for the attack. Militants in the Niger delta have attacked pipelines, kidnapped petroleum company employees and fought government troops since January 2006. They demand that the federal government send more oil-industry funds to Nigeria’s southern region, which remains poor despite five decades of oil production.


Former oil tycoon Mikhail Khodorkovsky, who is in prison for fraud and tax evasion, says Russia’s justice system is a production line of guilty verdicts handed to anyone the state considers dangerous. Khodorkovsky made the claim in an article published in the newspaper Nezavisimaya Gazeta. The former CEO of the dismantled Yukos oil company says he based his assessment on seven years behind bars. Supporters say the eight-year sentence he is serving is punishment for challenging the political power of former President Vladimir Putin. Khodorkovsky faces another two decades in prison on similar charges. The European Court of Human Rights will hear a case Thursday in which Yukos lawyers contend the company was broken up illegally.


A top official of a Texas-based company that has a construction-materials plant at hope says 50 to 60 people will lose their jobs when the facility shuts down at the end of April. Irving-based Commercial Metals Chairman, President and CEO Murray McClean says the workers have been told their last day will be April 29th. Commercial Metals is the parent of the CMC Joist and Deck Company fabricating facility at Hope that builds lightweight steel joists used in construction of large retail stores. The plant laid off 60 workers in January because of reduced demand for its products. Mcclean said that officials of the parent company have decided to get out of the joist and deck fabrication business because the outlook for demand is weak.


The Senate can now get back to work on a measure that includes longer and more generous jobless benefits through the end of the year. Last night, Senators were able to approve stopgap legislation temporarily extending those benefits–along with highway funding and health insurance subsidies for the unemployed. This, after Republican Senator Jim Bunning of Kentucky gave way. He had held up action on the bill for days, trying to force Democrats to find ways to finance it so that it wouldn’t add to the deficit. President Barack Obama quickly signed the extension, saying that the focus needs to be on supporting American workers and their families. Democratic leaders, meanwhile, say Bunning yielded after accepting an offer he had rejected for days. His support among fellow Republicans had been dwindling, amid fears that Democrats would capitalize on the failure to help the jobless.


A group of Democratic Senators wants the Obama administration to suspend an economic stimulus program aimed at financing renewable energy because of concerns that it’s creating jobs in foreign countries. New York Senator Chuck Schumer and three others made the request in a letter to Treasury Secretary Timothy Geithner. An Energy Department spokesman responded that the stimulus program has helped generate foreign investment in the U.S. wind industry. He called it the “opposite of outsourcing” and said it should be encouraged. The Treasury Department declined to comment. Senators Sherrod Brown of Ohio, Robert Casey of Pennsylvania and Jon Tester of Montana also signed the letter to Geithner.


Many applicants for broadband stimulus money will have a few more weeks to submit their proposals to the government. The government is pushing back the deadline for applications in the second and final round of stimulus funding for high-speed Internet access. Applications are now due to the Commerce Department by March 26th and to the Agriculture Department by March 29th. The new deadlines apply to projects that seek subsidies to build networks. Proposals for public computer centers and broadband training programs are still due by the original march 15 deadline. Some applicants have complained that the original deadlines were unfair because the government has yet to respond to all proposals submitted in the first funding round.


The Transportation Department heard from some Toyota owners who say they’re still having trouble with unintended acceleration after their recalled cars were repaired. David Strickland, the administrator of the National Highway Traffic Safety Administration, says the agency is contacting these consumers to find out what’s happening and make sure Toyota is doing everything possible to make its vehicles safe. Strickland says in a statement that if owners are still experiencing sudden acceleration after taking their cars to the dealership, “we want to know about it.” So far, the government has received a limited number of acceleration complaints from the Toyota owners whose floor mats or gas pedals already have been fixed. Toyota recalled more than eight million vehicles.


The owner of the Radisson chain is launching a $1.5 billion rebranding and expansion to make its hotels more luxurious in markets where it now lags and increase the number of hotels it operates by 50 percent. Carlson Hotels Worldwide is announcing the plan even as its industry continues to struggle with plunging revenue and mounting debt. About 15 percent of hotels nationwide are behind on payments, according to one measure. Carlson said it will open five “flagship” hotels in major U.S. cities and spend hundreds of millions of dollars upgrading and renovating existing hotels. The Minneapolis company will add 500 hotels worldwide over five years, a mix of Radissons, Country Inns & Suites, Regent Hotels and Park Inns.


Continental Airlines will begin charging coach customers extra if they want a seat with more legroom. Continental said that it will give customers the option to buy the roomier seats beginning March 17th. Prices will vary depending on the length of flight and popularity of the route. A spokeswoman says extra room on a Houston-New York flight might cost $59. The airline doesn’t plan to reconfigure its planes but instead will charge extra for those who want to sit in exit-row seats with at least seven inches more legroom than the other rows in coach. Top-level members of Continental’s frequent-flier program will be able to claim the exit row without extra charge.

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