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Wednesday PM January 12th, 2011

Federal Reserve’s survey of national economic conditions finds late-year improvements; Texas sales tax revenue improves…Oil resumes flow in Trans-Alaska pipeline following pump station leak…Texas Railroad Commission again pushing for name change…


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The U.S. economy ended last year on an encouraging note, with all parts of the country showing improvements. Factories produced more, shoppers spent more and companies hired more. All those signs point to a stronger economy in 2011. That’s the picture that emerges from the Federal Reserve’s survey of nationwide economic conditions. Fed Chairman Ben Bernanke is optimistic that the economy will strengthen this year, but warned last week that it will take up to five years for unemployment, now at 9.4 percent, to drop to a historically normal level of around six percent. Still, risks loom. Declining home prices and millions of foreclosures are depressing housing markets around the country, the survey says. Bernanke says rising gasoline prices also could drag on the economy.

The Texas economy continues to improve with December state sales tax revenue reaching $1.81 billion. State Comptroller Susan Combs announced the latest figure is up 9.4 percent, compared to December 2009. Combs says it’s the ninth consecutive month of year-over-year improvement in Texas sales tax revenues. She says increases in the oil and natural gas and manufacturing sectors reflect recovering business spending. Sales tax in the retail trade and restaurant sectors also rose in December. November sales tax collections in Texas also topped $1.8 billion.

The federal budget deficit narrowed slightly in December compared to a year ago, but the deficit for the entire year is still on pace to exceed $1 trillion. The Treasury Department says the government ran a deficit of $80 billion last month, down 12.4 percent from the previous December. Through the first three months of the current budget year, the deficit totals $370.8 billion, an improvement of 3.1 percent from the same period a year ago. However, private economists expect that the tax-cut package signed into law last month will lead to a much larger deficit while also helping to boost economic growth.

Oil is flowing through the Trans-Alaska pipeline again, but at only two-thirds the rate as it was before the line was shut down due to a leak. The 800-mile pipeline was restarted at 9:03 last night. By this morning, the pipeline that transports about 13 percent of the nation’s domestically produced oil was carrying about 400,000 barrels of crude. The pipeline was shut down Saturday when a leak was discovered near a pump station at Prudhoe Bay. The 84-hour shutdown turned out to be the second longest since the pipeline began operating in 1977. Fabrication work continues on a bypass pipe since there is still a leak. In the meantime, officials say an 800-gallon containment tank is being used to capture spilled oil.

Top lawmakers are discussing changes to the Texas business tax, but they promise not to use the reforms to raise revenue to battle the state’s budget woes. Governor Rick Perry, Lieutenant Governor David Dewhurst and House Speaker Joe Straus–all Republicans–met in Austin. The leaders later told reporters that they’d balance the strained Texas budget without new taxes. But Perry held the door open to legislation reforming the state’s business tax, which has provided far less revenue than originally projected. The governor says he’d consider reforms aimed at “fixing any inequities” in the tax system. Texas lawmakers, according to projections released Monday, face a possible revenue shortfall of at least $15 billion for the next two-year budget, compared to current spending.

The agency responsible for regulating the oil and gas industry is hoping the legislature will finally change its name from the Texas Railroad Commission to something more appropriate. The Sunset Advisory Commission is voting on recommendations for revamping the agency, including changing its name to the Texas Oil and Gas Commission. Two other lawmakers are also drafting legislation to change the agency’s name. But similar legislation failed in the House in 2005 and 2009, even though the commission has nothing to do with railroads. The Railroad Commission was established in 1891 to regulate rates. However, those responsibilities rapidly dwindled when that moved under the federal umbrella, and the agency was assigned regulation of the oil and gas industry.

Airlines are canceling hundreds of flights in the snowy northeast, but they say travelers won’t face the same nightmare that occurred right after a Christmas weekend storm. It will be easier to find new seats for stranded passengers because planes aren’t as full in mid-January as they were during the holidays, according to the airlines. American, Delta and other airlines had already canceled hundreds of flights by this morning, and travel in and out of New York and Boston was very limited. American is resuming flights at New York city-area airports, but won’t start flying again in Boston until tonight.

The number of people applying for a mortgage rose last week as lower rates lured more borrowers to refinance. The Mortgage Bankers Association says its overall mortgage application index increased 2.2 percent from the previous week. The refinance index rose 4.9 percent, while the purchase index slipped 3.7 percent last week. Rates on fixed mortgages edged down last week, but are still more than half-point higher than they were in late October. They have risen as Treasury yields increased on rosier economic data and expectations that tax cuts will spur growth and spark higher inflation. Mortgage rates tend to track those yields. The rate on the 30-year fixed mortgage fell last week to 4.78 from 4.82 percent a week earlier. The rate on the 15-year fixed loan dropped to 4.15 percent from 4.23 percent.

Dallas Area Rapid Transit is spending $217 million on up to 452 buses powered by compressed natural gas. The Dallas Morning News reports DART’s order for new buses will be the nation’s largest and will be the first big purchase to include electric air conditioning. A DART board committee voted unanimously for the fleet purchase, with service expected to begin in 2013. DART will build CNG fueling stations, with the federal government helping with the cost. Current buses run on diesel fuel. DART Chairman William Velasco cited environmental reasons for using CNG-powered buses, saying “cleaner air is better air.” DART provides transportation for Dallas and a dozen surrounding cities in a 700-square-mile service area. The operations include the state’s largest municipal rail system.

Corn production across the U.S. dropped five percent in 2010 and analysts say wet weather and above average temperatures contributed to the decline. The United States Department of Agriculture’s 2010 crop report shows corn production totaled 12.4 billion bushels last year with average yields falling to 152.8 bushels per acre. But event with the drop, last year was the third largest corn crop on record. Wisconsin and Minnesota set record yields in 2010, but the rest of the corn belt saw decreased production. Despite reduced yields, Iowa remained the nation’s top corn producer. Soybean production dropped just one percent in 2010 to 3.33 billion bushels and 43.5 bushels per acre. Wheat and grain sorghum production also fell in 2010 but cotton production increased.

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