Actual finance blog

The dollar slipped against other major currencies Wednesday after Greece announced measures to reduce its deficit by four percentage points this year.

What prices are doing: The dollar fell 0.6% against the euro to $1.3694, and dropped 0.8% against the pound to $1.5131. The greenback edged 0.4% lower against the yen to ¥88.47.

The dollar was first higher Tuesday but then lost steam and ended lower, as the euro rose on hopes that debt-choked Greece would make decisions about its deficit.

What’s moving the market: Greece announced plans to make steep cuts in civil servant salaries and raise taxes to save the debt-challenged country more than $6.5 billion this year, according to a report in the Wall Street Journal’s online edition.

Greek officials expect the cuts to lower Greece’s budget deficit to 8.7% of the country’s gross domestic product from its current level of 12.7%, according to the report.

Investors also digested some U free credit report and score.S. economic data ahead of Friday’s all-important February jobs release. Traders took in labor market reports from outplacement firm Challenger, Gray & Christmas and payroll data firm Automatic Data Processing, which showed job losses continue to slow.

The employment component of the Institute of Supply Management’s report on the service sector also rose to its highest level since April 2008 as the service sector expanded.

What analysts are saying: "The dollar is trading lower today as Greece’s austerity package lifts demand for European currencies," said Kathy Lien, director of currency research at Global Forex Trading, in a research note.

But the rally in the euro may be limited because there is still a lot of back and forth on whether Germany and other strong European countries will offer aid to Greece, she added. 

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Having reached capacity at their two St. Louis brewing facilities, the makers of Schlafly beer are finalizing arrangements to expand production through deals with two out-of-state breweries.

St. Louis Brewery Inc. has tentative agreements with brewing sites in Stevens Point, Wis., and Latrobe, Pa., company co-founder Dan Kopman told the Post-Dispatch. The brewer will begin making some lager-style beers in Wisconsin as early as this summer in an effort to keep up with booming craft-beer sales.

The arrangement allows Schlafly to act as a tenant, renting brewery equipment and space from the out-of-state beermakers. The move is more cost- and time-efficient than building a third local brewing site, Kopman said.

"Even if we acquired land today, it would be five years before we were brewing on a new site," he said. "We needed something a little sooner than that."

The brewery has reached its production ceiling in St. Louis.

On Friday, cranes lowered four stainless-steel, 200-barrel fermenting tanks into the company’s Bottleworks brewery in Maplewood. The new tanks — where yeast ferments and beer develops alcohol and carbonation — cap a $500,000 project that will help increase Schlafly’s annual local production by nearly 30 percent to 45,000 barrels of beer.

"This is the end of how much we can squeeze into Bottleworks," Kopman said. "Nothing else will fit in the building."

St. Louis Brewery will send raw ingredients as well as personnel and lab equipment to the Wisconsin brewery to keep standards in line with its St. Louis operations. The Pennsylvania facility will be used only if additional production is needed, Kopman said. Both out-of-state locations specialize in lager brewing and have canning lines should the brewery decide to put its beers in cans — a move several craft brewers have recently made.

Many start-up and regional breweries have turned to arrangements with outside producers as the credit market tightened and demand for craft beer climbed, said Paul Gatza, director of the Colorado-based Brewers Association payday loans with no fax.

It’s a good way to quickly fill expansion needs, Gatza said, but it "can create more work and travel for brewing staff … to ensure brand consistency over multiple brewing systems."

St. Louis Brewery currently sells about 90 percent of its Schlafly brands in the St. Louis metro area, though the company has expanded distribution into parts of Kentucky, Indiana and Tennessee. Any Schlafly beer brewed outside of St. Louis will say so on its packaging.

"In the long term, we’re committed to making all the beer that we sell in St. Louis in St. Louis," Kopman said. "We just need some breathing room right now."

St. Louis Brewery will be sharing the Wisconsin space with, among others, O’Fallon Brewery of O’Fallon, Mo., which last year outsourced production of its year-round beers to Stevens Point.

O’Fallon founders Tony and Fran Caradonna, who saw sales of their beers increase 36 percent in 2009, made the decision to contract-brew after reaching capacity at O’Fallon’s 3,000-barrel-a-year brewery northwest of downtown St. Louis.

Kopman also reported surging retail sales so far this year — up about 18 percent compared with January-February 2009. Schlafly set a company record last year by selling about 30,000 barrels of beer, which translates to about 10 million 12-ounce bottles.

Gatza expects the demand for craft beers to continue climbing, which means even more options for consumers. "There has never been a better time for beer drinkers in America."

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President Barack Obama’s “Volcker Rule” to ban proprietary trading at U.S. banks may not survive in Congress, hampered by criticism that the administration waited too long and offered too few details.

The proposal’s timing is viewed by some as “transparently political and not substantive,” Senate Banking Committee Chairman Christopher Dodd said on Feb. 2. It was “airdropped” into the Senate debate on legislation to overhaul U.S. financial rules, said Senator Richard Shelby, the panel’s top Republican.

“It’s tough to take on another issue at this point,” Dodd, a Connecticut Democrat, said at a hearing in Washington yesterday that included executives from Goldman Sachs Group Inc. and JPMorgan Chase & Co. “It was never my intention, or I believe the intention of this committee, to solve every issue surrounding the financial-services sector.”

Members of the Senate panel have been working for weeks to translate into legislation the plan Obama released in June to overhaul U.S. financial rules. The focus is on the Senate after the House passed its version of the legislation in December.

Obama named the Jan. 21 proposal after its chief proponent, ex-Federal Reserve Chairman Paul Volcker, now a White House adviser. Based on an idea circulated in a January 2009 report by the Volcker-led Group of Thirty, composed of former central bankers and finance ministers, it would force banks to stop the trading they do on their own accounts and give up their stakes in hedge funds and private-equity funds.

Citigroup Trader Quits

Some traders have already taken note. Matthew Carpenter, head of a Citigroup Inc. unit that trades U.S. stocks using the bank’s money, quit to join hedge fund Moore Capital Management LP, people briefed on the matter said yesterday. Leaving with him is his deputy, Matthew Newton, amid concern the government may order banks to exit such businesses, the people said.

Dodd and Shelby told reporters yesterday they hadn’t ruled out incorporating the plan into the bill. Dodd, who on Feb. 2 said he “strongly” supported the proposal, said he’d consider language empowering regulators to carry out the recommendations without having lawmakers write the rules, and Shelby said he wanted to see whether regulators already have the power.

The announcement came two days after a Republican victory in the Massachusetts Senate race that cost Democrats their supermajority in the Senate — timing that stoked speculation it was motivated by politics.

Volcker said Feb. 2 that the timing was “sheer coincidence.” Obama decided to back the proposal weeks before the Massachusetts election, he said. Volcker wasn’t available for comment yesterday, according to his assistant, Anke Dening.

Client Business

The White House defines proprietary trades as those not done for the benefit of customers, a senior administration official said when the Volcker plan was announced. Regulators would have the power to ask banks whether certain trades are related to client business, the official said. If they’re not, the regulators could order firms to exit the positions.

“We’re working closely with the Congress to rein in risky practices on Wall Street,” Treasury Department spokesman Andrew Williams said in an e-mailed statement. “The House passed a strong bill in December and now we’re working with the Senate to get the job done.”

Senator Michael Crapo, an Idaho Republican, pressed Deputy Treasury Secretary Neal Wolin at the Feb. 2 hearing to release details of the plan “so that we can understand specifically what we are talking about or what the proposal is with regard to proprietary trading.”

Wolin responded by telling Crapo the administration is working with regulators to prepare a draft legislative proposal that it will send to Congress “soon.”

Drawing a Line

Drawing a line between bank and customer trading won’t be easy, said Hal Scott, a professor at Harvard Law School who specializes in international financial systems.

A narrow definition probably won’t reduce risk, Scott said, while a broad one could “seriously impair the basic function of modern banks as market-makers” in government and non-government securities and as packagers of consumer debt into bonds.

Goldman Sachs’s E. Gerald Corrigan, who like Volcker is a past president of the Federal Reserve Bank of New York, said at yesterday’s hearing that banks should be allowed to own and sponsor hedge funds and private equity funds because any risks can be managed. Corrigan is chairman of the firm’s regulated bank subsidiary.

Barry Zubrow, JPMorgan’s chief risk officer, told the committee the activities the administration is proposing to restrict didn’t cause the financial crisis.

“Indeed, in many cases, those activities diversified financial institutions’ revenue streams and served as a source of stability,” Zubrow said in his prepared testimony. “Further, regulators currently have the authority to ensure that risks are adequately managed in the areas the administration proposes to restrict.”

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The owner of Quality Candy Shoppes and Buddy Squirrel has filed for Chapter 11 bankruptcy, but the future of the 13-store St. Francis-based chain could not immediately be determined.

Quality Candy Shoppes/Buddy Squirrel of Wisconsin Inc. filed for bankruptcy Jan. 15 in U.S. Bankruptcy Court in Milwaukee. The company listed assets of between $1 million and $10 million and liabilities in the same range.

Two of the company’s largest unsecured creditors are suppliers: Cargill Inc., for $89,938, and Wright Brothers Paper Box at $10,959. The other top unsecured creditors include radio station owner Lakefront Communications, $10,332; George Pinter, accounting services, $8,910, and J.M. Swank Co., $8,032.

Harris Bank is the company’s secured lender and is owed an unspecified amount.

In a Jan. 19 hearing, Quality Candy/Buddy Squirrel sought emergency funding to make its payroll. Bankruptcy Judge Margaret McGarity approved the motion and required the company to provide an accounting of its cash use by this Wednesday and make interest-only payments to the bank until then payday loans guaranteed no fax.

Another hearing is scheduled for Feb. 8.

Jonathan Goodman, an attorney for the company, declined to comment Monday. The president, CEO and sole shareholder is Margaret Gile, who represents the third generation of family ownership.

Quality Candy was founded in Milwaukee in 1916, according to the firm’s Web site. In the 1960s, Quality Candy bought Buddy Squirrel of Wisconsin, and in 1999, the two businesses were merged and the company was renamed Quality Candy Shoppes/Buddy Squirrel of Wisconsin Inc. The company built a 15,000-square-foot distribution center in 2001.

Margaret Gile, represents the 3rd generation as owner and president.

Quality Candy/Buddy Squirrel owns and operates stores in the Milwaukee area, Racine and Madison.

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Canada’s finance ministers have agreed to consult the public on how to boost retirement savings in advance of aging baby boomers straining public health and long-term care services.

Meeting in Whitehorse Friday, they agreed with Ontario’s Dwight Duncan that government officials should study, consult and report back by May on a short list of proposals put forward by industry, labour and advocacy groups.

The list includes everything from a continued reliance on voluntary savings plans to forcing higher contributions to the Canada and Quebec Pension Plans in order to eventually pay for richer benefits.

Duncan said in a telephone interview there was an exciting degree of consensus among ministers of all political stripe about the challenges and options that need to be explored "in a prudent and timely fashion."

"There is a certain impatience," Duncan said, alluding to earlier declarations by British Columbia and Alberta finance ministers that they were prepared to start province-wide savings plans to expand pension coverage.

But, Duncan said after the ministers met, "I think there is a very real willingness to work together" and agreement should be a "pan-Canadian solution."

Research papers commissioned by Ottawa, Ontario and British Columbia documented the success Canada has had with tax-supported programs that have reduced poverty among the elderly.

But Ontario’s study also raised questions about why many middle-income and upper-income Canadians are nearing retirement without enough savings or assets to avoid a decline in their standard of living.

Meanwhile, said Duncan, high debt levels threaten to delay the increase in savings that support living standards in old age and allow the nearly 10 million baby boomers to help fund through their taxes the cost of health care and long-term care as they age.

Ted Menzies, parliamentary secretary to federal finance minister Jim Flaherty, said in a telephone interview "we really didn’t rule out any options."

But he said Flaherty urged ministers from the provinces and territories to adopt the first principle of medicine when considering changes to Canada’s retirement income system: "Do no harm high risk personal loans."

The provinces said unanimously that no province gets out ahead of the rest," Menzies told the Canadian Press. “They all agreed that a pan-Canadian solution would ultimately be the best solution."

Ontario’s outline of the options that should be considered acknowledges that "changes to any one pillar or the retirement income system will directly or indirectly affect other pillars (of the private and public retirement income system)."

For example, an expansion of Canada Pension Plan coverage could result in changes to private company pension plans, whose benefits are generally integrated to supplement CPP benefits.

Other options include a supplementary pension plan, either voluntary or with automatic enrolment and the right to opt out, regulatory changes to allow expansion of private-sector savings options and tax reform to increase the incentive and opportunities to save more.

Experts, labour groups and some provinces have been sounding the alarm on the fraying of Canada’s pension system. They say the recent financial crisis exposed weaknesses in the system and the aging of the population will only exacerbate the pitfalls.

More and more people are left uncovered by corporate pension plans, they say. Those who are covered have plans that are less and less generous. And those with no plan often fail to save on their own.

Reports prepared for the Whitehorse meeting by University of Calgary economist Jack Mintz and pension expert Bob Baldwin for the Ontario government concluded that Canada’s retirement system has been working well.

But Baldwin emphasized the future is dim. He said keeping the status quo would seriously hurt the standard of living of some significant groups of people: immigrants and single people depending on the federal government’s Guaranteed Income Supplement, and seniors with dependants.

The Canadian Life and Health Insurance Association said it was pleased the ministers want to study proposals for bringing more workers into pension plans offered by insurers.

jdaw@thestar.ca

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Indonesia can’t replicate the “high single digit” economic growth of China and India because of impediments to investment and high credit costs, according to Credit Suisse Group AG.

“We don’t expect investment to take off,” Cem Karacadag, an economist at Credit Suisse in Singapore, said in a report received yesterday. “It will take the government many years to fix the structural obstacles to investment, including corruption, regulatory risks, and a weak legal framework.”

President Susilo Bambang Yudhoyono’s re-elected government has “neither the mandate nor the capacity” to implement quickly the reforms needed to overcome these obstacles to investment, according to Credit Suisse. Borrowing costs are also too high as the central bank isn’t committed to keeping monetary policy “stable and tight,” Karacadag said in the report.

Indonesia wants to be included among the so-called BRIC nations of Brazil, Russia, India and China, according to Emil Salim, an adviser to President Yudhoyono and a former Cabinet member. The nation’s accelerating growth provides a case for its inclusion among BRIC economies, Morgan Stanley said in June.

Credit Suisse said it was likely that gross domestic product growth in Southeast Asia’s largest economy would remain below that of China and India.

“The key question for Indonesia is will investment accelerate quickly and be efficient enough to lift GDP growth to high single digits?” Karacadag said. “Our answer is no.”

‘Bright’ Outlook

Still, Indonesia’s long-term economic outlook is “bright” and annual GDP growth may average 5.6 percent from 2010 to 2014 and 6.5 percent from 2015 to 2019, according to Credit Suisse. That will see per capita income almost triple to $6,800 by 2019 from $2,300 in 2009, it said.

Indonesia’s economic growth accelerated in the three months to Sept. 30 for the first time in five quarters, with GDP expanding 4.2 percent from a year earlier. The $514 billion economy may expand 4.3 percent this year and between 5 percent and 5.5 percent in 2010, the central bank said yesterday.

“The country has a sound fiscal policy, good balance of payments, declining government and external debt ratios, and an improving political situation,” Karacadag said. “However, we don’t expect investment and real GDP growth in Indonesia to take off in a hurry.”

China and India will continue to achieve faster rates of GDP growth until Indonesia fixes structural impediments to investment and shows a “credible commitment to low inflation,” according to Credit Suisse.

Inflation Target

Bank Indonesia kept its benchmark interest rate unchanged at 6 payday loan.5 percent for a fourth straight month yesterday, after nine consecutive cuts that ended in August.

The central bank said monetary policy would be directed toward “keeping inflation low while taking into account the recovery of the economy.” Inflation this year may be “lower than” the target of 3.5 percent to 5.5 percent, the bank said.

“Unfortunately, we don’t perceive the government and Bank Indonesia to be committed to keep monetary policy stable and tight enough to rein in inflation and persistently high inflation expectations,” Karacadag said. “Even if the central bank was committed to bringing inflation under control once and for all, it first would probably have to keep real interest rates high for many years.”

Indonesia’s inflation rate has hovered around 4 percent to 17 percent over the past decade, according to Credit Suisse.

Weak Credibility

“Being able to deliver on their inflation targets in the coming two years would be a significant breakthrough for Indonesia,” said Enoch Fung, an economist at Goldman Sachs Group Inc. in Hong Kong. “Weak inflation credibility is the biggest issue overhanging the Indonesian risk premium.”

Indonesia’s inflation unexpectedly slowed in November, suggesting that the central bank may take more time before it follows other Asia Pacific nations including Australia, India and Vietnam in withdrawing monetary stimulus.

Consumer prices rose 2.41 percent last month from a year earlier after gaining 2.57 percent in October.

“There is less pressure for Bank Indonesia to increase rates earlier in 2010 following Vietnam and Australia,” said Destry Damayanti, chief economist at PT Mandiri Sekuritas in Jakarta. “The central bank may maintain the benchmark rate at the current rate of 6.5 percent at least until the second quarter of 2010 before gradually increasing it to 7.25 percent.”

Bank Indonesia needs to show a stronger commitment in its fight against inflation in order to bring down borrowing costs to companies and consumers, according to Credit Suisse.

“The higher the rate of inflation, the higher are real lending rates because of the inflation risk premium that is built into nominal interest rates,” Karacadag said. “It would only be much later, once tight and consistent policy has raised the credibility of the central bank, that the payoff would come in the form of lower real interest rates.”

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The author of a statewide ballot initiative that would permit full-strength beer and wine sales in Colorado grocery and convenience stores said he plans to modify the measure to increase the percentage of shelf space that must be devoted to craft beer and boutique wine.

Blake Harrison said Tuesday at a hearing for Initiative 29 that he had thought his proposal, which was largely copied from a failed 2008 legislative effort, required 25 percent of alcohol shelf space go to smaller breweries and wineries.

When a Denver Business Journal reporter pointed out its wording actually called for only a minimum of 20 percent shelf space for the products, he said that he plans to grow that area as the measure moves along in the process.

That alteration of the language appears to be the only part of Harrison's proposal that is changing after weeks of discussions with affected parties such as grocers and convenience store owners, however.

Grocers are working on a separate bill or ballot initiative to let them sell all alcohol and a convenience store association is unlikely to back Harrison's plan, but Harrison said he feels his idea can win popular support in the 2010 election.

"I recognize that this bill can be improved … We're just trying to break the stalemate," the Denver deputy district attorney and Democratic legislative candidate said after the Capitol hearing. "The real answer to this may be something that neither side likes."

The measure, submitted to the Legislative Council on Nov. 17, goes next to a title-setting board in the Secretary of State's office. While Harrison can submit his initiative quickly to that board — which must approve its wording before he can collect signatures to put it on the ballot — he said he may wait for a few months to see what the Legislature does first.

Legislative committees have killed bills the past two years that would have ended the post-Prohibition ban on grocery and convenience stores selling any wine or selling beer stronger than 3.2 percent alcohol by volume. While grocers and convenience stores have backed those bills, liquor stores and craft-beer makers lobbied for their defeat, claiming their businesses would be hurt.

Harrison hopes the Legislature will come up with a solution and even included in his proposal a clause saying that any legislative action

allowing grocery stores to sell full-strength beer or wine will supersede his measure.

Grier Bailey, government affairs manager for the Colorado Wyoming Petroleum Marketers and Convenience Store Association, said he expects several legislative proposals will seek incremental changes in the law this year.

Association officials met with Harrison in recent weeks to see if they could back his plan but generally are not supportive of it, Bailey said. They believe a provision in the initiative limiting full-strength beer and wine sales to just 5 percent of a store's shelf space is too restrictive and would help large grocers far more than smaller local proprietors, he said.

"I think the language is, from a small-business perspective, not well thought-out," Bailey said.

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Stocks fell Friday, capping a mostly down week, as investors remained jittery about the economy and the outlook for the technology sector.

The Dow Jones industrial average (INDU) fell 14 points, or 0.1%, to close at 10,318.16. The S&P 500 (SPX) slipped 0.3% to end at 1091.38. The tech-heavy Nasdaq composite (COMP) dropped 0.5% to 2146.04.

Despite Friday’s decline, the Dow ended the week with a 0.5% gain. The S&P 500 fell 0.2% and the Nasdaq slid 1% over the last five days. The mixed performance came after all three major gauges posted two consecutive weekly gains.

The dollar rose against rival currencies for the second day in a row, helped by increased demand for safe-haven assets and supportive comments from Federal Reserve officials.

The stronger greenback weighed on the oil market, with crude prices closing below $77 a barrel. Gold prices recovered from early losses to close at another record high.

Wall Street started the week on a high note, closing at 13-month highs on Monday and Tuesday. A softer dollar and bets that U.S. interest rates will remain low for a prolonged period helped boost the S&P 500 above the key 1,100 level early in the week.

But the tone turned more cautious Wednesday after government data showed a surprise drop in new home construction and a pair of software makers issued bearish profit forecasts.

Housing and tech woes continued to plague the market Thursday after a report showed that nearly 10% of all mortgage loans were delinquent in the third quarter and analysts at Bank of America Merrill Lynch downgraded the semiconductor industry.

On Friday, tech shares remained under pressure after PC giant Dell reported weak third-quarter results late Thursday. Homebuilder stocks fell after D.R. Horton posted a larger-than-expected quarterly loss and said conditions in the industry remain challenging.

"The market is suffering from mixed economic news this week," said John Wilson, chief technical strategist at Morgan Keegan. However, the declines were surprisingly small considering the market’s recent strength, he added.

"I think the market has to work-off a fairly overbought position," he said.

Analysts said the market was ripe for a move lower given growing concerns that stocks have come too far, too fast. After bottoming at 12-year lows in March, stocks have been on a near-continuous rally fueled by signs of economic stabilization.

"There’s a lot of concern that the stock market has gotten ahead of expectations," said Jack Ablin, chief investment officer at Harris Private Bank. "There’s not much room to advance without a concurrent improvement in economic news."

Looking ahead, trading is expected to be volatile next week with a busy economic calendar, quarterly results from Hewlett Packard (HPQ, Fortune 500) and thin trading volume.

Economic reports due next week include data on home sales and prices, a revised reading on gross domestic product and a monthly read on consumer confidence.

Dow component H-P reports quarterly financial results after the closing bell Monday.

U.S. markets will be closed on Thursday for the Thanksgiving holiday, and trading will end early on Friday. With many traders taking next week off, analyst said the number of shares trading hands will be small, which could exaggerate swings in the market.

Companies: D.R. Horton (DHI, Fortune 500), the nation’s second-largest homebuilder, said its quarterly loss narrowed to $231.9 million, or 73 cents a share, in the fourth quarter ended Sept. 30. Shares fell 15%.

Analysts surveyed by Thomson Reuters were expecting a loss of 30 cents per share.

After the closing bell Thursday,Dell (DELL, Fortune 500) reported a sharp drop in quarterly profit that fell short of Wall Street’s estimates. The stock tumbled 10%.

Also on Thursday, analysts at Bank of America Merrill Lynch downgraded the semiconductor industry. That came one day after two key software companies issued cautious profit outlooks.

But in other earnings news, retailer Gap (GPS, Fortune 500) said its quarterly profit surged 25%.

Economy: A government report showed more U.S. states suffered rising unemployment rates, though fewer reported joblessness above the national average in October.

World markets: Asian shares retreated. The Nikkei in Japan lost 0.5% while the Hang Seng fell 0.8%. Major European indexes also closed lower, with the CAC-40 in Paris falling 0.8%.

Money, gold and oil: The dollar rose versus major international currencies, including the euro, the yen and the pound.

Gold rose $4.90 to settle at a record $1,146.80 an ounce.

The price of oil fell 74 cents to close at $76.72 a barrel.

Bonds: Prices for U.S. Treasurys were mixed. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell to 3.36% from 3.50% late Thursday. The yield on the 3-month Treasury bill, which is seen as a temporary shelter from market volatility, stood at 0.015%.  

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Consumer spending probably rebounded in October, showing that mounting unemployment is restraining, not derailing, the biggest part of the U.S. economy, analysts said before reports this week.

Purchases increased 0.5 percent after dropping by the same amount in September, according to the median estimate of 61 economists surveyed by Bloomberg News before a Commerce Department report due Nov. 25. Other figures may show orders for durable goods and home sales climbed.

Consumers added to their wardrobes, frequented restaurants and bought more automobiles last month even after the government’s trade-in incentive expired. A jobless rate that is projected to remain above 10 percent through the first half of next year means households will still be hard-pressed to boost spending further, limiting their contribution to growth.

“A business recovery has taken root, notably in output and sales, although not yet in employment,” said Neal Soss, chief economist at Credit Suisse in New York. “The recovery will likely be mediocre relative to previous recoveries following severe recessions.”

The labor market and reduced bank lending are some of the “headwinds” facing the economy, Federal Reserve Chairman Ben S. Bernanke said last week. To help ensure the economy doesn’t falter, Bernanke and his fellow U.S. central bankers will probably keep monetary policy unchanged well into 2010.

Vehicle Sales Rise

Auto industry data show sales of cars and light trucks rose to a 10.5 million unit annual pace in October, up 14 percent from the previous month. Purchases were still short of the 14.1 million rate reached in August when the government’s cash-for- clunkers plan, which expired near the end of that month, revived demand.

U.S. retailers last month increased sales 1.4 percent after a decline of 2.3 percent in September, according to Commerce Department figures released Nov. 16. Sales rose at department stores, restaurants and Internet-based businesses such as Amazon.com.

Most retailers have boosted profits by trimming costs and inventories. Saks Inc., the New York-based U.S. luxury retail chain, last week reported an unexpected profit, its first in more than a year, for the period ended Oct. 31.

“The current economic and retail environment remain uncertain,” Saks Chairman and Chief Executive Officer Stephen Sadove said on a Nov. 17 conference call with investors and analysts. “It’s a fragile period for everyone in this industry.”

Incomes Rise

The Commerce Department spending report on Nov. 25 may also show incomes grew 0 payday loan.2 percent in October, the biggest gain in five months, after no change the previous month.

Even with that gain, a weak labor market continues to weigh on consumers’ ability to boost purchases. Payrolls fell by 190,000 last month, bringing total job losses to 7.3 million since the recession began in December 2007, the most of any contraction since the Great Depression.

President Barack Obama, seeking to halve job losses since the recession began, announced on Nov. 12 that he plans to hold a White House jobs summit. He said he’ll convene business executives and experts to seek solutions to spur job creation.

The job cuts are causing measures of consumers’ outlooks to weaken this month. The Conference Board’s confidence index, due Nov. 24, is forecast to fall, and the Reuters/University of Michigan gauge the next day is projected to drop from the previous month.

The S&P 500 rose as much as 64 percent from a 12-year low in March, closing at a 13-month high on Nov. 17.

Durable Goods

The increase in demand for automobiles likely contributed to a gain in bookings at factories. Orders for durable goods, those meant to last at least three years, probably rose 0.5 percent in October after a 1.4 percent surge, the first back-to- back increase since May, according to the median estimate ahead of a Nov. 25 report from the Commerce Department.

Excluding demand for transportation equipment, which tends to be volatile, orders probably increased 0.6 percent, the survey median showed.

The government’s revised figures for third-quarter gross domestic product, due on Nov. 24, may show the economy expanded at a 2.9 percent annual rate, compared with the 3.5 percent estimated last month, according to the survey median. The revision will reflect a bigger trade gap and weaker retail sales in September, economists said.

The worst housing slump in more than 70 years is showing signs of improvement, with government support in the form of a tax credit for homebuyers.

Existing Home Sales

The National Association of Realtors is expected to report tomorrow that purchases of existing homes rose 2.3 percent in October to an annual pace of 5.7 million, the highest level since July 2007, according to the survey median.

The Commerce Department on Nov. 25 may report that purchases of new houses rose 0.8 percent last month to a 405,000 annual pace, according to the Bloomberg survey median.

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An Indian Ocean airline is planning the first regular flights for more than 800 passengers after buying a budget version of the Airbus A380, the world’s largest airliner, with economy seating throughout.

Reunion-based Air Austral confirmed an order for two superjumbos at the Dubai Air Show and said it would operate them between Paris and the French overseas department from 2014.

The deal will put the A380 into service as the industry’s largest people carrier and comes 80 years after the first wood and canvas plane touched down on the Indian Ocean island after making the 9,300 kilometer (5,800 mile) trip from Paris in 10 days.

The A380 entered service in 2007 and is designed to seat 525 people in ordinary three-class seating or 853 people when its two floors of cabins are filled with economy seats — giving it 8 times more capacity than Airbus’s smallest model, the A318.

So far, buyers of the plane have focused on luring premium passengers with facilities from beds and showers in first class to a stand-up bar, with total seating of around 500 people.

Air Austral said its low-cost version would seat 840 people.

“We are convinced that airplanes with good priced tickets will help explode traffic figures,” founder and president Gerard Etheve told Reuters after announcing the deal on Tuesday.

The economy end of the airline market has performed relatively better during the financial crisis, but revenues everywhere have been battered by recession this year no credit check payday loans.

The budget version of the A380 aims at tapping growth in China, India and demand from airlines flying aging Boeing 747s on high-density routes in markets like Japan, where rival Boeing dominates air travel.

Boeing’s 747-400D, a version of the jumbo jet built for the Japanese domestic market, carries up to 660 people in one class.

Etheve said the airline he founded in 1975 had paid less than the $660 million list price for two Airbus A380s.

The aircraft was tested for the ability to evacuate over 800 people in cabin emergency tests before entering service.

Air Austral’s planes will be powered by engines from the Engine Alliance, a joint venture between General Electric and Pratt & Whitney.

The A380 deal, reported by Reuters earlier this week, includes options for a further two A380s to either serve future Caribbean routes or more flights to La Reunion.

(Editing by Jon Loades-Carter)

(Reporting by John Irish, Writing by Tim Hepher, editing by Will Waterman and Jon Loades-Carter)

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