On Wednesday February 16, 2011, 6:25 pm EST
Rising wholesale prices
spur inflation concerns
WASHINGTON (AP) -- Steady
improvement in the economy may soon come at a price -- faster inflation.
Shoes, clothes, tires,
plastics and other products all cost more at the wholesale level last month,
putting pressure on businesses to pass the increases along to their customers.
The hikes also give
ammunition to critics who fear that the Federal Reserve's bold steps to
strengthen the economy have started to feed inflation and need to be reined in.
Those critics include some Fed officials.
A widely watched measure of
wholesale inflation, the core Producer Price Index, rose 0.5 percent last
month, the largest monthly increase since October 2008. The entire index, which
includes volatile gas and food prices, rose 0.8 percent.
Drug prices rose 1.4
percent, the most in almost three years. Prices rose for products throughout
the economy.
Some Fed members talked
about cutting bond program
WASHINGTON (AP) -- Some
Federal Reserve officials last month raised the possibility of scaling back the
Fed's $600 billion Treasury bond purchase program out of fear that a
strengthening economy could spur high inflation.
The minutes from the Fed's
Jan. 25-26 meeting were released on the same day that the government reported
that a measure of wholesale inflation rose in January at its fastest pace in
more than two years.
Still, Fed officials
unanimously concluded at the policy meeting that inflation wasn't a problem
yet, and decided to stick with the pace and size of the bond-buying program.
The bond purchases are intended to invigorate the economy by getting Americans
to spend more.
The central bank also
raised its forecast for economic growth for this year. The fear among some
critics of the bond-buying program is that as consumers and businesses spend
more, prices will rise at an unhealthy pace.
Apartments pushed home
construction up in January
WASHINGTON (AP) -- Home
construction rose at the fastest rate in 20 months, pushed up by a spike in
apartment building. But construction of single-family homes declined, a sign
that demand for housing remains weak.
Builders broke ground on
new homes and apartments at a seasonally adjusted annual rate of 596,000 units,
a 14.6 percent jump from December.
Single-family homes, which
make up nearly 70 percent of new construction, fell 1 percent to an annual rate
of 417,000 units. Multifamily construction, a more volatile category,
skyrocketed 80 percent to an annual rate of 171,000 units.
Last year, builders worked
on 587,600 new homes, just barely better than the 554,000 started in 2009. In a
healthy economy, builders start about 1 million homes a year. The housing
industry is coming off the worst two years for home construction dating back to
1959.
Snowstorms that fell in
most parts of the country likely slowed some construction last month. But
Michael Gapen, senior U.S. economist with Barclays Capital, said home building
is unlikely to see a turnaround until builders can sell off most of the homes
sitting idle on the market and there are fewer foreclosures to compete with.
Economists are watching the
pace of multifamily construction, which includes housing with five or more
units, to see if it continues to rise throughout 2011.
Asia's poor suffer as food
prices drive inflation
Surging food prices in
India are forcing families to cut back on meat and vegetables. In Indonesia,
they prompted the president to urge people to grow their own chili peppers. And
in China, restaurant owners are feeling the squeeze.
Inflation is climbing
across Asia as the cost of food jumps, echoing the previous global food crisis
that peaked in 2008. While people in the U.S. and other wealthy Western nations
will barely feel the effects of higher prices, getting enough to eat is a big
challenge for tens of millions in Asia. Poor families typically spend more than
half their household income on food and are bearing the brunt.
Wary of potential unrest,
governments are trying to keep food price inflation from spilling into the rest
of the economy. Officials face a tough dilemma as they raise interest rates to
dampen inflation. Too fast and it will choke off economic growth, too slow and
the problem could spiral out of control.
Sanofi-Aventis to buy
Genzyme for $20 billion
Sanofi-Aventis is buying
specialty drugmaker Genzyme for $20.1 billion, the latest example of a
beleaguered pharmaceutical company snapping up high-priced biotech drugs to
offset dwindling sales of older, simpler medications facing generic
competition.
Sanofi, the world's
fourth-largest drug maker, overcame Genzyme's reluctance to a takeover by
raising its previous offer to $74 per share and agreeing to make additional
cash payments pending the success of several drugs.
Wednesday's announcement
comes after nearly nine months of back-and-forth between the two companies,
with Sanofi-Aventis finally deciding Genzyme's portfolio of rare disease
treatments was worth adding an extra $5 a share to its original $69 per share
offer.
The combination seems odd
at first: a huge French company best known for vaccines used by millions of
patients each year, buying a Cambridge, Mass.-based biotech company whose drugs
are taken by only a handful of patients around the world.
But experts say the merger
reflects the landscape of the pharmaceutical industry, as companies seek to
replace older medications that have lost their patent protection.
Williams to split pipeline,
exploration businesses
TULSA, Okla. (AP) --
Williams Cos. plans to split into separate companies -- one for oil exploration
and production, and the other to operate pipelines. Its shares jumped in
aftermarket trading.
Williams said its board has
approved the sale of up to 20 percent of its stake in the exploration business
through an initial public offering in the third quarter. Next year, it will
spin off the remaining interest to Williams shareholders.
The company also said it
would raise its quarterly dividend to 20 cents per Williams share beginning in
June. That's up from 12.5 cents per share in recent quarters.
Williams shares rose $2.44,
or almost 9 percent, to $30.20 in aftermarket trading.
Last month Marathon Oil
said it will split its refining operation from its oil exploration and
production business.
Cable companies strike back
at cord-cutting idea
LOS ANGELES (AP) -- Cable
TV and other companies that provide subscription services are striking back at
the notion that people are dropping their TV packages en masse to watch video
over the Internet. Industry gains in the fourth quarter returned to normal
following a spate of cancellations spurred by the end of discounted pricing.
Subscriber losses from
top-ranked Comcast Corp. and No. 8 Cablevision Systems Corp. reflected one-time
items, such as the defection of customers angry over a two-week blackout of Fox
programs on Cablevision in October.
Comcast's loss of 135,000
video subscribers was about a third less than expected as it held onto more
customers with better programming, and fewer people dropped service with the
expiration of promotional prices offered during the 2009 transition to digital
over-the-air broadcasts. Comcast ended with 22.8 million video customers, and
Cablevision had 3.3 million.
Those losses were more than
erased by gains at such rivals as AT&T Inc. and Verizon Communications
Inc., which offer video services over phone lines. The phone companies reported
fourth-quarter results last month, while Comcast and Cablevision announced them
Wednesday.
Along with an expected gain
of about 100,000 video subscribers combined at satellite operators DirecTV and
Dish Network Corp., which report next week, the established pay TV industry is
on track to add 200,000 to 250,000 TV subscribers in the final three months of
2010, according to Nomura Securities.
Cord-cutting refers to the
phenomenon of people dropping pay TV packages with the growth of online video
offerings through Hulu, Netflix and other services.
Bank of England says inflation
worsening
LONDON (AP) -- The Bank of
England warned Wednesday that inflation is surging faster than anticipated, but
Governor Mervyn King dampened expectations of an early interest rate hike to
counter rising prices as the bank also lowered its growth forecast for the
British economy.
Speaking to reporters after
the release of the bank's closely-watched Quarterly Inflation Report, King
robustly defended the nine-member Monetary Policy Committee against a raft of
questions challenging the bank's credibility and the validity of its 2 percent
inflation target.
Official figures out
Tuesday showed that consumer prices rose to 4 percent in January, from 3.7
percent in December -- double the bank's target and prompting a public
explanation from King to Treasury chief George Osborne.
The bank's central forecast
is for inflation to peak at about 4.4 percent this year amid higher commodity
prices and domestic inflationary expectations and remain above target until
around the middle of 2012. King added that the timing and extent of the fall
are uncertain.
The bank added that the
growth outlook has worsened after surprise figures last month showing gross
domestic product shrank by 0.5 percent in the fourth quarter.
The forecasts assume key
interest rates rise to 1 percent by the end of this year and 2 percent by the
end of 2012, but King cautioned against predicting a rise too soon and
highlighting differences of view among the MPC about the inflation outlook.
Bankruptcy: Borders'
penalty for being a step slow
NEW YORK (AP) -- Borders
was slow to get the message as the big-box retailer lost book, music and video
sales to the Internet and other competition. The result: It filed for Chapter
11 bankruptcy Wednesday, and will close nearly a third of its stores.
Less nimble than rival
Barnes & Noble, Borders now begins what analysts expect will be a quickly
resolved struggle for the survival of its remaining stores. It's the latest
cautionary tale about the dangers retailers face when they fail to keep up with
swiftly changing technology and consumer habits.
Borders plans to close
about 200 of its 642 stores over the next few weeks, from San Francisco to Fort
Lauderdale, Fla., costing about 6,000 of the company's 19,500 employees their jobs.
The closures are also a blow to publishers already owed tens of millions of
dollars by the company, which stopped paying them in December.
Borders said it is losing
about $2 million a day at the stores it plans to close, all of them
superstores. The company also operates smaller Waldenbooks and Borders Express
stores.
By The Associated Press
The Dow Jones industrial
average rose 61.53, or 0.5 percent, to close at 12,288.17, its highest close
since June 13, 2008.
The S&P 500 rose 8.31,
or 0.6 percent, to 1,336.32. That was double its intraday low of 666.79 reached
on March 6, 2009 at the height of the financial crisis.
The Nasdaq composite index
rose 21.21, or 0.8 percent, to 2,825.56
On the Nymex benchmark West
Texas Intermediate crude for March delivery rose 67 cents to settle at $84.99
per barrel. Brent crude rose $2.14 to settle at $103.78 per barrel on the ICE
Futures exchange.
In other Nymex trading,
heating oil rose 4.58 cents to settle at $2.7748 a gallon and gasoline gained
5.59 cents to settle at $2.5447 a gallon. Natural gas lost 5.5 cents to settle
at $3.921 per 1,000 cubic feet.