Wednesday PM April 14th, 2010

Consumer prices edge up slightly; retail sales rise for third straight month…OPEC expects less demand for oil this year…Senate considers extending unemployment benefits…


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Consumer prices edged up a modest amount in March with prices outside of food and energy rising at the slowest pace over the past 12 months in six years. Despite the good inflation news, household budgets remained under pressure as hourly earnings fell again. The Labor Department said that consumer prices edged up 0.1 percent last month. Core inflation, which excludes food and energy, was unchanged last month. The small overall increase was in line with expectations while the flat reading for core prices was better than the 0.1 percent rise economists had expected.

Retail sales rose for the third straight month in March as better weather and auto incentives encouraged more spending. The report is the latest sign that consumer spending is rising fast enough to support a modest economic recovery. The Commerce Department said sales rose 1.6 percent last month, up from February’s revised 0.5 percent gain. Economists surveyed by Thomson Reuters expected a gain of 1.2 percent. The increases were widespread. Car dealers, home furnishing stores, building suppliers, clothing retailers and general merchandise stores all reported gains. Auto sales rose 6.7 percent, the most since October. Excluding autos, sales rose 0.6 percent, also ahead of the 0.5 percent expected by analysts.

Businesses increased their stockpiles for the second straight month in February, a positive sign that they expect further sales gains. The Commerce Department says business inventories rose 0.5 percent after increasing by an upwardly revised 0.2 percent in January. That’s above analysts’ expectations of a 0.4 percent gain, according to Thomson Reuters. That’s also the largest jump since July 2008, before the financial crisis intensified. Factories, retailers and wholesalers slashed inventories during the recession as sales plummeted. Economists are now hoping sustained gains in sales will persuade businesses to rebuild their stockpiles, triggering increased factory production and providing support for the fledgling recovery.

OPEC expects less demand for its oil this year, reflecting a world economy that’s still struggling. The Organization of the Petroleum Exporting Countries forecasts that it will need to put 100,000 barrels less crude on the market in 2010 that it did last year. The estimate was contained in OPEC’s monthly oil report. It said daily demand for OPEC oil will likely be 28.8 million barrels this year. The report also said demand in 2009 contracted by 2.3 million barrels a day compared to 2008, before the recession fully hit.

State Farm Insurance is heading to court in a disclosure battle with regulators over the state publicizing its rates. A court hearing is scheduled Thursday in Austin over the lawsuit, filed in late March by the state’s largest property insurer. State Farm, after filing twice in eight months for higher rates, seeks to block the Texas Department of Insurance from publicizing documents related to the increases. The Dallas Morning News reports that the figures represent a statewide increase of 13 percent for homeowner rates. Company representatives say State Farm is just protecting its financial interests and those of its 1.2 million Texas customers with homeowner policies. Regulators say all documents associated with the rate filing are public information.

Federal Reserve Chairman Ben Bernanke expresses confidence to Congress that the unfolding economic recovery will have staying power, although it won’t be strong enough to bring quick relief to high unemployment. Bernanke, in prepared remarks to Congress’ Joint Economic Committee, also once again called on lawmakers and the White House to come up with a plan to whittle down record-high budget deficits, saying the red ink raises risks to the country’s long-term economic health. He says a credible deficit reduction plan could provide the economy with benefits in the near term, including lower longer-term interest rates and increased consumer and business confidence.

Democrats controlling the Senate are seeking to give unemployed people jobless benefits through Memorial Day instead of risking another cutoff in just three weeks. Montana Democrat Max Baucus says the additional time would give negotiators a chance to iron out more complicated legislation to extend jobless benefits through the end of the year and revive expired tax breaks. A pending bill would set a May 5th deadline. An extended jobless benefits program lapsed last week, which is easing people who would otherwise be able to reapply for benefits off the rolls. Several other programs have also lapsed, including federal flood insurance, higher Medicare payment rates for doctors and generous health insurance subsidies for people who have lost their jobs.

The Obama administration wants the public to submit its ideas for how to remake the institutions that provide money for home loans. The Treasury Department published a list of seven questions designed to get input from banking and securities industry groups, academic experts and consumer organizations. One of the key questions is how big the federal government’s role will be in supporting the mortgage system. The administration has not drafted any formal proposals to reform the housing finance system. Mortgage finance companies Fannie Mae and Freddie Mac nearly collapsed in September 2008. Propping them up has cost taxpayers about $126 billion so far.

Many farmers are expecting a sweeping overhaul from federal regulators revising antitrust rules for the meat and poultry industry. They could end up being the toughest antitrust rules since the Great Depression. Lawmakers in farm states claim a lack of competition among meat companies drives down prices farmers receive for cattle and poultry. They put in a requirement in the 2008 farm bill that the U.S. Department of Agriculture overhaul its antitrust rules by this summer. West Virginia poultry farmer Mike Weaver says he’s met with Agriculture Secretary Tom Vilsack and thinks the Obama administration will push for tougher and more far-reaching regulations. Tyson Foods and other big meat companies say they’re ready to challenge rules they consider too strict.

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