WASHINGTON — It was the second-worst month on record for sales of new houses. But last month still brought a long-awaited shred of good news for the battered building industry.
February’s results, while still far below last year’s levels, provided some hope that new house sales have finally hit bottom and the worst may be past. Prices, however, are likely to remain weak for months as builders continue to clear out their stock of unsold houses.
The Commerce Department said sales rose 4.7 percent in February to a seasonally adjusted annual rate of 337,000 from an upwardly revised January figure of 322,000.
Even after the revision to January’s sales results, that month remained the worst on records dating back to 1963.
Economists had expected February sales to fall to a pace of 300,000 units.
The report "is another faint but nonetheless encouraging sign that the economic slide may be moderating," wrote David Resler, chief U.S. economist at Nomura Securities.
Because the report reflects signed contracts to buy new houses rather than completed sales, it could reflect the early impact of a new, $8,000 federal tax credit for first-time buyers instant payday loan.
Despite the boost, February’s sales were still down by more than 40 percent from the same month a year earlier. The median sales price fell to $209,000, a record 18 percent drop from the same month last year.
Some analysts remain skeptical new house sales are starting to recover, saying the data are notoriously volatile. Until job losses stop mounting, "I don’t think you’re going to see good housing numbers," said Patrick Newport, an economist at IHS Global Insight.
Nationally, the number of unsold houses fell to the lowest point since April 2002. But sales are so slow that it would take more than a year at the current sales pace to exhaust the supply.
"I’m hopeful the worst is over," said David Crowe, chief economist for the National Association of Home Builders. "I don’t think we’re quite out of the woods either. I think we will bounce around a bottom for a month or two."
Confidence among institutional investors dipped in March with investor morale lower in North America and Europe but showing improvement in Asia.
The U.S. financial services firm said on Tuesday its State Street Investor Confidence Index fell slightly by 2.7 percentage points to 70 from a revised five-month high of 72.7 in February, led by a 4.8-point retreat in the North American index to 59.4.
State Street, which compiles the index by analyzing the buying and selling patterns of institutional investors, said the easing in U.S. investor sentiment was not surprising as it came after a rebound in confidence over the last quarter months from an all-time low of 30.6 in December.
Elsewhere, Europe had a 3.2-point decline in investor risk appetite but the Asian index rose by 2.5 points.
"There is an increasing sense among institutional investors that the rapid freefall of the real economy is approaching its end, both because much adjustment has occurred and because of the gathering power and breadth of the U paydayloans.S. Fed and Treasury response," said Harvard University Professor Ken Froot, a co-developer of the index.
"Institutions seem to appreciate this and are moving to a less defensive risk stance."
State Street said confidence among European institutional investors was still languishing at new lows, reflecting the relatively slower pace of policy response in the region.
The firm said the index would include indicators on level of institutional investor risk appetite from May 26. The index will be rebased so a reading of above 100 will indicate increasing exposure to risky assets and a sub-100 reading will imply a reduction of risky-asset exposure.
Bank regulators closed three banks Friday, marking the 18th, 19th and 20th failures this year.
The FDIC estimates that the combined cost of the bank failures to its deposit insurance fund will be approximately $207 million.
The announcements mark the ninth week in the past ten that bank failures have been reported.
FirstCity Bank, based in Stockbridge, Ga., with $297 million of assets and $278 million of deposits as of March 18, was closed by state regulators, according to the Federal Deposit Insurance Corp., which was named the receiver.
The FDIC, unable to find a bank to take the assets of FirstCity, said on Monday it will mail the bank’s former customers checks to cover insured funds.
A message on First City’s Web site said that "an assuming bank could not be located."
According to an FDIC representative, the assets of the failed bank in Georgia were not attractive to buyers. "There was no franchise value," wrote David Barr, spokesperson for the FDIC, in an email. "More than half the deposits were out of area and the assets were highly concentrated in development loans. We had interest until they saw the deposit and asset makeup."
Direct deposits from the federal government - like Social Security and veterans payments - to First City account holders will go directly to SunTrust Bank.
First City customers with brokered deposits need to be in touch with their brokers. The FDIC will reimburse insured, brokered deposits after the brokers provide the FDIC with the appropriate documentation.
The FDIC fully insures individual accounts up to $250,000 through the end of 2009. When the bank was closed down, the failed bank had about $778,000 in deposits that exceeded the insurance limits, according to the FDIC, although that total could fluctuate as the FDIC hears from the customers.
The FDIC estimates the bank failure will cost its fund approximately $100 million.
Starting Monday, depositors of Stockbridge, Ga.-based bank can go to the FDIC Web site, http://www2.fdic.gov/dip/Index.asp, to obtain the status of their account. A customer can enter his or her bank account number into the field on that site to get an update.
Two more banks fail
Teambank National Association of Paola, Kan., and Colorado National Bank of Colorado Springs, Colo., were closed later on Friday by the Office of the Comptroller of the Currency.
The FDIC was named the receiver for both banks. The FDIC entered into a purchase and assumption agreement with Herring Bank of Amarillo, Texas, to assume all of the deposits of Colorado National and with Great Southern Bank of Springfield, Mo., to assume all of the deposits of Teambank.
The four offices of Colorado National will reopen as branches of Herring Bank and the 17 offices of Teambank will reopen as branches of Great Southern Bank on Saturday no fax payday loans. Depositors of the failed banks will automatically become depositors of the purchasing banks.
As of the end of 2008, Colorado National had total assets of $123.5 million and total deposits of $82.7 million. Herring Bank purchased approximately $117.3 million in assets at a discount of $4.2 million, and will pay a 1% premium on deposits. The FDIC will hold the rest of the assets to dispose of later.
The FDIC estimates that the cost to the Deposit Insurance Fund of the failed Colorado National Bank will be $9 million.
At the end of 2008, Teambank had total assets of $669.8 million and total deposits of $492.8 million. The Great Southern bank will assume $474 million in deposits and the FDIC will pay out $18.8 million to the broker and agreed to purchase $656.5 million in assets at a discount of $100 million, and pay a 1% premium on deposits. The FDIC will retain the rest of the failed banks’ assets.
The FDIC estimates that the cost to the Deposit Insurance Fund of the failed Teambank will be $98 million.
Over the weekend, depositors of both failed banks can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.
Banks in the spotlight
Banks have been hit hard by risky, mortgage based assets during the mortgage meltdown. The Troubled Asset Relief Program, a $700 billion rescue, was enacted last fall to recapitalize the struggling banking system and encourage lending.
Even as smaller, regional banks tumble, the government has made it a priority to prop up major financial institutions like Citigroup (C, Fortune 500) and Bank of America.
Friday, Federal Reserve Chairman Ben Bernanke defended the distribution of bailout cash to big financial companies in a speech before a group of community bankers in Phoenix, Ariz. "I do not think we have had a realistic alternative to preventing such failures," he said.
In all of 2008, 25 banks failed. Sheila Bair, chairman of the FDIC, said Friday that she expected bank failures to cost about $65 billion over the next five years.
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The numbers paint a grim picture. Almost 300,000 full-time jobs lost since last October, close to 83,000 in February alone. The volume is startling and is driven home every day as newspapers, television, radio and websites carry news of more plant closings and layoffs.
The forecasts are so bleak experts are drawing comparisons to the Great Depression.
To put a face on the numbers, the Star spoke with five people from across the GTA to find out how the recession is affecting them. They range from blue collar to white collar; from a laid-off plant worker to a part-time comedian. Their backgrounds are different, but they all share similar worries.
Some are in a better financial position than others, but there are no guarantees that their current situation will last.
One is still pulling in a regular paycheque, though it is a temporary position created to help fellow workers deal with a sudden plant closing and is expected to dry up by the end of summer. Two are using contract or freelance work to keep afloat, unsure of what the next week or month will bring. The remaining two are handing out hundred of resumés, getting by on spousal support or tapping into their savings and RRSPs.
Each week the Star will check in with one of the five, to find out about their successes and disappointments.
Noel Vanhorne, 57, worked as a press operator at Polywheels Manufacturing Ltd. in Oakville, a plant that made plastic and fibreglass parts for GM. He was also a union chairperson. It went bankrupt in June, putting about 280 people on the street.
"I think it will be hard times for a number of years to come. The recession is not going to jump out overnight," he says.
Vanhorne, who lives in Mississauga, works as a co-ordinator at the Polywheels Action Centre, where former employees can get information on job opportunities, retraining and Employment Insurance.
He can still pay his bills; he has just had to shuffle a few around to make ends meet. He says most of the men and women he speaks with are in worse straits than him.
Janis Greener is using unemployment to go back to school; she is taking a three-week program in Mississauga offered through the province called the Experienced Workers Program. The 57-year-old Mississauga resident says the course offers workshops on everything from personality assessment and resumés to cover letters and how to sell yourself during an interview.
"They say 70 to 90 per cent of the jobs out there are never advertised. It’s through who you know."
The class is geared to people 45 and older. "Because we face different issues than somebody who is fresh out of school with no working experience or who has just arrived in the country."
Greener was a marketing manager for Artistic Innovations, a home décor company, for more than two years, she lost her job when the company went bankrupt in July.
The roughly 65 employees were told it was a temporary layoff, then notified the company was shut down, she says. EI covers rent and utilities, RRSPs make up the rest. She is working on about $400 a week, for medical bills, transportation, car and home insurance and food. Little luxuries, like manicures and high-quality cuts of meat are out the window. "I miss my ability to go out for social activities," says Greener.
She has sent out about 200 resumés and came very close to two jobs. "There have been positions where I have been interviewed by the company, down to the wire then there is a hiring freeze."
Kathy Scott would settle for one job. "I have applied to 365 jobs and out of 365 I have applied for I got three interviews."
Scott is raising two teenagers and about to get full custody of her 5-year-old foster child. She was let go from her administrative assistant position at Angus Consulting Management Ltd. last spring.
"I basically started looking for work right away," says Scott, 54.
She worked from her home for a real estate company as a project manager for about six weeks. Then the market dived and her job went with it. Scott says she has earned high praise for her resumé, but believes her age is holding her back. She lives off spousal support and payments from foster care. Once the mortgage is paid she has about $900 a month to pay bills and buy food and clothing. It doesn’t go far. Lately she has taken to turning down the heat and the kids use blankets.
It would help if families like hers got a bit more help from the government, she says cash advance. "I have paid into unemployment for 30 years and when I really needed it was eligible for 26 weeks."
Todd Van Allen has been working as a freelance writer and comedian since he was laid off from his job as a project manager at Exchange Solutions, a company that tracks consumer-spending habits, in 2007.
He also plans to start doing voice-over work.
Van Allen loves what he does, but freelance work is a pretty precarious way to make a living, he says.
You have to take everything you are offered because you can because you never know when it will dry up, he says. "When it rains it pours," says the 39-year-old Toronto resident.
"It gets tense once in a while but you can usually find some way to stumble through."
Sandra Brawley, a real-estate agent dealing in new homes and condos, says it wasn’t a surprise when sales started to slow about a year ago.
"It didn’t stop dead in its tracks by any means, but there was a wave we were riding for a long time with a steady flow of sales and it was almost an unrealistic amount." What is happening now is a correction, she says. "It sounds bad but really it’s just a normalizing of what is going on."
Brawley, 53, and her husband, also in real estate, have adjusted how they live, buying only what they need. She admits to being "a bit obsessed" with the price charts offered by Toronto Hydro explaining the cost of electricity at any given hour.
She has also been heading to No Frills to get deals on groceries.
"We will be fine. We are borrowing now, we will pay it off later." They have raided their RRSPs and are using a line of credit but are convinced the market will pick up.
"People are taking a more wait-and-see attitude," with real estate, she says. "I think people were in a dark tunnel and now they are starting to get the sense that there may be light at the end of it."
Brawley has no plans to change her career, but out of curiosity applied to a Lowes store to see if someone with her qualifications could get a job. They called her back, but she wasn’t offered an interview.
Five people with distinctly different skills, doing what they can to stay afloat. Despite their circumstances all five are staying positive and trying to find ways to adapt to the new economic reality.
Vanhorne hopes the provincial government will promote job-training programs for Canadians out of work. There are jobs in areas like sustainable energy, but workers need more information on how to get involved, he says. When his job wraps up in six months he expects to go on EI and plans to upgrade his own skills.
"I think people should really take whatever opportunities they can to get retrained. Because you probably won’t be working anyways."
Greener says even though her resumés have not resulted in a job she believes there is work out there. The class is a big help.
"You need to be more positive in a negative environment."
She graduates on Friday. She is optimistic but unsure about whether she will ever enjoy full-time work again.
"In the future people will be working two part-time jobs to meet their financial needs," she predicts.
Scott plans to keep handing out resumés. "I’ve always been able to take care of myself and my family, so this is a really difficult thing for me." She is working hard to stay positive.
"I have to, that is the only way I can keep going."
Van Allen expects that working multiple jobs is just part of the new economic reality.
"I think what you are going to see is more and more people becoming less and less dependent on traditional full-time work," he says.
"I think the days of 1950s – you work at a job for 50 years, you get a gold watch at the end – those days are long gone. But I think we have known that for a while."
While Brawley waits for the real estate market to improve she leans on an expression her father employed in tougher times, "Keep on going."
She says she and her husband are putting a positive spin on the lull.
"We are going to take retirement now while we are young, then we are going to work until we are 80. So we are enjoying it while we can enjoy it."
North American stock markets appear headed for a flat open Friday, with investors concerned that the U.S. Federal Reserve's plan to inject more money into the economy might not be a cure and could lead to some damaging consequences.
The worry is that the Fed's decision to buy long-term Treasury bonds and other securities will weigh on the dollar and stoke inflation.
In just two days, the U.S. dollar has fallen five per cent versus the euro and three per cent versus the yen. It's fall against the Canadian dollar has been more moderate.
The Canadian dollar opened at 80.61 cents US, down 0.19 of a cent from Thursday's close.
The loonie soared by as much as 1.78 cents earlier in the day to 82.02 cents, the first time it had been above 82 cents since early February, but it closed up just 0.56 cent on Thursday.
Markets initially jumped on the central bank's announcement Wednesday, contributing to a rally that has seen major indexes in New York and Toronto gain more than 14 per cent over seven days fast cash now.
But Wall Street gave up a portion of those gains Thursday as the Dow Jones industrial average fell nearly 86 points to 7,400.8.
Toronto's S&P/TSX composite index rose for the eighth consecutive session, moving up 61.39 points to 8,690.49 points.
Ahead of the market's open Friday, Dow Jones industrial average futures rose three, or 0.04 per cent, at 7,414. Standard & Poor's 500 index futures fell two, or 0.3 per cent, to 773.10, while Nasdaq 100 index futures rose 0.75, or 0.06 per cent, to 1,204.25.
Oil prices fell 52 cents to US$51.09 a barrel in premarket electronic trading on the New York Mercantile Exchange.
Overseas, Japan's stock market was closed for a holiday. In afternoon trading, Britain's FTSE 100 fell 0.2 per cent, Germany's DAX index rose 0.2 per cent, and France's CAC-40 fell 0.4 per cent.
The fallout continued Tuesday over $165 million in bonus payments paid to executives by bailed-out insurer American International Group.
Treasury Secretary Tim Geithner said Tuesday night that the government would force on AIG a "contractual" duty to pay the government an amount equal to the total of the bonuses.
Geithner, in a letter to Congress he released publicly, said the money would be deducted from $30 billion in government assistance AIG is set to receive.
The government has stepped in four times to help AIG through $170 billion in bailout packages, in large part because it had issued risky credit default swaps — a kind of insurance for bad loans made by banks and investment companies.
Geithner also said that future bonus payments by the firm would be "subject to strict executive compensation provisions" contained in the economic recovery law enacted last month.
Separately, a New York prosecutor said Tuesday that AIG had given 73 employees bonuses of more than $1 million each.
In a letter to House Financial Services Committee Chairman Barney Frank, D-Mass., New York state Attorney General Andrew Cuomo said that the money AIG issued this year to its Financial Products employees included one bonus that was as high as $6.4 million.
The financial products division wrote the insurance contracts on high-risk mortgage-backed securities that eventually brought AIG to its knees.
"These payments were all made to individuals in the subsidiary whose performance led to crushing losses and the near failure of AIG," said Cuomo in the letter. "Thus, last week, AIG made more than 73 millionaires in the unit which lost so much money that it brought the firm to its knees, forcing a taxpayer bailout."
"Something is deeply wrong with this outcome," he added.
According to Cuomo, the top seven recipients received more than $4 million each, and the top 10 got a combined $42 million, according to Cuomo’s letter. In the next tier, 22 AIG employees received a combined $72 million with those bonuses totaling at least $2 million each.
Cuomo also noted that 11 of the employees who received $1 million bonuses from AIG (AIG, Fortune 500) no longer work for the insurer, including one recipient who took home $4.6 million.
The New York attorney general dismissed AIG’s claim that it paid the bonuses to retain its top talent.
Cuomo said the fact that AIG was able to cut deals with its workers for them to take salary cuts in exchange for getting retention bonuses "flies in the face of AIG’s assertion that it had no choice but to make these lavish multi-million dollar bonus payments same day payday loans."
On Monday, Cuomo said that he had subpoenaed AIG for the names of the executives who had received bonuses. On Tuesday, AIG said it would respond.
"We are in ongoing contact with the attorney general and will respond appropriately to the subpoena," said AIG spokesman Joseph Norton. "In the meantime, AIG Financial Products continues to work diligently to unwind operations, and has made significant progress in doing so."
Cuomo’s letter comes ahead of a House Financial Services committee hearing on AIG’s impact on the global economy scheduled for Wednesday at 10 a.m. ET.
Though the attorney general did not call for any specific measures to be taken, "I hope the committee will address [the issue] head on."
Washington irate
"Everybody is offended by the message that any bonus like this sends," White House spokesman Robert Gibbs said Tuesday. "It offends our common sense, [and] it offends our values."
President Obama on Monday tasked Geithner and government lawyers with figuring out a way to recover some of those bonuses and explore "every legal avenue" to stop the payouts.
"It’s hard to understand how derivative traders at AIG warranted any bonuses," Obama said.
But some say the bonuses, which were promised before the government bailed out the insurer, could be hard to legally reverse.
Still, Senate Majority Leader Harry Reid, D-Nev., said Tuesday that the Senate Finance Committee will pursue a legislative fix that would prevent bonus recipients from keeping all their money. "And that’s an understatement," said Reid.
Two key senators announced a plan to impose a hefty tax on retention bonuses paid to executives of companies that received federal bailout money or in which the United States has at least a 50% equity interest.
Sens. Max Baucus, D-Mont., and Chuck Grassley, R-Iowa — the chairman and top Republican on the Senate Finance Committee — said that companies would not be allowed to restructure the payments to those executives through deferred compensation to avoid the tax.
General Growth Properties Inc GGP.N, the No. 2 U.S. mall owner, said on Monday some of its lenders had agreed give it more time to refinance its debts, pushing off yet again the threat of bankruptcy.
General Growth said lenders under its 2006 Senior Credit Agreement had agree to forbear exercising certain rights on $2.6 billion owed until December 31.
But the real estate investment trust’s subsidiary, The Rouse Company LP, did not reach agreement on a similar forbearance from holders of $2.25 billion in debt. It extended the expiration date for the so-called consent solicitation it had previously announced until March 20 from March 15.
General Growth, which faces $27 billion of debt maturing over the next four years, warned last week it was already past due on $1.18 billion of debt — not including the Rouse Company notes — and that this threatened the firm’s liquidity position.
Hedge fund manager William Ackman, one of the company’s biggest shareholders, told Bloomberg Television on Monday that he expects the company to file for bankruptcy “imminently.”
In its statement on Monday, General Growth said it already had agreement from a committee holding 41 percent of The Rouse Company’s notes to forbear from exercising those remedies freecreditreport.
Two of five sets of noteholders had reached the required levels of consent for the solicitation to succeed, according to figures provided by the company.
“We are pleased with the positive reaction to the bond consent solicitation,” said Chief Executive Adam Metz. “Given this support, we feel it is appropriate to extend the expiration date.”
General Growth spokesman Tim Goebel could not be reached immediately for comment.
The company, which owns or manages more than 200 shopping malls across the United States, in February reported it barely broke even in the fiscal fourth quarter as a deteriorating economy took the air out of consumption and pressured occupancy rates.
The company’s shares closed on Monday down about 5 percent at 61 cents. They are down about 99 percent off their 12 month high in May last year.
(Reporting by Helen Chernikoff; Editing by Lincoln Feast)
U.S. Treasury Secretary Timothy Geithner said he will soon announce details of his plan to help banks clean up the non-performing assets that are clogging the financial system.
“We’re going to move quickly to lay out a new financing program to deal with these legacy assets,” Geithner said in an interview with Bloomberg television two days ago during a meeting of Group of 20 finance ministers in Horsham, England. “We have and expect to see a lot of support for this program” among potential buyers of the assets, he said.
Geithner disappointed investors and was criticized by U.S. lawmakers including Senator Kent Conrad of North Dakota, chairman of the budget committee, for outlining plans to address toxic assets without explaining how they will work. The Standard & Poor’s 500 Stock Index slumped 4.9 percent on Feb. 10, the day Geithner unveiled the plan.
Geithner’s program has three main elements: Injecting fresh government capital into some of the country’s biggest financial institutions; establishing a public-private partnership to handle as much as $1 trillion of banks’ bad assets; and starting a credit facility with the Federal Reserve of as much as $1 trillion to promote lending to consumers and businesses.
The Treasury hopes to unfreeze credit markets by providing new incentives to banks and investors to resume trading in mortgage securities and other troubled assets. U.S. regulators are conducting a new series of examinations to make sure banks have enough capital to accept losses when selling these assets, while also planning to provide government financing to the investors who might buy them.
Gauging Interest
More information about the public-private investment plan will be made available in the next week, a Treasury official told reporters in Horsham, speaking on condition of anonymity. The Treasury will roll out enough information for investors to gauge their interest in the new program, along with an operational timeframe, the official said.
In the interview, Geithner said the Treasury already is well on its way to starting “a dramatic lending program to help securities markets get flowing again.” He said regulators will ensure banks have a “backstop of capital” to make sure they can “do what’s necessary” to restore lending.
The Treasury also is looking to a new program, launched in partnership with the Federal Reserve, to encourage banks to make new loans. The Term Asset-Backed Securities Loan Facility is intended to revive the market for securities backed by consumer loans, yet it may start with just a handful of deals, according to participants in the preparations.
TALF Delay
Last week, the Fed delayed by two days until March 19 the deadline for submissions of proposed packages of debt that investors can buy with Fed financing. Brokers and investors have had difficulty agreeing over contract terms for the TALF, the people said.
The Treasury isn’t worried if the TALF gets off to a slow start, the Treasury official told reporters no fax payday loan. The program is meant to be a longer-term effort to spur new lending, so a slow initial take-up shouldn’t be surprising, he said.
Details of another plan to spur lending to small businesses will be announced today by Geithner and President Barack Obama, according to a person familiar with the matter. The administration plans to use $375 million to expand federal guarantees and lower fees on small-business loans, the person said.
Geithner met over the weekend with Chinese Finance Minister Xie Xuren, days after Chinese Premier Wen Jiabao said he was “worried” about China’s investment in U.S. Treasury securities and wanted assurances that the holdings are safe. In Horsham, Geithner said the U.S. and the Chinese focused on their common goal of helping restore health to financial markets and the global economy.
Good Tone
“The tone was very good,” Geithner said in the interview, when asked about his meeting with Xie. “China is playing a very strong, very stabilizing, very important role in responding to this global crisis and we’re going to work closely with them.”
Geithner left the G-20 with a broad pledge from his counterparts to wield monetary and fiscal policy “as long as needed” to heal financial markets and the global economy. The ministers also were supportive of Geithner’s proposal to increase funding for the International Monetary Fund, without specifically endorsing his target to provide up to $500 billion.
On the subject of executive salaries and bonuses at institutions receiving bailout funds, Geithner said he wanted to see “guidelines for the future” to better align corporate pay and risk. The Obama administration has not yet released specifics of how it will apply its new executive compensation limits along with new restrictions passed this year by Congress.
AIG Bonuses
Separately, American International Group Inc., the insurer saved from collapse by a $170 billion taxpayer bailout, was ordered by the Treasury to scale back its $1 billion plan to give retention pay and bonuses.
AIG agreed to reduce some retention payments in 2009 by 30 percent and tie bonuses to the company’s recovery, according to a person briefed on the matter and a letter from AIG Chief Executive Officer Edward Liddy. The New York-based insurer still plans to distribute about $165 million on March 15 because of legally binding contracts, said the person, who declined to be identified because the talks weren’t public.
Geithner was “really upset” by AIG’s plan to distribute the bonuses, Austan Goolsbee, a top White House economist, said on the “Fox News Sunday” program yesterday. “You worry about that backlash” from the public, “but you’re also angry,” he said.
U.S. store sales showed a smaller-than-expected decline in February after an unexpected surge in January that was bigger than originally reported, according to a government report Thursday.
The Commerce Department said total retail sales fell 0.1% last month, compared with January’s revised increase of 1.8%. January’s increase was originally reported at 1%.
Economists surveyed by Briefing.com had been expecting a decrease of 0.5% for February.
This second month of better-than-expected sales results prompted one retail expert to say he was "hopeful" that the six-month stretch of monthly sales declines was "moderating" and could reverse before the end of the year.
"We have changed our thinking based on these numbers," said Scott Hoyt, senior director of consumer economics with Moody’s Economy.com.
Hoyt said the surprisingly strong sales numbers both in January and in February’s core sales, which exclude auto purchases, was due to lower-income consumers having more money in their pockets as a result of government actions.
"There was a significant increase in payments to Social Security, and welfare and food stamp payments in January," said Hoyt, adding that this factor combined with a reduction in tax payments was boosting household budgets.
"There will be another bump to household cash from the government over the course of spring and into summer no credit check payday loans. That could spur spending again," he said.
But another analyst was less optimistic.
"It [retail sales increase] is highly unlikely to last given the latest downdraft in consumers’ confidence and the continued pressure on incomes as payrolls collapse," Ian Shepherson, chief U.S. Economist with High Frequency Economics, wrote in a report Thursday.
"It looks to us like little more than a temporary, though welcome, rebound," he said.
The overall monthly sales number was dragged down by a 4.9% drop in auto sales and a 4.3% decline in sales of auto parts.
Sales excluding autos and auto parts increased 0.7%, compared to a revised 1.6% rise in January. The measure had originally shown a 0.9% increase for January.
Economists had forecast a decrease of 0.1% for February sales, excluding auto purchases, according to Briefing.com.
The government report showed sales rose across retail categories, including a 2.8% gain clothing purchases, a 0.7% increases in furniture sales and a 1.1% increase in purchases at department stores.
Gasoline station sales jumped 3.4%, boosted by rising gas prices at the pump.
More consumers, struggling to contain medical expenses, are resorting to "pill cutting" to makes their prescriptions last longer.
And at some drug stores, pharmacists are stepping in to help cash-strapped customers get the option to split their pills.
Although the drugstore chain "doesn’t advocate any one practice," Walgreens (WAG, Fortune 500) spokesman Robert Elsinger said he’s learned anecdotally of many instances over the past year in which pharmacists have contacted doctors on customers’ behalf for "double" dosage prescriptions of some medications.
As Elsinger explained, for many popular medications - but not all - a larger dose is often the same price as the lower dosage. He said a 40-milligram pill of the cholesterol-cutting drug Lipitor, for example, can cost the same as a 20-milligram pill.
"If the price is the same, people can cut the higher dose pill in half so they’re paying less for more medication," Elsinger said.
So getting double the dosage, then splitting the pills to get twice as many 20-milligram pills, would help consumers reduce their co-payments.
The savings can be even greater for consumers who are paying out of pocket for prescription drugs.
Industry watchers say pill cutting is catching on in a tight economy as consumers, insurance providers and employers all search for affordable ways to manage rising health care costs.
About 15% of Americans, or one in six people, say they’re splitting their pills in half, according to the latest consumer survey from non-profit group Kaiser Family Foundation.
As evidence of this trend, retail sales of "pill splitters," small box-shaped devices used to cut pills in half, have also increased over the past year.
Medical devices maker Carex Health Brand, one of the leading makers of the pill splitter, said it sold over 2 million of its Apex pill splitters in 2008, up 9% over the prior year.
Its Apex pill splitter, priced under $5, is sold at mass discount and drug stores such as Wal-Mart (WMT, Fortune 500) and Amazon.com (AMZN, Fortune 500).
"Despite a pullback in consumer spending, products like the pill splitter are generally need driven, and continued to [sell] at retail because they’re helping consumers and insurance companies save money," said Nathalie Kim, vice president of marketing with Carex Health Brands paydayloans.
Some large insurance companies are now favoring pill splitting because it help them save money on co-payments as well.
UnitedHealthcare (UNH, Fortune 500), for instance, offers its customers a voluntary "half tablet" program and even gives a "free" tablet splitter as incentive to sign up.
Under UnitedHealthcare’s program, a doctor writes a new prescription for twice the strength and half the quantity of a medication, noting the patient’s intent to split the tablets on the prescription,
Once the prescription is filled, the patient pays only half the usual copayment.
The insurer’s program covers 18 popular medications, including the antidepressant Zoloft, blood pressure drug Diovan, and cholesterol-reducing drugs Crestor, Lipitor and Zocor.
Healthcare experts have mixed feelings about pill cutting.
"It’s very important for consumers to know that not all pills are meant to be split," said Sophia De Monte, a registered pharmacist and member of the American Pharmacists Association.
Pills that are "scored," or have an indentation down the middle, can be split. Other medications, such as hard or soft capsules, should not be split, she said.
Even with scored tablets, De Monte said there’s a risk of "uneven" cutting that can affect the efficacy of the pill.
Her best advice: "Speak to your doctor or pharmacist first. Don’t split pills on your own. And see if there are other choices, like a generic drug or another lower-priced medication if cost is a concern."
For his part, consumer advocate Greg Scandlen took issue with insurance companies advocating pill splitting as a way for consumers to save on drug costs.
"Co-pay is usually $ 5 or $10. So it’s not much savings anyway," he said. "If consumers are splitting pills, they should get better cost benefit."
Instead, he suggests insurance companies split half the savings with the customer. "If their pill splitting plan saves [insurance companies] 90% per prescription, they ought to reward the consumer with half that savings," he said.
And make the reward more direct to consumers. "Just send the consumer the check," he said.
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