Finance & Business World

Lobbyists are pushing the Treasury Department to consider a plan to purchase mortgage-backed securities in the hopes of driving mortgage rates to as low as 4.5%, an industry source said.

Similar to an effort unveiled last week by the Federal Reserve, the proposal calls for Treasury to buy securities backed by 30-year fixed-rate mortgages from Fannie Mae and Freddie Mac. Details on the plan remain sketchy, but an announcement could come as early as next week, the source said.

The increased demand for mortgage-backed securities would prompt mortgage rates to drop. That, in turn, would enable homeowners to refinance into lower-cost loans and make it cheaper for potential homebuyers to get into the market.

Spokeswomen from Treasury and the Federal Housing Finance Agency, which oversees Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), declined to comment.

Last week’s Fed move drove mortgage rates down to 5.5%, from 6.06% a week earlier. The Fed said on Nov. 26 that it would purchase up to $500 billion in mortgage-backed securities from Fannie, Freddie and Ginnie Mae, and that it would buy another $100 billion in direct debt issued by those firms.

Mortgage applications more than doubled as a result, the Mortgage Bankers Association said Wednesday. Much of the activity stemmed from homeowners looking to refinance.

Industry groups have been pressuring President-elect Barack Obama and lawmakers to lend a helping hand to the housing market. The National Association of Realtors, for instance, has called for Treasury to buy mortgage-backed securities.

Meanwhile, a coalition of industry groups have banded together under the "Fix Housing First" banner to call for measures including tax credits of up to $22,000 and the creation of a 30-year mortgage, carrying rates as low as 2.99%.

Experts, however, had mixed views on how much a new Treasury initiative would help homeowners and the economy cash advance loan. Some felt lower rates would help stabilize the housing market by bringing in new buyers and would give those who refinance more money to spend.

"If it gets people buying homes and spending, it will help reverse the economy and get us out of this recession," said Scott Talbot, senior vice president of the Financial Services Roundtable, which is pushing the measure.

While it takes time to entice new buyers into the market, low rates accelerate that process, said Greg McBride, senior financial analyst at Bankrate.com.

"It is clearly designed to bring buyers into the marketplace and soak the inventory of unsold homes," he said.

But others questioned whether rates would remain low and, even if they did, only a narrow slice of credit-worthy borrowers would benefit.

Rates are already inching up, hitting 5.75% on Wednesday, said Keith Gumbinger, vice president of HSH Associates. Several government attempts to lower mortgage rates this year have failed to have a lasting effect.

Also, the proposal would do little to help troubled borrowers who have fallen behind on their payments, have no equity in their homes or have lost their jobs. With credit standards still high, these homeowners would not be able to refinance and take advantage of the lower rates, he said.

Finally, super-low rates could keep private investors out of the mortgage-backed securities market, forcing the government to remain the primary buyer of such investments, Gumbinger said. Rates have not fallen below 5.37% in more than 45 years.

"I can’t imagine there will be a significantly active marketplace of people who want to buy at these low rates," he said. 

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Pakistan obtained a $7.6 billion bailout from the International Monetary Fund to help prevent the country defaulting on its debt.

The State Bank of Pakistan, which this month raised its benchmark interest rate to 15 percent from 13 percent, has committed as part of the aid to “further tighten monetary policy as needed,” the IMF said in a statement in Washington yesterday. South Asia’s second-largest economy will be able to immediately draw upon $3.1 billion of the loan, it said.

President Asif Ali Zardari, facing pressure from the U.S. to step up the fight against Taliban and al-Qaeda insurgents along the border with Afghanistan, needs IMF financing to prop up Pakistan’s ailing economy. The nation’s foreign-exchange reserves have shrunk 75 percent in 12 months to $3.45 billion and economic growth is forecast to slump to a seven-year low.

Pakistan’s rupee gained 0.44 percent against the dollar to a seven-week high of 78.70, as of 11:15 a.m. in Karachi. The currency has declined as much as 26 percent this year as foreign investors spooked by the global credit crunch withdraw funds from emerging markets. The yield on the benchmark 9.6 percent bond due August 2017 held at 15 percent.

The loan from the IMF “will ease constraints on foreign currencies and it will boost the confidence of overseas and domestic investors,” said Samiullah Tariq, an economist at InvestCapital & Securities Ltd. in Karachi. “Now investors know that there will be a lot more fiscal discipline.” He said he expects rupee to strengthen to 75 against the dollar in a month.

Global Recession

The IMF has approved more than $40 billion of loans in recent weeks to prevent the global financial crisis and recession from undermining the stability of developing nations. Ukraine, Serbia and Iceland have already got funds from the IMF. Belarus has requested $2 billion and Turkey may also agree to emergency funding.

“The Pakistani economy was buffeted by large shocks during fiscal year 2007 and 2008, including adverse security developments, higher oil and food import prices and the global financial turmoil,” said IMF Deputy Managing Director Takatoshi Kato business cards online. “By providing large financial support for Pakistan, the IMF is sending a strong signal to the donor community about the country’s improved macroeconomic prospects.”

Pakistan expects the IMF loan will help it win additional aid from a group of other lenders and donor nations, including the U.S., U.K., China and Saudi Arabia. The group’s Nov. 17 meeting in Abu Dhabi adopted a “work plan” for financial help to Pakistan, the Foreign Ministry has said.

‘Significant Tightening’

To secure the IMF loan, Pakistan agreed to a “significant tightening of fiscal policy” and an end to central bank financing of the government. Pakistan plans to reduce its budget deficit to 4.2 percent of gross domestic product in 2009 from 7.4 percent in the past financial year, according to the Washington-based lender.

The cost of insuring a $10 million Pakistani government bond against the risk of default has more than doubled since the end of September to $2.28 million a year from $987,000 per annum, according to CMA Datavision.

Last week Pakistan’s government said the country’s $150 billion economy was expected to expand 4.3 percent in the fiscal year ending June 2009.

Growth is easing after central bank Governor Shamshad Akhtar on Nov. 12 increased interest rates by the most in more than a decade to curb inflation, which jumped to a 30-year high of 25.33 percent in August.

Pakistan completed its last IMF program in 2004 with a credit rating from Standard & Poor’s of B+, four levels below investment grade. S&P cut the nation’s rating to CCC on Nov. 14, one day before the latest IMF loan was announced, citing a risk of default on external debt payments.

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Jason’s Deli, which operates six restaurants in the Austin area, is nixing high fructose corn syrup—completely.

The Beaumont-based deli chain says it’s rolling out an entirely new menu of breads, dressings, desserts and other items that will all be free of the common additive. Jason’s Deli says it’s already eliminated artificial trans-fats and MSG.

The company has more than 200 restaurants in 25 states including markets like Chicago, Atlanta, Dallas and Houston.

“Even though this was an enormous undertaking as high fructose corn syrup is pervasive in the food system, we found that removing HFCS actually makes the food taste better” says Rusty Coco, a co-owner and executive vice-president of Jason’s http://paydayintime.com. “We’re fighting The Battle for Real Food as the food industry has gotten addicted to cutting back on quality and cheapening products. Our aim is to serve the tastiest meals at the best prices.”

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As a local construction company, Alberici Corp. has benefitted greatly from the growth of St. Louis.

The company, started by an Italian immigrant, got its break renovating a Boatmen’s Bank branch office in 1918. The family’s name has been seen on cranes at countless local commercial projects, including the Edward Jones Dome and Scottrade Center.

In its 90th year of business, Alberici is riding a wave of strength. Last month, Alberici’s experience building and upgrading auto plants around St. Louis helped it win a $500 million deal to build Volkswagen Group of America’s auto plant in Tennessee.

The Overland-based company, which employs 450 people, has seen revenue growth in each of the last four years and is expecting record revenue of $1.3 billion this year.

But there are challenges on the horizon. The prospects for future construction activity are dimming with the slowing economy, and a legal dispute with St. Louis University has put into question the ownership of the company.

At any given time, Alberici is contracted or working on 125 to 150 projects in the United States, Canada and Mexico. But this year may represent the peak in the current cycle of commercial development.

"We’re seeing that projects haven’t gone away, but businesses aren’t rushing to invest in (buildings that create) productivity gains," said Greg Kozicz, the company’s chief executive and president.

Across the construction industry, demand for commercial projects is softening due to weak economic conditions. Beginning next year, the company expects its annual revenue to decline through 2011.

Alberici also has been dealing with the recent handover of the majority of its

ownership to a longtime friend of the company — St. Louis University — and a legal dispute resulting from this new relationship.

The school received a 70 percent ownership stake in the company when the company’s chairman, Gabe Alberici, died in December 2002.

After a lengthy IRS review of the gift was completed, the university declared it wanted to sell the shares. But the two sides have been unable to agree on the value of the shares and how much financial information SLU should be allowed to see.

As a result, SLU filed a lawsuit against Alberici in late April, claiming the company’s refusal to release certain financial data will keep the school from selling the shares. SLU would not comment on the suit or its relationship with Alberici.

Ideally, Alberici would prefer to buy the shares, Kozicz said. He said the company also would be comfortable if SLU were to retain ownership, which would only strengthen the long relationship between the entities.

In addition to building several projects on SLU’s campus, Gabe Alberici sat on the university’s board of trustees for 24 years and was a loyal Catholic, proudly displaying a picture of himself and the Pope in his office, according to a former colleague.

Gabe Alberici’s will did not stipulate what SLU could do with the shares or limit when they could be sold. To add to the complexity of the situation, while the 5 million shares represent 70 percent of the value of the company, they are nonvoting shares, so control of the company remains in the hands of the Alberici family and the school cannot force the company to buy back the shares.

Still, the potential for conflict with a new owner is a genuine concern for Kozicz.

"Our discomfort would be not knowing if the cultures are as good of a match as the Alberici and SLU cultures are," he said.

This is the kind of uncertainty no construction firm wants to deal with while competing for contracts in an already difficult economy, Kozicz said guaranteed payday loans.

"Our success is driven by our culture and ability to focus on what is a very challenging marketplace," Kozicz said. "To the degree there are non-core distractions that cause us not to focus on our day-to-day business, this (lawsuit) represents an additional challenge that’s not about moving the business forward."

In the spirit of moving forward, the company will not appeal the decision in the court case, Kozicz said. The lawsuit is pending in St. Louis County Circuit Court.

If the situation has been a distraction, at least one client said it has not been apparent in business dealings. For the last 18 months, Sherry Hausmann, president of SSM St. Clare Health Center, has attended weekly meetings with Alberici officials regarding the construction on the $146 million hospital the company is building near Fenton.

"I was unaware of it," Hausmann said of the suit. "They are very focused on St. Clare and providing a hospital to the community."

She added that if SSM were still hearing proposals for the hospital, the stability of the company’s ownership would be considered. Still, she said Alberici’s work on the project has been phenomenal.

The local construction community long has held Alberici in high regard. The company is a trendsetter, said Len Toenjes, president of Associated of General Contractors of St. Louis.

Specifically, Toenjes noted many of Alberici’s local jobs lead to projects in other regions and countries. Its work on local auto plants, for example, led it to set up offices in Detroit to work more closely with the Detroit Three.

That’s a model most major construction companies aim for.

"I think a lot of people here don’t realize they do way more work outside of St. Louis than in St. Louis," Toenjes said of Alberici.

Geographic diversity is the company’s safety net, Kozicz said. Alberici has developed relationships across North America to protect itself against economic slowdowns. For example, when U.S. manufacturers slowed their construction of factories and warehouses, the company found new work in Mexico, Kozicz said. Also, Canada’s booming mineral and commodity export business has created projects for Alberici in that nation.

Alberici’s current or planned projects range from a $65 million deal to build a chocolate factory for Hershey Co. in Mexico to the $1.2 billion Holcim Inc. cement plant in Ste. Genevieve County.

The company also was smart to switch from heavy dependence in construction of auto plants to develop expertise in the green building movement, Toenjes noted.

In 2005, the company established Vertegy, a subsidiary concentrated solely on designing, consulting and procuring environmentally friendly construction projects. Alberici’s goal is to employ the largest number of people certified to build projects to the highest environmental standard.

Only about six of Alberici projects in 2008 will utilize its green expertise, Kozicz said, but he noted that just five years ago, it had no such projects.

While Kozicz said the short-term prognosis for Alberici isn’t positive, he expressed confidence in the company’s historic ability to deal with adversity.

"I don’t think anybody can crystal ball the durations (of economic conditions), but all well-run companies know the boom cycles and the down cycles come and go, and you learn how to manage through them."

cboyce@post-dispatch.com | 314-340-8345

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A record spending spree by U.S. consumers will come to an abrupt end this quarter as job losses cause Americans to hunker down, a Bloomberg News survey predicts.

Personal spending, the biggest part of the economy, will stall from July to September, three months earlier than predicted last month, according to the median estimate of 49 economists polled from Sept. 2 to Sept. 9. The slump will slow growth to less than half the prior quarter's pace.

“The seemingly resilient U.S. consumer is finally buckling,'' said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York, who cut spending forecasts for this quarter and the next. “We're getting pretty close to a full-blown recession.''

Eight months of job cuts, wages that haven't kept up with inflation, falling property values and restricted access to credit are likely to depress spending into 2009, the survey showed. The bailout of Fannie Mae and Freddie Mac will, at best, only prevent growth from slowing even more, economists said.

The world's largest economy will expand at a 1.2 percent annual pace this quarter after growing 3.3 percent from April to June. Last quarter was boosted by a narrowing of the trade gap and a rise in spending propelled by the government's tax rebates. Growth will slow to a 0.7 percent rate in the last three months of 2008, the survey showed.

After stagnating this quarter, consumer spending will grow at a 0.4 percent pace to end the year, and expand at a 1 percent rate in the first three months of 2009, the survey showed. Purchases grew 3 percent per quarter on average in the previous five years and have been rising since 1992, the longest string on record.

Payroll Slump

The job market is sending the surest signal the economy is contracting. Payrolls have shrunk by more than 600,000 workers so far this year and the jobless rate shot up 1.1 percentage points from May to August, the biggest four-month jump in almost 27 years, the Labor Department reported last week.

“There will shortly be a sea change in the consensus economic outlook for early next year, and it won't be an upward revision,'' said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis, who forecast spending would drop this quarter and next and the economy would shrink in the last three months of 2008. “Too many households are just one job loss away from default and foreclosure.''

Foreclosures accelerated in the second quarter to the fastest pace in 29 years and the share of loans with one or more payments overdue rose to the highest since records began in 1979, the Mortgage Bankers Association reported last week http://paydayloans-on.com.

Fannie, Freddie

The government's takeover on Sept. 7 of Fannie Mae and Freddie Mac, which make up almost half the $12 trillion U.S. mortgage market, may ease borrowing costs. That would prevent the housing downturn from deepening and further restricting growth.

“It takes away one of the worst-case scenarios for the economy,'' Lehman's Harris said.

Big-ticket items like automobiles have been the hardest hit by the surge in food and fuel costs. Vehicle sales over the last three months were the weakest since 1993.

“Not only is the U.S. in a recession, but the rest of the world is slowing down,'' Ford Motor Co. Chief Executive Officer Alan Mulally said in a speech this week in Dearborn, Michigan. “I've never seen anything quite like it.''

The jobless rate will reach 6.3 percent by mid-2009, according to this month's survey median, matching the peak reached in 2003 following the last recession and higher than previously anticipated. The rate rose to a five-year high of 6.1 percent in August.

`Reason to Worry'

“The consumer is more cautious, more concerned,'' said John Lonski, chief economist at Moody's Investors Service Inc. in New York. “There's far more reason to worry than reason to expect the economy will be improving by 2009.''

Exports are likely to remain a bright spot, even as the U.S. slowdown spreads overseas, softening demand for American- made goods.

“Strength in exports is helping economic growth keep its head above water,'' Lonski said.

The odds that the U.S. is, or will soon be, in a recession remained at 51 percent in the latest survey.

Economists also predicted inflation pressures will cool as the economy slows. Consumer prices will rise 2.7 percent over the 12 months to June 2009 after peaking at a 5.3 percent gain in the year ending this month, according to the survey median.

The slowdown in growth and inflation will prompt Federal Reserve policy makers to keep the benchmark interest rate unchanged at 2 percent through the first three months of 2009, according to the median forecast. Central bankers will probably start raising the rate in next year's second quarter.

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Stocks ended mixed Friday after a tough session and week, as a rally in the hard-hit financial sector countered amplified recession fears that were sparked by a weak labor market report.

Bond prices edged lower, raising the corresponding yields, while the dollar strengthened versus the euro and yen. Oil prices settled at a five-month low, while gold and other commodity prices also declined modestly.

The Dow Jones industrial average (INDU) gained 0.3%, due to strength in financial components AIG (AIG, Fortune 500), American Express (AXP, Fortune 500), Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500) and JP Morgan Chase (JPM, Fortune 500).

The broader Standard & Poor’s 500 (SPX) index gained 0.4% and the Nasdaq composite (COMP) lost a few points.

After the close, reports surfaced that the Treasury Department is close to announcing a plan to help troubled mortgage lenders Fannie Mae and Freddie Mac.

The plan, which could be announced as soon as this weekend, is expected to include a capital injection and changes to senior management at both firms, the Wall Street Journal reported. The two government-sponsored firms own or back about half the mortgage debt in the country. Fannie Mae (FNM, Fortune 500) shares fell 18% in extended-hours trading, while Freddie Mac (FRE, Fortune 500) shares lost 10%. (Full story)

Friday’s market: All three major gauges fell through the morning Friday but managed to recover in the afternoon as the financial sector turned around. Financial stocks make up the second biggest sector in the S&P 500, after technology, so a rally can help improve the overall market.

Friday’s action reflects the extreme volatility in the markets, said Phil Dow, director of equity research at RBC Wealth Management. It also reflects the impact of large trading firms that aren’t strictly making decisions based on market fundamentals - or even in reaction to the day’s economic news.

"Hedge funds and proprietary trading desks dominate," he said. "The daily news matters when it does, but then it doesn’t."

The Dow has posted triple-digit losses in 51 sessions this year, according to Dow Jones. That’s the worst record for the blue-chip barometer since 2002, when the Dow declined at least 100 points 67 times during the year.

"My sense is you are eventually going to see a rally when fundamentals turn around," said Phil Dow. "I don’t think we’ll turn positive on the popular indexes this year, but if you get any kind of progress on the credit crisis, maybe you can see some of this volatility dry up."

For the week, all three major gauges slipped. The Dow declined 2.8%, the Nasdaq lost 4.7% and the S&P 500 lost 3.2%

Stocks plummeted Thursday, with the Dow plunging 345 points as mixed retail sales, lower oil prices and dour labor market readings amplified worries about a global economic slowdown. The weak job market report Friday kept those worries front and center, although the selling pressure was pretty mild in comparison with other selling sessions.

"People were expecting it (the unemployment rate) to get over 6% by year end, but the speed by which it occurred was a surprise," said Ben Halliburton, chief investment officer at Tradition Capital Management. "Along with other recent economic news, it has raised worries that third-quarter GDP could be negative."

Slower economic growth transfers to slower corporate profit growth, and the jobs report only added to such worries, he said.

Next week brings a slew of relevant economic reports, but most are not due until the end of the week. The one early-week report of note will be the July pending home sales index on Tuesday. Other reports of note include two due on Friday: the August retail sales index and the producer price index, a measure of wholesale inflation.

Labor market weakens: The unemployment rate surged to a five-year high of 6.1% in August, as employers cut jobs from their payrolls for the eighth straight month amid the weak economy. Economists surveyed by Briefing.com had forecast the unemployment rate would hold steady at July levels of 5.7%.

"The jump in unemployment was a bit of a shock," said Jane Caron, chief economic strategist at Dwight Asset Management.

Caron said what is especially concerning is that the unemployment rate will likely go even higher in the next few months. That’s largely because the rate typically peaks in the months after a recession has hit its low point, and the current sluggish economy isn’t even technically in a recession much less near a low point.

"If we believe that the economy is in a recession and we think that the trough is in the fourth quarter of this year or first quarter of next year, that suggests the unemployment rate is going to go higher," she said easy fast cash.

Her current forecast is for an unemployment rate of 7% sometime in mid-2009.

At the same time, if the worsening trend in both the weekly and monthly jobless figures continues at the current pace, the downturn in the second half is going to be steeper than most economists think, she said.

Employers cut 84,000 jobs from their payrolls in August, according to the U.S. Labor Department, versus forecasts for 75,000 cuts. Employers cut 60,000 jobs from their payrolls in July. Through August, the U.S. economy has lost 605,000 jobs in 2008.

"The absolute number of job losses is not huge by historic standards, but the trend is not good," said Dow.

Average hourly earnings, the report’s inflation component, rose 0.4% after rising a revised 0.4% in July. Economists were looking for average hourly earnings to rise 0.3%, on average. (Full story)

In other economic news, a record 1.25 million homes were in foreclosure during the second quarter of 2008, according to the Mortgage Bankers Association. (Full story).

And in Fed speak, San Francisco Federal Reserve Bank president Janet Yellen said in a speech late Friday afternoon that U.S. economic growth will be weak in the second half of 2008. Yellen is an alternate member of the FOMC’s rate-setting committee this year and will be on the committee next year.

Company news: Goldman Sachs (GS, Fortune 500) downgraded fellow financial services company Merrill Lynch to "sell," citing the likelihood of further writedowns tied to bad mortgage bets.

Goldman also said it expects Merrill to post a bigger third-quarter and full-year loss than previously expected. Merrill (MER, Fortune 500) shares ended higher along with the rest of the financial sector, recovering from morning losses.

Nokia (NOK) warned that its third-quarter global market share will decline from second-quarter levels and that the global mobile device market will be hit by the weaker economy and consumer spending slowdown. Shares slumped 7.6%.

Dell (DELL, Fortune 500) is reportedly looking to sell some or all of its PC-manufacturing plants as a means of cutting costs, according to a report Thursday. Shares were little changed. (Full story).

UST (UST) rallied 25% after a published report said Altria Group plans to buy the smokeless tobacco company. However, Altria (MO, Fortune 500) dismissed the report as untrue.

Commodity shares declined, including Dow components Alcoa (AA, Fortune 500), Chevron (CVX, Fortune 500) and Exxon Mobil (XOM, Fortune 500).

Microsoft (MSFT, Fortune 500) was the Dow’s biggest loser.

But the financial sector did an about-face, turning higher after a weak morning. That turnaround helped the broader market trim losses.

Market breadth was mixed. On the New York Stock Exchange, winners topped losers by a narrow margin on volume of 1.2 billion shares. On the Nasdaq, decliners beat advancers seven to six on volume of around 2.27 billion shares.

Fuel prices: U.S. light crude oil for October delivery fell $1.66 to settle at $106.23 a barrel on the New York Mercantile Exchange, after ending the previous session at a five-month low.

Prices have fallen more than $40 a barrel from a record high of $147.20 in July on bets that a sluggish global economy is cutting into demand. Investors have also been trying to determine the impact of Gustav, which struck this week in the Gulf Coast region that accounts for about 25% of U.S. oil production, as well as determine what threat there is from three storms in the Atlantic. (Full story)

Gas prices declined for a fifth straight day, according to a national survey of credit-card activity.

The recent decline in driving has cut into the federal Highway Trust Fund, prompting the government to ask Congress for an $8 billion emergency infusion Friday.

Other markets: In the bond market, Treasury prices gave up early gains and turned lower. The decline lifted the yield on the benchmark 10-year note to 3.64% from 3.62% late Thursday. Prices and yields move in opposite directions.

The dollar gained versus the euro, hitting its highest point against the European currency since October of last year. The dollar also hit its highest level against the British pound in two years. But the greenback was flat versus the yen.

COMEX gold for December delivery fell 40 cents to settle at $802.80 an ounce. 

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Japan's demand for services fell the most in four months in June as higher energy and food costs discouraged spending in the world's second-largest economy.

The tertiary index, a gauge of money households and businesses spend on phone calls, power and transportation, decreased 0.8 percent from May, the Trade Ministry said today in Tokyo. The median estimate of 33 economists surveyed by Bloomberg News was for a 0.3 percent drop.

A drop in spending by consumers, whose sentiment is at the lowest level in at least 26 years, contributed to the economy's contraction last quarter. Economists say that Japan may slip into its first recession since 2001 this year as households cut back just as a weakening global economy hurts exporters.

“It's becoming more apparent that price increases are making consumers spend less,'' said Junko Nishioka, an economist at RBS Securities Japan Ltd. in Tokyo. “Consumer spending will probably stay weak in the months ahead. Chances for a recession are increasing.''

Gross domestic product contracted an annualized 2.4 percent last quarter, the Cabinet Office said yesterday. The government last week described the economy as “weakening,'' language it hadn't used in seven years instant payday advance.

“Rising prices for daily necessities are stopping consumers from spending,'' Tadashi Okamura, chairman of the Japanese Chamber of Commerce, said yesterday.

Cutting Spending

The price of frequently purchased goods rose 4.2 percent in June, when wages dropped for the first time this year. Households cut spending for a fourth month after the jobless rate rose to the highest since September 2006.

“Demand for services is weakening because of rising food and gasoline prices,'' said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “We can't count on consumer spending to help the waning economy.''

Sluggish consumer spending and higher prices are prompting some companies to reconsider plans for expansion.

Morinaga & Co., a Tokyo-based confectioner, postponed this year's construction of a plant in Gunma Prefecture because of rising oil prices and weak consumer spending, according to Rika Baba, a company spokeswoman. Profits fell 67.2 percent in the three months ended in June, the company reported this month.

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China's industrial-production growth accelerated on rising exports, signaling that the world's fourth-biggest economy is weathering a global slowdown.

Output rose 16 percent in May from a year earlier after gaining 15.7 percent in April, the statistics bureau said today. That matched the median estimate of 22 economists surveyed by Bloomberg News.

Overseas shipments surged last month and retail-sales growth was close to the highest in nine years, keeping factories busy even as the deadliest earthquake in 32 years disrupted output in Sichuan province. The shortening of a weeklong May holiday to a three-day break boosted production.

“This is just a temporary rebound because of the extra working days,'' said Sun Mingchun, an economist at Lehman Brothers Holdings Inc. in Hong Kong. “With global demand slowing, industrial production will trend down this year.''

The yuan traded at 6.9028 versus the dollar as of 11:01 a.m. in Shanghai, after closing at 6.9018 on June 13.

Chinese output growth is more than double the pace in India, the world's second-fastest growing major economy. Production in that country rose 7 percent in April from a year earlier.

Global growth will slow to 1.8 percent this year, the weakest pace since 2002, the Organization for Economic Cooperation and Development said this month. The figure is for the OECD's 30 members. China's economy will ease to a 10 percent expansion after growing 11.9 percent in 2007, it said.

Quake Reconstruction

Sichuan's small role in China's manufacturing limited the May 12 disaster's effect on production. Quake reconstruction work is boosting output of some products, with state-owned steelmaker Baosteel Group Corp payday advance lender. making more color-coated sheets.

Raw-coal production rose 18.5 percent in May from a year earlier after gaining 13.9 percent in April. Crude-oil output climbed 1.8 percent after increasing 0.5 percent.

Strength in production, retail sales and exports may encourage the central bank to implement the “forceful measures'' that it said last week were needed to stop prices from rising excessively.

“With export and domestic consumption holding up, China's policy makers are more concerned about inflation than economic growth,'' said Paul Tang, chief economist at Bank of East Asia Ltd. in Hong Kong.

No. 1 Challenge

Rising prices are the economy's biggest challenge in 2008, the government says. Producer prices jumped 8.2 percent last month, the largest increase in more than three years, signaling pressure for inflation to rebound after easing from close to a 12-year high. Consumer prices rose 7.7 percent in May.

The central bank has ordered lenders to set aside a record 17.5 percent of deposits as reserves from June 25 to try to prevent excess cash in the financial system from fueling inflation. It has also allowed the yuan to gain 5.8 percent versus the dollar this year.

China's export growth accelerated to 28.1 percent in May from a year earlier. Retail sales gained 21.6 percent.

For the first five months, industrial production climbed 16.3 percent from a year earlier, the statistics bureau said. China's economy expanded 10.6 percent in the first quarter from a year earlier.

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Cal Expo and the National Basketball Association agreed Wednesday to proceed with exploring a joint redevelopment of the fairgrounds that would include a new arena, commercial space and housing.

Now the Cal Expo board and NBA will determine what the project might look like, how it would be funded and which developers might want to participate.

The letter of understanding that Cal Expo and NBA commissioner David Stern signed Wednesday afternoon doesn't obligate either party to actually proceed with any project on the 360-acre grounds. Instead, it is the next step toward preparing a request for proposal to obtain the third critical player — a developer or developers that would deliver the private funds necessary to redevelop the fairgrounds.

Community leaders, residents and basketball fans went before Cal Expo board members Wednesday to urge them to proceed with researching the project.

Several board members, including ex-officio member Assemblyman Dave Jones, expressed concerns about the amount of money Cal Expo might need to spend on consultants as it continues looking into the proposal. The board will keep employing the services of former Gov instant cash advance. Pete Wilson and other consultants from Bingham Consulting Group.

Whatever might get built on the fairgrounds would remain the property of the state, said Norb Bartosik, Cal Expo general manager. New buildings, including an arena, would be operated under long-term leases.

John Moag, consultant to the NBA, said he had no estimate for the cost of a new arena. Earlier preliminary estimates not based on this site were around $500 million, he noted.

Moag said he's spoken to developers who, without being solicited, are interested in participating in a project at Cal Expo. He described it as "substantial interest from substantial players."

The fairgrounds are "so well positioned," with 360 acres close to downtown, that developers will surely respond, Wilson said.

Still, Wilson said, "this is an ambitious undertaking" and one that is "not easily accomplished."

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David Steele, former president of Chevron Latin America and dean of the Silberman College of Business at Fairleigh Dickinson University, was named dean of the College of Business at San Jose State University.

"Dr. Steele's global perspective, engineering and business expertise, proven track record as a corporate and academic leader, and unquestionable integrity make him ideally suited to succeed within our college, campus and community," said Carmen Sigler, vice president for academic affairs. "I am confident he will take San Jose State's College of Business to a new level of excellence in providing our students with the academic and professional training they need to prosper in Silicon Valley and beyond."

A resident of Melbourne, Fla., Steele will begin at San Jose State in July 2008. He will succeed former Dean Bruce Magid, who left San Jose State in June 2007 to head the International Business School at Brandeis University in Massachusetts.

"I have a driving desire to culminate my career at an academic institution that has a vision of excellence, an international focus, a vibrant business community and where I can pass on to others the knowledge and cultural sensitivity I acquired as a global business executive," Steele said. "I believe that San Jose State University will provide that dynamic environment."

Steele was dean of the Silberman College of Business at Fairleigh Dickinson University from 2002 to 2005 payday loan. The largest private university in New Jersey, Fairleigh Dickinson has a total enrollment of more than 11,000 students and a large international student body on two campuses and four off-site corporate locations. Steele was also professor and dean of the College of Business at the Florida Institute of Technology in Melbourne, Fla. Founded in 1958 to train professionals working at what is now the Kennedy Space Center, the institute has a total enrollment of more than 5,100 students.

Steele also has more than 25 years of executive experience in global business development, finance and engineering in the petroleum and IT industries. He rose through the ranks of Chevron Corp. to become president of Chevron Latin America. Based in Venezuela, he managed projects with huge capital investments in countries with difficult social, economic and political environments, and chaired the operating committee of an international petroleum consortium.

San Jose State's College of Business has about 6,000 students enrolled in its undergraduate and graduate programs.

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