Gas falls for 11th day, nears 5-year low

NEW YORK (CNNMoney.com) -- A daily survey of gas station credit-card swipes shows that gas prices are dropping to the lowest levels in nearly five years.

Regular unleaded gas fell for the 11th consecutive day Tuesday to an average of $1.616 a gallon, down 3 tenths of a cent from the previous day's price of $1.619, according to motorist group AAA. That's the lowest price since gas hit $1.6027 a gallon in January 2004.

Prices are down nearly $2.50, or more than 60%, since hitting a record average high of $4.114 a gallon this July. Prices have plummeted along with the price of crude oil, the main ingredient in gas, as the current economic has crisis intensified and threatened demand for petroleum-based fuels. Oil has shed more than $100 a barrel since July.

In the United States, the world's largest oil consumer, people drove 100 billion fewer miles during the 12-month period between November 2007 and October 2008 compared with the prior year, according to the U.S. Department of Transportation.

State prices: Prices remained above $2 a gallon in only two states Tuesday: Alaska ($2.560) and Hawaii ($2.326).

Gas was cheapest in Missouri at $1.406 a gallon on average, and sold for less than $1.50 on average in 10 states.

Out of major U.S. cities, Anchorage, Alaska, has the highest average gas prices, at $2.382 a gallon, according to GasBuddy.com, a service that lets motorists post local fuel prices online. Kansas City, Mo. has the lowest average, at $1.357.

Diesel: The price of diesel fuel, which is used in most trucks and commercial vehicles, fell to $2.431 on average Tuesday.

Ethanol: The price of E85, an 85% ethanol blend made primarily from corn, fell by 1.2 cents to an average of $1.475 a gallon in Tuesday's survey, according to AAA. E85 can be used in place of regular gas in specially configured "flex-fuel" vehicles, but it is not readily available in some states.

The AAA figures are state-wide averages based on credit card swipes at up to 100,000 service stations across the nation. GasBuddy prices are averages of local regular unleaded gasoline prices that about 700,000 volunteer gas prices spotters have posted online. Individual drivers may see lower fuel prices in different areas of each state. 

Banks cut lending by 55% in 2008

NEW YORK (Reuters) -- U.S. loan issuance in 2008 tumbled 55% to $764 billion, the lowest volume since 1994, as the global credit crunch choked off lending to American businesses, according to data from Reuters Loan Pricing Corp.

Loan issuance was down from $1.69 trillion in 2007 as banks focused on repairing balance sheets damaged by mortgage losses and had little interest in underwriting riskier deals, RLPC reported on Tuesday.

Investment-grade loans fell to $319 billion, down 52% from 2007's 658 billion, while leveraged loan issuance slid to $294 billion, down 57% from $689 billion in 2007, RLPC said.

JPMorgan (JPM, Fortune 500) was the lead issuer for U.S. loans in 2008, with $198.5 billion, or 26% market share, followed by Bank of America (BAC, Fortune 500), with $137.4 billion, or 18% market share, and Citigroup (C, Fortune 500), with $116 billion, or 15% market share.

Lending will likely remain anemic in 2009, according to an RLPC quarterly survey of loan market participants. Nearly 54% of respondents said their lending will be limited to key relationships.

Institutional loans were especially hard hit as collateralized loan obligations disappeared from the market. Loans purchased by institutional investors slid to $69.6 billion, down 84% from 2007's $425.8 billion.

Loans backing leveraged buyouts, a key source of loan growth for the past several years, were down by 80% to just $41.3 billion from $209.9 billion.

Much of the loan slump came in the second half of the year, after Bear Stearns collapsed and Washington Mutual Inc. (WM, Fortune 500) was seized by regulators, sending convulsions through the financial system.

As banks scrambled to limit risk, bridge or temporary loans became the only viable funding source for many companies. A $14.5 billion one-year bridge loan backing Verizon Wireless' (VZ, Fortune 500) acquisition of Alltel Corp was the largest deal of the year in the loan market, according to RLPC. 


Taxpayers will get a return from the bailout
Despite slowdown, banks are still lending
Home loan troubles break records again

Home prices post record 18% drop

NEW YORK (CNNMoney.com) -- Home prices posted another record decline in October, falling 18% compared with a year earlier, according to a closely watched report released Tuesday.

The 20-city S&P Case-Shiller index has posted losses for a staggering 27 months in a row. In October, 14 of the 20 cities set fresh price decline records.

"The bear market continues; home prices are back to their March 2004 levels," says David Blitzer, Chairman of the Index Committee at Standard & Poor's.

Sunbelt cities suffered the most, but most of the country is watching home values fall. Home prices in Phoenix, Las Vegas and San Francisco all fell more than 30% on a year-over-year basis. Miami, Los Angeles and San Diego recorded year-over-year declines of 29%, 28% and 27%, respectively.

"As of October 2008, the 20-City Composite is down 23.4%," said Blitzer. "In October, we also saw three new markets enter the 'double-digit' club."

Atlanta, Seattle and Portland each reported annual rates of decline of about 10%.

"While not yet experiencing as severe a contraction as in the Sunbelt, it seems the Pacific Northwest and Mid-Atlantic South is not immune to the overall demise in the housing market," Blitzer added.

Deteriorating environment

Many of the factors affecting home prices turned strongly negative this fall, according to Blitzer.

"October was really the first month to feel the full brunt of the credit crunch," he said. "Up until the Lehman Brothers [bankruptcy filing on September 15], everyone felt relatively optimistic."

Plus, in many of the free-falling cities the majority of real estate sales consist of distressed properties such as foreclosed homes and short sales. These houses tend to sell at a steep discount to the rest of the market, and when they account for a large proportion of all sales, they can exaggerate the depth of price declines.

Of course, foreclosures continue to be a big problem as well. In October alone, nearly 85,000 people lost their homes to foreclosure, adding vacant inventory to an already overburdened market.

Home sellers should not expect prices to improve any time soon, according to Pat Newport, a real estate analyst for IHS Global Insight.

"I expect it's going to get quite a bit worse over the next couple of months," he said. "Existing home sales reports have really been bad."

Home sales fell 8.6% in November, much more than expected, to an annualized rate of 4.49 million units according to the National Association of Realtors.

And although interest rates are currently extremely low- the 30-year fixed-rate averaged 5.14% during the week of December 24, according to mortgage giant Freddie Mac (FRE, Fortune 500) -that's doing more to help people refinancing existing mortgages than it is to help new home buyers.

"Buyers still have to have a 20% down payment," said Newport, "and, in this environment, it can be hard to meet that criteria."

The latest Case-Shiller numbers provide more ammunition to Washington policy makers who want to do more to fix the housing mess, according to Jaret Seiberg, an analyst with the Stanford Group, the policy research firm.

"These data just add to the tremendous pressure on the president-elect and the Democrats to stimulate housing," he said. "That means more lucrative tax incentives and broad foreclosure prevention. All of this will likely be in the stimulus plan that Congress adopts in January."

Nicholas Retsinas, Director of Harvard University's Joint Center for Housing Studies, agrees. "Housing problems are at the core of our economic problems," he said, "yet, of the government interventions made during 2008, few were focused on housing."

With a new administration and Congress in place next month, he expects to see a renewed interest in stabilizing the housing market. 


Gas prices continue to slip
Wholesale prices fall again
November home sales tank

Midwest manufacturing lowest in 12 years

CHICAGO (Reuters) -- Manufacturing in the U.S. Midwest fell to its weakest level in almost 12 years in November as steel and machinery production dropped, the Chicago Federal Reserve Bank said Monday.

The Chicago Fed's Midwest factory index dropped 1.6% to a seasonally adjusted 96.4, the lowest since January 1997, from a downwardly revised 98.0 in October. The October reading was originally reported at 98.6.

Compared with a year earlier, Midwest output was down 10.8%, worse than the 7.3% drop in national factory output previously reported by the Fed.

Bucking its recent trend, Midwest auto sector production rose 1.1% in November after falling 3.6% in October and 6.2% in September.

Still, compared with a year earlier, the region's automotive output was down 24%, while national auto output fell 15.7%.

Regional steel output fell 4.3% for a second straight month and was down 14.1% on the year, worse than the 11.4% national decline.

Machinery sector output was off 2% in November after falling 1.7% in October. Regional machinery output was down 6.6% from a year ago, while national output fell 2.6%.

Resource sector output fell 1.9% in November after rising 2.3% in October. All five resource subsectors -- food, chemicals, paper, wood and non-metallic minerals -- were lower.

Compared with a year ago, Midwest resource output was down 4.8% in November while national output dropped 5.3%.

The Chicago Fed Midwest Manufacturing Index is a monthly estimate of manufacturing output in the region by major industries. The survey covers the five states that make up the seventh Federal Reserve district: Illinois, Indiana, Iowa, Michigan and Wisconsin. 


Manufacturing (ISM)
Industrial Production
November home sales tank

Treasurys edge higher as December winds down

NEW YORK (CNNMoney.com) -- Treasurys rose Monday as investors continued to seek out the safety of government-backed bonds in the last few trading days of the year.

Meanwhile, bank-to-bank lending rates continued to ease though at a slower pace than just a month ago, signaling some equilibrium may be near.

The price on the benchmark 10-year note rose 5/32 to 114-15/32 and its yield dipped to 2.10% from 2.13% Friday.

Bond prices and yields move in opposite directions.

The 30-year long bond fell 1-1/32 to 137-22/32 and its yield edged up to 2.64% from 2.61%.

The 5-year note rose 9/32 to 100-7/32 and its yield slipped to 146% from 1.51%.

The 2-year bond increased 8/32 to 100-6/32 and its yield dipped to 0.79% from 0.88%.

Meanwhile, the 3-month yield - widely considered a gauge of investor confidence - edged up to 0.02% from 0.015%. Yields hovering around the 0% level suggest investors are highly risk averse.

The government has been auctioning off debt to pay for bailout programs. On Monday, Treasury auctioned off $26 billion of 90-day bills and a $27 billion of 181-day bills.

However, as jittery investors continue to be battered by volatile equity markets, Treasurys may be forming their own bubble.

"Treasurys are acting a lot more like tech stocks: almost no sense of logic whatsoever," said Joe Clark, managing partner at Financial Enhancement Group.

Credit ease. The 3-month Libor was little changed at 1.46%. Rates were not tallied Thursday (Christmas) or Friday (U.K. bank holiday.

Libor - the London Interbank Offered Rate - is a daily average of rates 16 different banks charge each other to lend money in London, and it is used to calculate adjustable-rate mortgages. More than $350 million in assets is tied to Libor.

Libor rates have come down after a huge spike in October during the height of the credit crisis, as central banks worldwide have worked to inject liquidity into the global economy.

In fact, the 3-month Libor was at 2.22% just a month ago. And on Oct. 14, the measure reached 4.82%, the highest since mid-December 2007.

"Confidence is beginning to reemerge," said Clark. "Banks were skeptical of other banks, and that has dissipated a bit. They're giving credit to those who deserve it."

Market gauges. Two market gauges painted a mixed picture of confidence.

The "TED spread," a measure of banks' willingness to lend, slipped to 1.4 percentage points - very near the rate before the September collapse of Lehman Brothers.

The higher the spread, the more unwilling investors are to take risks. The rate has skyrocketed as the credit crunch exploded into a crisis, but it has fallen since the government put trillions of dollars into credit-easing programs in recent months.

Another indicator, the Libor-OIS spread, rose to 1.27 percentage points from last Wednesday's rate of 1.24 percentage points. The Libor-OIS spread measures how much cash is available for lending between banks, and is used for determining lending rates. The bigger the spread, the less cash is available for lending.

The Libor rates stand well above their central bank benchmarks, however, in a sign that financial system is still under stress. The Federal Reserve, the Bank of England and the European Central Bank have all slashed interest rates and made additional credit available to banks in hopes it will spark lending.

"When you cut interest rates when they're already this low, it's almost more widow dressing than it is reality," Clark said. "When everything is said and done, 2008 will be remembered more for what happened to the credit markets, not the stock markets." 


Despite slowdown, banks are still lending
Wall Street dips on Morgan woes
Good news when this bubble pops
November home sales tank

Commercial banks report $6B revenue

WASHINGTON (Reuters) -- U.S. commercial banks reported $6 billion of revenue from trading foreign exchange, interest-rate and other derivative instruments in the third quarter as credit spreads deteriorated and accounting rules inflated results, the Office of the Comptroller of the Currency said on Monday.

Revenue was up markedly from the second quarter, when banks reported $1.6 billion of trading revenue, as market disruptions led to a widening of credit spreads.

As credit spreads widened, the value of banks' trading liabilities declined and trading revenue increased.

Kathryn Dick, deputy comptroller for credit and market risk, said the value of trading revenue was inflated during the third quarter because of fair value accounting rules that went into effect at the end of 2007.

The rules require banks to mark derivative contracts to current market values each quarter.

"I don't think they had a really strong quarter; they had a good quarter," Dick said about the banking industry's trading revenue. "(The gain) was largely due to accounting purposes, not necessarily due to client flow or customer demand."

Dick said credit spreads have significantly narrowed during the fourth quarter as investor confidence in credit quality has increased.

"Credit spreads have come in dramatically, which means those (third-quarter) gains will be reversed," she said.

The comptroller's office, which oversees most big U.S. commercial banks, also said the notional amount of derivatives held by the industry -- the amount that generally does not change hands -- decreased by $6.3 trillion in the third quarter to $176 trillion.

However, credit derivative contracts increased 4% to $16 trillion.

"The uncertain credit environment created demand for credit hedges, particularly for counterparty credit risks," Dick said.

The OCC said the net current credit exposure for the industry increased $30 billion, or 7%, in the third quarter to $435 billion.

The agency uses that figure as the primary means to measure credit risk in derivatives activity. It said the largest five U.S. banks hold 97% of the total notional amount of derivatives.

The OCC said national banks reported strong client demand and increased client revenues due to wider bid/offer spreads and market disruptions such as the U.S. government takeover of mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) in September and the failure of Washington Mutual (WAMUQ) in the same month.

The agency also said derivative contracts remain concentrated in interest rate products, which account for about 78% of total derivative notional values.

(Reporting by Karey Wutkowski; Editing by Steve Orlofsky and John Wallace) 


Treasurys edge higher as December winds down
Despite slowdown, banks are still lending
Hedge graveyard: 693…so far

Inflation (CPI)

NEW YORK (CNNMoney.com) -- Consumer prices fell by a record amount in October, another worrisome sign about the contracting economy, the government reported Wednesday.

The Consumer Price Index, a key inflation reading, fell 1% last month, according to the Labor Department. That was much weaker than September's flat reading and exceeded the 0.8% decline a consensus of economists surveyed by Briefing.com had forecast.

Prices fell by the greatest amount since the Department of Labor began publishing seasonally adjusted changes in February 1947.

"It's a sign of the times in a difficult environment," said Terrin Griffiths, a former Labor Department employee and currently an economist at the California Credit Union League. "Prices rose too much earlier in the year, and now there's a drastic change in the global economic outlook."

The issue of consumer prices has changed dramatically in recent months. For most of the year, inflation driven by high energy prices has caused consumer prices to soar, reaching a 17-year high in July.

Deflation fears

Now, economists are worried about deflation - the opposite of inflation. Falling prices may be a welcome sign for consumers in grocery store aisles and filling up at the pump, but deflation is generally a bad sign for the economy.

"You cannot deny the threat of deflation now," said Griffiths. "We're in an environment where there is a general unwillingness to buy anything."

If prices fall below the cost it takes to produce products, businesses will likely have to cut production and slash payrolls. Rising unemployment would cut demand even further, sending the economy into a vicious circle.

Deflation usually represents a system-wide contraction in demand, with consumers waiting on the sidelines as they wait for prices to decline even further.

But deflation is not yet here, and despite predictions of a long and deep recession, deflation may never rear its ugly head in this business cycle. The 1% fall in October left overall prices 3.7% above where they were 12 months earlier. That's down from the 4.9% rise on that basis in September, and it is the lowest level since October 2007.

"It is very clear disinflation, but it is not deflation," Lakshman Acuthan of Economic Cycle Research Institute told CNN. "That would be persistent price declines. You may be seeing deflation in housing and energy, but what this is, is the silver lining of the recession - lower prices."

Government steps in

Demand for consumer products took a sharp turn downward in recent months as the credit crisis took hold. Consumer confidence fell to an all-time low in October, according to a recent Conference Board study. Consumers would rather save money than spend it, and for those who want to make big purchases, loans have been expensive and hard to come by.

As a result, the government has launched a massive, multi-trillion-dollar financial rescue effort aimed at stimulating lending and boosting the economy. But the global economic climate has taken a sharp turn for the worse since September. The stock markets have fallen drastically, and many experts believe the United States is in a recession.

So now the government needs to worry about monetary policy that both stimulates the economy and boosts lending in order to get consumers interested in buying products again.

"Stimulus, from a monetary perspective, is not really generating the desired results, because everyone is still hoarding money," Griffiths said. "With Obama coming in, the government will need to stimulate from a fiscal perspective, since it's really the labor market that's most impacting consumers."

President-elect Barack Obama has repeatedly stated his support for another economic stimulus package in the form of tax rebates to consumers, states and municipalities. Stimulus checks delivered in the spring of 2008 helped boost consumer spending in the second quarter, but the positive results proved to be only temporary when the credit crisis and economic downturn took hold.

Core inflation falls

The closely watched core CPI, which strips out volatile food and energy prices, fell 0.1%. Economists had expected a 0.1% rise after a 0.1% jump in September. Core CPI posted a 12-month change of 2.2%, down from a 2.5% rise on that basis from the month before.

Food prices actually continued to rise - increasing 0.3% in October - but energy prices fell by a staggering 8.6% in the month.

Core inflation is now at its lowest point since October 2007, but it is still a bit above the perceived comfort zone of central bankers. The Federal Reserve is generally believed to want to see the 12-month change in core inflation readings remain between 1% and 2%.

Economists say falling prices could give the Federal Reserve more wiggle room for lowering interest rates. The Fed cuts its key funds rate to an all-time low of 1% in response to deterioration in global financial system, but those cuts tend to be inflationary.

On Tuesday, a separate Labor Department report showed wholesale prices also fell by a record amount in October as energy costs continued to decline. 


Wholesale prices fall again
Jobless claims make surprise jump

Retailers want their bailout, too

NEW YORK (CNNMoney.com) -- Facing a disastrous holiday shopping season, the retail industry on Tuesday urged President-elect Barack Obama to incorporate three national tax-free shopping holidays in 2009.

The group wants the measure to be included in Obama's stimulus efforts.

"The situation is critical," the National Retail Federation (NRF) wrote in a letter to Obama. "In October, consumer confidence was at its lowest level in the 41 years. We urge you to act quickly on legislation to help stimulate consumer spending as one of the first priorities of your new administration," the NRF said.

So far, most of the ideas under consideration as part of the stimulus package vary widely, but do not include a plan for a tax holiday.

Consumer spending is vital since it fuels two-thirds of U.S. economic activity.

Talkback: Have you curbed your holiday shopping?

To that end, the NRF proposes that tax holidays be held during March, July and October 2009, each lasting 10 days.

It said the tax-free benefits would apply to all goods subject to a state sales tax from clothing and home furnishings to restaurant dining and automobiles but would exclude tobacco and alcohol.

According to the Census Bureau, state sales tax rates range from 2.9% to 7.25%. By temporarily lifting the sales tax for the three 10-day periods, the NRF estimates that consumers could save nearly $20 billion.

Based on the 112.4 million households in the United States, the figure would amount to almost $175 saved by the average family, the group said. It says that the sales tax holidays would also help millions of U.S. retail workers keep their jobs.

The NRF wants states to opt into these tax-free holidays and is asking Obama to urge them to participate in the effort, explained Rachelle Bernstein, vice president and tax counsel with the NRF.

The group wants the federal government to reimburse states that charge a sales tax for the lost revenue from this effort. The NRF also wants states without a sales tax to get federal funds on par with the rest of the nation.

This year holiday sales are expected to be the weakest in six years, according to the NRF. That's a huge problem for merchants since the November-December shopping months can account for as much as 50% of their annual profits and sales.

Unless stimulus to aid consumers is explored, the NRF warned that the retail recession will extend well into 2009.

"It does not appear that these concerns will abate any time soon," the NRF said in the letter. "With consumer spending accounting for 70 percent of GDP, it is difficult to foresee an improvement in overall economic growth until consumers regain their footing."

No tax vs lower tax

Mike Englund, chief economist with Action Economics, said there are both pros and cons to tax-free shopping events.

"Typically we see spending [in stores] drop off a month before the event as people hold off on their purchases," he said. This, in turn, "robs" spending from the surrounding months. "So the benefit to retailers may not be as much as expected."

"From a policy standpoint, perhaps the most effective way to deal with the sales tax issue is to lower the tax rate rather than eliminate it altogether," he said, adding that a lower rate rate would be an incentive to consumers to shop more while states would still get the revenue to invest in infrastructure development.

All news is bad news in real estate right now. Have you recently bought a house anyway? Send your story and photos to realstories@cnnmoney.com and you could be featured in an upcoming article. 


Black Friday, Blue Christmas
Shoppers get break on return policies
Holiday tally: Losers are plenty

Gas prices: Five-year low and falling

New York (CNNMoney.com) -- Gas prices fell for the ninth consecutive day, according to a survey of credit card swipes at service stations across the nation released on Sunday.

The national average price dropped for its ninth consecutive day to $1.627 a gallon, down 0.3 cents from the previous day, according to the motorist group AAA.

The national average last hit close to the current price on February 5, 2004, when it averaged at $1.627.

Prices are down 60% from the record high of $4.114 a gallon touched on July 17.

Gas is below $2 in all 48 contiguous sates and the District of Columbia, according to AAA. The highest average gas price was in Alaska ($2.52), while the cheapest was found in Missouri ($1.44).

The AAA figures, compiled by Oil Price Information Services, are state-wide averages based on credit card swipes at up to 100,000 service stations across the nation. 


Regulators adopt new credit card rules
November home sales tank
Gas prices fall to 4-1/2 year low

Phoenix finally hops on the train

PHOENIX (Reuters) -- With a hearty "All Aboard," Phoenix launched a sleek new $1.4 billion light-rail system Saturday amid uncertainty people will hop out of their cars and onto the train.

About 75 people became the first riders of the 20-mile system that snakes through a sprawling desert metropolitan area that includes the cities of Tempe and Mesa.

Planners project building 30 additional miles of light-rail lines by 2025, but it has yet to be determined if the area's love of cars will trump trains.

"The novelty is going to wear off and you'll see whether it catches on or not," said Sam Mazzeo, 50, a mortgage broker who was at a downtown Phoenix light-rail station. "People use mass transit in other cities. You know, gas is not going to stay cheap forever."

Critics question whether enough people will be willing to switch from air-conditioned cars and trucks to the light-rail system where they will have to sweat out summertime waits at train stations. The average high temperature for Phoenix in July is 106 F .

Phoenix had been the largest U.S. city without a public rail transit system. The fifth-most populous U.S. city has about 1.6 million people, with more than 4 million in the Phoenix-Tempe-Mesa area.

Phoenix's old trolley system shut down 60 years ago.

The economic crisis should encourage ridership, said Phoenix Mayor Phil Gordon.

"Everybody realizes that the days of three- or four-car families are a thing of the past," Gordon told Reuters. "We can no longer afford to do that."

Gordon said commuting by train was cheaper than car travel, reduced traffic congestion and helped cut auto emissions, which are linked to global warming.

Rides will be free until Thursday, the first day of 2009, when they will cost $1.25. A day pass will cost $2.50. Metro officials expect 26,000 boardings a day in 2009.

Other Western U.S. cities that built train systems in the past two decades include Dallas, Denver, Houston and Salt Lake City, Utah.

Plans for the system were first envisioned in the 1980s, but voters rejected several ballot measures before finally approving a sales tax to help finance light rail. Federal funds paid roughly half the cost. 


Good news when this bubble pops
It takes practice to make a good presentation

Save energy, save the economy

NEW YORK (CNNMoney.com) -- It looks like America may be getting a whole lot more energy efficient as part of any new stimulus plan.

But how exactly will that happen? While new light bulbs, insulation and air conditioners may play well with homeowners, will they actually put enough people to work to jumpstart the economy?

The energy-saving plan is expected as part of a stimulus package from lawmakers set for early January that could top $800 billion and include everything from tax breaks to road repairs.

Conservation is thought to be the first big energy component of President-elect Barack Obama's long-term energy plan, for a couple of reasons.

First, it can be done relatively quickly using existing state and regional agencies.

Conservation is also essential if the country is to switch to cleaner, more renewable forms of electricity, since they can't currently provide the sheer megawatts that fossil fuel or nuclear power can produce.

If a major conservation initiative is included in the stimulus package, it might look something like a plan being pushed by the electric utility industry and a handful of environmental groups.

Breaking down how the money is spent

Under that plan, the government would commit just over $30 billion toward making the nation energy efficient. The money would be spent as follows:

-- $3 billion for home energy retrofits, which could include rebate checks for people who buy energy-efficient appliances like air conditioners and refrigerators.

-- $3 billion for energy retrofits at public buildings, which may include hiring people toconduct energy audits and install so-called "smart-meters" that more efficiently allocate power.

-- $3 billion to promote energy efficiency in commercial buildings, largely in the form of tax breaks for developers who build them.

-- $3 billion for efficiency projects at schools.

-- $3.5 billion to expand current state energy-efficiency programs.

-- $5 billion more for states that pass stricter building-efficiency standards and restructure their utility conservation incentives.

-- $6 billion for local governments to make power plants and transportation networksmore efficient.

-- $4 billion for things that include construction of a better electric grid, efficiency at military institutions, workforce training, additional smart meters and an expansion of the weatherization program to better insulate homes.

In the interest of time, no new agencies are planned. Instead, the money would likely be administered by existing agencies, be they state, federal or regional, or utilities with strong conservation departments.

All told, the program might drop the country's energy consumption by half a percent each year for 20 years. While that doesn't sound like much, with the U.S. spending over $1 trillion on energy each year, the savings could top $5 billion a year, or over $100 billion in all.

"An economic recovery bill that includes significant investments in energy efficiency will not only create jobs immediately, but also and more importantly will bring American ingenuity and its 'can-do' spirit to a new, clean and sustainable energy future," said Kateri Callahan, president of the Alliance to Save Energy, when announcing the program last week.

Fine, but is it stimulating?

There's little doubt energy efficiency is something the country should invest in, and there's little doubt it will save energy.

But should we borrow money for it and include it in a stimulus bill - a bill that's designed to create jobs and get the economy back on track?

Plenty of people say yes.

The Alliance estimates their plan will directly create 190,000 jobs in short order.

The Associated General Contractors of America backs the plan, saying every $1 billion spent on infrastructure - energy efficiency included - nearly 30,000 jobs are created.

"Clearly, it will put construction workers back to work and put money in the economy," said Brian Turmail, a spokesman for the contractors' association. "This is a tremendous opportunity."

But others see it as little more than a tremendous opportunity for waste.

"How on earth can this thing be administered without generating a lot of waste," Rudolph Penner, a senior fellow at the think tank the Urban Institute, said of the stimulus plan.

Beyond the potential for waste, critics generally argue that it takes too long for the projects to start up to have the desired effect, and that the economics simply don't make sense.

Once the projects get going, they also say the projects are hard to stop and can then contribute to inflation, not to mention a ballooning debt once the economy recovers

On the energy part specifically, Penner said it would be hard to calculate who was conserving because of the incentive, and who would normally have spent money to conserve anyway.

"Some people would choose to insulate their homes anyway," he said. "For them, this would just be a windfall."

All news is bad news in real estate right now. Have you recently bought a house anyway? Send your story and photos to realstories@cnnmoney.com and you could be featured in an upcoming article. 


Obama ups jobs goal to 3 million
Startups defy sour economy
Obama reveals job-creation plan

Americans keep tighter grip on cash

NEW YORK (CNNMoney.com) -- In a troubling sign that consumers are retrenching this holiday season, consumer spending and orders for durable goods fell further in November, according to government reports released Wednesday.

A Commerce Department report showed spending by individuals fell 0.6% last month, after falling 1% in October. It was the fifth consecutive monthly decrease. Economists surveyed by Briefing.com had forecast a 0.8% drop.

Falling consumer prices contributed heavily to the decline in overall spending. When prices were not taken into account, spending actually rose by 0.6%.

The so-called core PCE deflator rose by just 1.0% in the past 12 months, down from 2% by that measure in October. The key reading, which measures prices paid by consumers for goods and services other than food and energy, echoes a Labor Department report released last week that showed consumer prices fell by a record amount for the second straight month.

Still, declining overall spending is a worrisome sign for the holiday shopping season. It's particularly troubling for the economy, because consumer spending accounts for more than two-thirds of the nation's gross domestic product.

Durable goods fall less than forecast

Spending declined as a separate report released by the Census Bureau showed orders for durable manufactured goods declined a seasonally adjusted 1% to $1.9 billion in November. Last month's decline was narrower than the revised 8.4% drop in October and the 3.1% drop forecast by economists.

In an encouraging sign, nondefense, nonaircraft capital goods - considered a proxy for business spending - actually rose 4.7%, following three consecutive decreases.

Inventories of manufactured durable goods, up 16 of the last 17 months, increased $1.6 billion or 0.5%. This is the highest level since the Commerce Department began tracking that measure in 1992, according to the report.

But the Commerce Department report actually showed spending on durable goods rose 0.6% in November after a 4% decline on that basis in the previous month.

Durable orders measures the dollar volume of orders, shipments and unfilled orders of goods built to last three years or more. The report is viewed as an indicator of manufacturing activity.

Real income, savings increase

The Commerce Department reported personal income fell 0.2% in November, following a 0.1% rise in the previous month. Economists had forecast no change.

The rise in personal income far outpaced the change in prices, however, leading to a 1% rise in real income in the period. That's more than the revised 0.7% rise in that measure in October and the biggest increase since September 2005.

Because income fell less than spending, consumers posted a savings rate of 2.8% in the month compared with 2.4% in October. That means the average household saved $2.80 on every $100 of after-tax income.

In an attempt to jump-start consumer spending, President-elect Barack Obama's economic team and congressional staffers said Tuesday they are close to finalizing a massive recovery proposal.

Some economists estimate the price of such a package could go as high as nearly $800 billion. But the last stimulus package only provided a short-term boost to the economy in the second quarter.

All news is bad news in real estate right now. Have you recently bought a house anyway? Send your story and photos to realstories@cnnmoney.com and you could be featured in an upcoming article. 


Jobless claims make surprise jump
Retail Sales
November home sales tank

Manufacturing (ISM)

NEW YORK (CNNMoney.com) -- A closely watched index of the nation's manufacturing activity fell to a 26-year low in November and stands at a level indicating overall economic contraction for the second straight month.

The Tempe, Ariz.-based Institute for Supply Management, a purchasing management group, said Monday its manufacturing index declined to a reading of 36.2 in November from 38.9 in October. It was the lowest reading for the index since May 1982, when the economy was mired in recession.

November's reading was also well below the consensus forecast of 38 that economists surveyed by Briefing.com had expected.

The tipping point for the index is 50, with a reading below that indicating that manufacturing activity is shrinking. A reading below 41 is typically associated with a recession in the broader economy.

"Manufacturing is in free fall," said Ian Shepherdson, chief U.S. economist at research firm High Frequency Economics, in a note to clients. "This survey promises continued recession."

The part of the index that measures prices paid by manufacturers for raw materials plummeted 11.2 points in November to 25.5. It was the lowest reading since May 1949, nearly 60 years, when it registered 20.1.

While lower prices can provide some relief for struggling businesses and consumers, the dramatic decline in prices over the last few months has many economists worried about the prospect of deflation.

Deflation occurs when prices fall as a result of weak demand. That can force businesses to cut costs by eliminating jobs, which undermines consumers' purchasing power and further weakens demand.

The report is "weak across the spectrum," said Bob Brusca, an economist at Fact and Opinion Economics. "Clearly, employment, new orders and output are getting hit hard," he said.

Employment in the manufacturing sector declined for the fourth month in a row. The employment index fell 0.4 to a reading of 34.2 in November, according to the index.

The index showed that new orders for manufactured goods fell 4.3 points to a reading of 27.9 in November from 38.9 the month before. New orders have been declining for 12 months in a row.

Manufacturers reported that order backlogs fell another 2.5 points in the month to 27 from 29.5. It was the lowest level since the ISM started tracking backlog data in 1993.

Monday's ISM report follows similar reports on the manufacturing sectors in Europe and China that also showed severe weakens. 


Industrial Production
Jobless claims make surprise jump
November home sales tank

Gas prices fall to 4-1/2 year low

NEW YORK (CNNMoney.com) -- Christmas travelers haven't paid this little for gasoline in nearly five years.

Gas prices declined for the sixth straight day on Thursday, falling below the $1.65 per gallon, according to a national survey of credit card swipes at gasoline stations.

The nationwide average price dropped to $1.648 a gallon, down 0.7 cents from Wednesday's $1.655, according to motorist group AAA. The survey bases its information on credit card swipes from up to 100,000 service stations across the nation.

Gas prices were at their lowest national average since Feb 20, 2004 AAA reported.

The plunge in the nationwide average price comes as welcome news to Americans who are traveling for the Christmas holiday.

Still, motor travel has continued to fall off even as gas prices have plummeted nearly $2.50 since this summer's record highs. Americans drove 100 billion fewer miles during the 12-month period between November 2007 and October 2008 compared with the prior year, according to the a recent report from the Department of Transportation.

As this year's recession deepened, demand for fuel waned, sending oil prices down more than $110, or 76% from July 11. Gas prices have dropped off 60% since they hit a record-high of $4.114 on July 17.

Now, average gas prices are below $2 a gallon in all 48 contiguous states. Utah had the cheapest gas, averaging $1.463.

Alaska continued to have the highest price at $2.591 per gallon, followed by Hawaii, which stands at $2.37. 


Gas prices continue to slip
Discount grocers win over shoppers
November home sales tank
Gas nears its low

Oil rises after more supply cuts

TOKYO (Reuters) -- Oil climbed above $36 a barrel on Friday, after the UAE joined Saudi Arabia in deepening oil supply curbs to comply with OPEC's biggest-ever output cut last week, telling refiners it would stiffen shipping limits on exports of its main grades.

Crude for February delivery was trading up 82 cents at $36.17 a barrel by 0203 GMT. It settling down 9.3 percent, or $3.63, on Wednesday, not far off the more than 4-½ year low struck a week ago. London Brent crude was up 75 cents at $37.36, after settling down $3.75 on Wednesday.

Markets were closed on Thursday for Christmas Day.

Oil prices have dropped about $110 a barrel since their mid-July peak as the global financial crisis chipped away at fuel demand, spurring OPEC producers to cut 5 percent of global oil production to stem the slide.

The Abu Dhabi National Oil Co (ADNOC), the main producer in the United Arab Emirates, the world's fifth-largest oil exporter, will continue to supply its customers of flagship Murban crude with 15 percent less than normal contractual supplies in January, while Upper Zakum supplies will be reduced by 3 percent from the norm.

ADNOC said it will reduce supplies of all four crude grades for February, the deepest supply cuts since it started cutting allocations in November.

A source with an Asian refiner said the ADNOC cuts were more than expected.

"ADNOC had already allocated January volumes, but they reversed the decision, so that messes up our schedule," the source said. "For February, the reduction volumes are very large, so we may need to adjust our ship loadings."

Analysts and refiners said the notice was hard evidence that one of OPEC's core members was implementing its share of the group's agreed 2.2 million barrel per day (bpd) production cut, giving relief to an oil price that had been undermined by worries about adherence to OPEC's cuts.

Oil tumbled on Wednesday on news that U.S. jobless claims had risen to a 26-year high and consumers had cut spending for the fifth consecutive month in November, reinforcing expectations of a prolonged slowdown in energy consumption.

A U.S. Energy Information Administration report on Wednesday showed crude inventories dropped 3.1 million barrels last week, countering expectations of a 400,000 barrel rise, but dealers said larger-than-expected builds in U.S. refined fuel supplies last week kept the outlook bearish.

OPEC may call an emergency meeting before March if prices extend their slide, President Chakib Khelil said on Tuesday.

Japan's deepening recession is expected to cut oil demand in the world's third-biggest oil consumer by 4.7 percent in the year starting in April, after sliding 5.7 percent in the fiscal year ending next March, the Institute of Energy Economics (IEE), Japan, said in its annual outlook this week.

In yet another sign that lackluster demand was hurting, a company source from China offshore oil specialist CNOOC Ltd said the firm was likely to scale down or delay some projects as slumping oil prices threatened to invalidate its previous oil economics. 

Mortgage applications soar as rates fall

NEW YORK (CNNMoney.com) -- Near record low mortgage rates sent mortgage applications shooting higher last week, especially for refinances, according to an industry report.

The Mortgage Bankers Association reported that its overall Market Composite Index, a measure of mortgage loan application volume, shot up 48% on a seasonally adjusted basis for the week ending Dec. 19.

That was driven by a 62.6% leap in the group's Refinance Index. But the Conventional Purchase Index also increased 17.7%. The only component of the overall index to fall was the Government Purchase Index, which largely tracks FHA loans. It slipped 3.4%

The Federal Reserve announced last week that it had cut its benchmark fed funds rate to nearly 0%, and it also announced it would buy more mortgage-backed securities issued by Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), moves designed to jumpstart the faltering U.S. economy partly by taking mortgage rates lower.

And the moves by the central bank helped lower mortgage rates. Freddie Mac's survey of mortgage rates last week showed more than a quarter-percentage-point drop to what was then the lowest level in the 37-year history of the survey. The 30-year fixed rate mortgage fell last week to 5.19% from 5.47% the week before.

Freddie's latest mortgage survey, released Wednesday, showed that the average 30-year fixed rate fell for the eighth straight week to yet a new record low of 5.14%, although the adjustable rate mortgages edged up by 0.01 percentage points from last week's level.

But the jump in mortgage applications and the low rates are a rare bit of good news for the battered housing and home building markets. The report comes a day after the National Association of Realtors reported the number of existing homes sold during November plummeted 8.6% as prices plunged by record amounts. New home sales were also lower, according to a government report. And housing starts and building permits now stand at record low levels.

All news is bad news in real estate right now. Have you recently bought a house anyway? Send your story and photos to realstories@cnnmoney.com and you could be featured in an upcoming article.  


Lower rates spark wave of refinancing
Mortgage rates fall to 37-year low

Industrial Production

NEW YORK (CNNMoney.com) -- Industrial production grew in October, after September produced the worst dropoff in factory output in 62 years, according to a report released Monday by the Federal Reserve.

Industrial production grew a seasonally adjusted 1.3% from the previous month, surpassing the economists' consensus estimate of a 0.2% increase, according to Briefing.com. It was the largest monthly increase in factory output since October 1999.

Factory output in October only increased because production in September fell by a revised 3.7%. The Fed said September's poor output was due mainly to Hurricanes Gustav and Ike's disastrous effects on the Gulf Coast industry as well as a Boeing workers' strike that month. September's was the worst month-to-month decline since February 1946.

"We're getting a little bounce back from the hurricane, but this is a kind of one-off rise," said John Silvia, chief economist at Wachovia. "The production numbers still show we're in recession territory."

Significant drop from last year

Though last month's industrial production rose from the previous month, it fell a substantial 4.1% from a year ago. Factory output in September fell 5.6% from September 2007. It was the first time that industrial production fell by that much in two straight months since the 2001 recession.

Industrial production is one of the four factors that the National Bureau of Economic Research considers to determine if the nation's economy has fallen into a recession. The other three factors are employment, personal income and retail and wholesale sales of manufactured goods.

Industrial production has been volatile over the past year and a-half, registering up-and-down growth since January 2007, but it has only recently shown the kind of huge drop-off that is typical in a recession. Even with October's rise, production has fallen 3.7% since July. Production fell for 12 straight months during the 2001 recession.

Manufacturing output increased 0.6% in October, and the factory operating rate rose slightly to 73.8%. But factory operations are still nearly six percentage points below the average rate from the 35-year period from 1972-2007.

Auto production lowest since 1991

Auto manufacturing declined 3.9%, sinking to the lowest rate of automotive production since March 1991. Vehicle production has fallen 18.3% from October 2007.

"There will always be an auto industry, but federal intervention will be needed to stabilize the existing status quo," Silvia said. "Without intervention, you'd see a very different GM or Ford."

Congress this week will consider whether to bail out the troubled U.S. auto industry that has seen sales and production fall off a cliff amid higher fuel costs and sinking consumer sentiment.

Production of durable consumer goods fell 2.1% last month, dragged down by lower output of appliances and electronics equipment.

Capacity utilization for all industries, a measure that tracks the percentage of factories in use, posted a seasonally adjusted increase of 0.9 percentage point to 76.4%. Economists had expected a increase to 76.5%.

In other troubling news, the New York Fed's regional manufacturing survey slipped 0.8 point to a reading of minus 25.4 in November. The index was dragged down by rising prices and unemployment. 


Home loan troubles break records again
Business inventory cut by most in 5 years

Obama closing in on stimulus plan

NEW YORK (CNNMoney.com) -- President-elect Barack Obama's economic team and congressional staffers are close to finalizing a massive recovery proposal but are still hammering out details, Vice President-elect Joe Biden and economic adviser Larry Summers said Tuesday.

One of the principal remaining issues is the price, which was estimated last week to go as high as nearly $800 billion.

"There's overall agreement on the scope and nature of the investment we are going to be making," Biden said at a meeting of Obama's top economic advisers in Washington, D.C. "While our short-term goal is to start creating jobs as quickly as possible, we plan to invest in areas...that will produce long-term benefits for the long-term health of our economy."

Specifically, the package will call for investments to be made in health care, energy, education and infrastructure, Biden said.

One example of a long-term investment with short- and long-term job potential, Biden said, is the development of 'smart grids,' which would transport electricity by way of wind and solar energy.

A coalition including utility industry players and environmental groups has asked Obama to commit $1 billion in stimulus money for smart-grid efforts, but the ultimate cost of fully modernizing the grid is estimated to be as high as $2 trillion.

The stimulus package will also provide funds to help the jobless and the middle class.

"It's going to provide a down payment on the tax relief that we promised for the strapped middle class," Biden said.

During the campaign, Obama promised, among other things, to offer a "Make Work Pay" credit for the middle class worth $1,000 per working couple or $500 per individual worker. It's still not clear if that's the amount of money that would be offered in the economic recovery package and what income thresholds would apply.

Biden noted that aid would be provided for the "most economically vulnerable" who can't find work. The likely provisions: increased unemployment benefits, higher food-stamp payments and aid to states to subsidize Medicaid costs, which will rise as more people lose their jobs and their healthcare insurance along with them.

Plans to keep tabs on the money

To address the concerns of bailout-weary lawmakers and taxpayers, Biden and Summers stressed that the money spent on stimulus will be monitored closely.

"Each of the investments undertaken will be carefully evaluated before it is undertaken to make sure it is a rational investment, not simply a make-work project," said Summers, a former Treasury secretary who will head Obama's National Economic Council.

Summers noted the Internet may be used to ensure transparency and track projects' progress. "And there will be accountability for the success in carrying out those investments," he said.

Biden also said repeatedly that the package will be earmark-free.

"I know it's the Christmas season, but President-elect Obama and I are absolutely, absolutely determined that this economic recovery package will not become a Christmas tree," Biden said. "Every dollar will be closely watched to make sure it's being used in an effective manner."

That may be a hard promise to keep once Congress incorporates Obama's proposals into stimulus legislation - which it's expected to do in January.

Then again, it's Christmas, and the Obama team can certainly put an earmark-free bill on their wish list for Santa. 


Obama: I’ll help cash-strapped states
With no such thing as a safe bet, investors turn to the untraditional
Obama ups jobs goal to 3 million

Consumer confidence inches up

NEW YORK (CNNMoney.com) -- Consumer confidence rose slightly this month, coming off 28-year lows thanks to cheaper oil and deep discounts during the holiday-shopping season.

Reuters/University of Michigan released its monthly survey of consumer confidence Tuesday, and the December index increased to 60.1 from November's 55.3 - better than the 58.8 expected by economists surveyed by Bloomberg.

Talkback: Has the economy affected your holiday shopping?

The index was revised up from the 59.1 preliminary figure reported on Dec. 12, but the uptick is still substantially lower than the 75.7 reported in December 2007.

"It's a very minor increase, and we're still near all-time lows," said Adam York, economic analyst at Wachovia (WB, Fortune 500). "These surveys are fairly volatile in nature, and it's clear the rapidly deteriorating economic situation is pretty dire for the American consumer."

Temporary relief

Lower gas prices and deep discounts at retail stores provided temporary relief, according to the report, but absent the holiday price slashing, the index is expected to fall again next month.

"Even for those who haven't been laid off or suffered salary cuts, it's on their mind," York said. "It's a real problem for retailers."

He added that the country is likely "only halfway through what we'll see in job cuts."

Deflation concerns skyrocket

"The most significant change recorded in the December survey was the record plunge in inflation expectations," Richard Curtin, director of Reuters/University of Michigan Surveys of Consumers, said in a statement.

In fact, one in four consumers expected deflation would occur, a higher percentage than any time since the 1950s, the report said.

"We don't often take that number into strong consideration, but this shows a sharp concern," York said.

Still, the decline in gas prices and commodity prices "should start to help consumers soon," York added. "But even that wont completely offset income losses that come from a pretty bad labor market."

2009 outlook

Total consumer spending is expected to decline by 1% in 2009, with an "unusually slow recovery in 2010,"Curtain said.

"The personal finances situation of consumers remained bleak," the report said, adding that "the majority reported that their finances had recently worsened."

In the December survey 75% of consumers said they expect the recession to continue throughout 2009; 70% also forecasted a rise in unemployment.

"The fourth quarter will be the worst in economic growth," York said. "While the first quarter wont be pretty, it will be better." 


Discount grocers win over shoppers
Shoppers get break on return policies
Consumer Confidence

Consumer Confidence

NEW YORK (CNNMoney.com) -- A key measure of consumer confidence rose in November, after falling to an all-time low last month, as American households continue to grapple with the weak economy.

The Conference Board, a New York-based business research group, said Tuesday that its Consumer Confidence Index rose to 44.9 in November from an all-time low of 38 in October. It was significantly better than 39.5 reading that economists surveyed by Briefing.com had forecast.

Still, the index remains at historically low levels as rising unemployment, tight credit and volatile financial markets have taken a toll on household budgets.

Those concerns were reflected in the present situation index, which declined to 42.2 from 43.5 last month.

"Consumers remain extremely pessimistic and the possibility that economic growth will improve in the first half of 2009 remains highly unlikely," said Lynn Franco, director of the Conference Board Consumer Research Center, in a statement.

At the same time, consumers' outlook for the next six months improved. Those expecting business conditions to get better in the near future rose to 11.4% from 9.6% in October.

The more optimistic outlook comes as gas prices fall and the shock of the financial crisis begins to wear off, according to Ian Shepherdson, chief economist at High Frequency Economics.

"Expectations are very sensitive to changes in both stock and gasoline prices so, in October, the big story was the massive plunge in stocks after the Lehman failure," Sheperdson wrote in a research note. "People are still very unhappy about this but the shock is starting to fade, allowing the plunge in gas prices to have a visible effect."

While consumers appear heartened by falling gas prices, they remain reluctant to make big-ticket purchases.

The number of respondents with plans to buy a new automobile fell to 3.7% from 4.5% in October. Those with plans to buy a home declined to 1.9% from 2.6%. Those planning to buy a major appliance fell to 23.8% from 26.5%.

"Everybody thinks things are going to get better but no one wants to be the first in the mall," said Adam York, economic analyst at Wachovia Economics Group. He added that Tuesday's report signals a "tough holiday season" for the nation's retailers.

The index highlighted the concern Americans feel about the labor market, with those saying jobs are "hard to get" rising to 37.2% from 36.6% the month before.

But the number of consumers expecting jobs to be more plentiful in the months ahead increased to 9.2% from 7.3%. And those anticipating an increase in their incomes rose to 13.3% from 11.1%.

Also on Tuesday, federal officials announced plans to pump more money into the consumer debt market.

The Federal Reserve Bank of New York will lend up to $200 billion to holders of securities backed by consumer debt, such as credit card debt, auto and student loans.

The Consumer Confidence Index is based on a monthly survey of 5,000 U.S. households that concluded on Nov. 18. 


Consumer confidence inches up
Wholesale prices fall again
Discount grocers win over shoppers

Final holiday push: Empty stores

NEW YORK (CNNMoney.com) -- Foot traffic plummeted at stores this Saturday compared to last year but sales increased slightly, suggesting that shoppers are making fewer, more efficient trips for their holiday buying, according to a report released Tuesday.

This holiday season has been a grim one so far for retailers. Research firms predicted last-minute deals would draw in consumers, but traffic on the Saturday before Christmas declined a sharp 17% from the previous year, according to a report from retail research firm ShopperTrak RCT.

However, stores' sales increased 0.5% from the previous year. That's a reverse of last year's buying pattern: "Super Saturday" 2007 saw a 2% increase in foot traffic from the prior year but only a 0.1% increase in sales.

"Super Saturday's performance highlights the continued economic pressures on the American consumer this holiday shopping season," said Bill Martin, co-founder of ShopperTrak, in a prepared statement.

"That being said, with the current economy and rather poor weather this past weekend, focused consumers still efficiently planned retail visits around deeply discounted items and proved they were willing to spend more on fewer trips," he added.

ShopperTrak expects "Super Saturday" to be the second-biggest day of this year's holiday shopping season, right behind the post-Thanksgiving "Black Friday."

But the overall outlook for retailers remains depressed: Year-over-year sales for the week ended Dec. 20 fell 6.5% compared with last year, ShopperTrak estimates.

"There are still a few more days, but this is a very weak holiday shopping season. I don't think there's any way around that," said Scott Hoyt, senior director of consumer economics at Moody's Economy.com.

Economy slows shopping

ShopperTrak cited the economic slowdown, inclement weather, and calendar shift as reasons for the decline in traffic. This year, the Thanksgiving-to-Christmas shopping season had one less week than it did last year, and "Super Saturday" in 2007 fell two days closer to Christmas.

"There's no question the economy is the big story here," Hoyt said. "We're seeing very rapid job loss, declines in household wealth - the whole litany of bad consumer confidence that's the hallmark of a bad recession."

Snowy conditions could have impeded shopper traffic, but "the calendar-shift argument can go both ways," Hoyt said.

Indeed, previous ShopperTrak reports seemed to imply 2008's shorter shopping season would cause procrastinators to shop a lot during the the weekend before Christmas, compared with 2007's longest-possible season.

ShopperTrak's foot-traffic estimates are drawn sample of around 50,000 retail and mall shops throughout the United States. The company's retail-sales estimates are based on Commerce Department statistics and on ShopperTrak's own industry research.

All news is bad news in real estate right now. Have you recently bought a house anyway? Send your story and photos to realstories@cnnmoney.com and you could be featured in an upcoming article.  


Plunging sales push KB Toys into bankruptcy
Black Friday, Blue Christmas
Shoppers get break on return policies
Retail Sales

Gas nears its low

NEW YORK (CNNMoney.com) -- Gasoline prices declined for the fourth straight day on Tuesday, falling below the $1.66 per gallon mark, according to a national survey of credit card swipes at gasoline stations.

The national average fell .4 cents to $1.659 per gallon for regular unleaded, according to motorist group AAA. A recent 86-day streak of declines ended at $1.656 in mid-December when prices bumped slightly higher.

Prices at the pump have dropped $1.751 per gallon from a year ago and are now down 59.6% from the record-high of $4.114 per gallon reached in mid-July.

All 48 contiguous states and the District of Columbia recorded prices below $2 a gallon, with the cheapest gas found in Wyoming ($1.452).

Alaska continued to have the highest price at $2.572 per gallon, followed by Hawaii, which stands at $2.371.

The price of crude oil, the main component in petrol fuels, has also declined as crude investors fear the global economic slowdown will decrease demand for fuel.

Oil prices fell Monday as the January contract, which sank below $40, closed last week. The February contract became the front-month contract, with prices starting the day above $40 a barrel. Crude prices have declined more than $100 a barrel from a record high of $147.27 on July 11.

The AAA figures, compiled by Oil Price Information Services, are state-wide averages based on credit card swipes at up to 100,000 service stations across the nation. 

Retail Sales

NEW YORK (CNNMoney.com) -- Retail sales fell for the fifth straight month in November as mounting job losses last month curbed consumers' ability and willingness to spend money in stores.

The Commerce Department said Friday that retail sales fell 1.8% last month, compared with a revised 2.9% drop in October, the worst monthly sales on record. October sales were originally reported to have tumbled 2.8%.

Economists surveyed by Briefing.com on average had forecast a decrease of 2% for November.

November is a crucial sales month for retailers since it marks the start of the important holiday shopping season. Combined sales for November and December can account for as much as 50% of merchants' annual profits and sales.

Sales excluding autos and auto parts fell 1.6% in November, compared to a revised 2.4% drop in October. Ex-auto sales were originally reported to have fallen 2.2% in October.

Economists had forecasted a decrease of 1.8% in the measure, according to Briefing.com.

"The numbers were a little bit better and that was expected because September and October were so bad," Michael Niemira, chief economist with the International Council of Shopping Centers (ICSC).

To his point, taking out the auto and gasoline station sales last month, core retail sales actually increased 0.3%, which was the first increase in that component since July.

The government report showed auto sales fell 2.8% last month. The sharp pullback in gasoline prices led to a deep 14.7% drop in sale at the pump.

But elsewhere, the report showed sales gains across retail categories. Electronics stores reported a 2.8% increase last month, sales at health and personal care stores rose 1%, clothing sellers registered a 0.8% sales gain, sales at sporting goods stores also increased 2.8%.

And department stores logged a 2.1% sales gain while general merchandise sellers reported a 1.2% increase in November sales.

Still, Niemira said these gains need to be measured against very big drops in both September and October.

"I think this is more of a technical bounce in the numbers as a result of much easier month-over-month comparisons, and it doesn't really reflect any fundamental improvement in consumer spending," he said.

Niemira's theory is supported by ongoing weakness in another gauge - same-store sales. Leading store chains, with the exception of discounter Wal-Mart (WMT, Fortune 500), reported declines in their November sales at stores open at least a year, which is a key measure of retail performance known as same-store sales. 


Shoppers get break on return policies
Business inventory cut by most in 5 years

Job Growth

NEW YORK (CNNMoney.com) -- The economy shed 533,000 jobs in November, according to a government report Friday - bringing the year's total job losses to 1.9 million.

November had the largest monthly job loss total since December 1974.

"This is a dismal jobs report," said Keith Hall, commissioner of the Bureau of Labor Statistics, at a congressional hearing. "There's very little in this report that's positive. This is maybe one of the worst jobs reports the Bureau of Labor Statistics (founded in 1884) has ever produced."

The number of jobs lost in the current recession, which began in December 2007, surpasses the 1.6 million jobs lost in the 2001 recession.

The job market expansion leading out of that recession was drawn out and tepid, so the jobs lost now are more at the core of the nation's economy - a scary sign.

According to the Labor Department's monthly jobs report, the unemployment rate rose to 6.7% from 6.5% in October. The rate is compiled in a separate survey from the payroll number.

Revisions

Economists surveyed by Briefing.com had forecast a loss of 325,000 jobs in the month.

Revisions to the two prior months brought more dismal news. October's job loss was revised up to 320,000 from 240,000, and September was revised up to 403,000.

The revisions brought the 3-month job loss total to 1.3 million.

November's report provided the first glimpse at employers' reaction after the peak of the credit crisis, reached in mid-October.

With credit largely unavailable and expensive, consumers scaled back their spending, dragging down manufacturing and construction businesses. Travel has also been scaled back.

As a result, job losses were spread across a wide variety of industries: manufacturing, leisure and hospitality, construction and even, in the midst of the holiday shopping season, retail.

Also seeing sharp declines were professional and business services, a category seen by some economists as a proxy for overall economic activity, and financial services, at the heart of the current crisis.

Deeper cuts likely to come

With the economy in a recession and most economic indicators signaling even more difficult times ahead, economists say job losses will likely deepen and continue through at least the first half of 2009.

Citing weak economic conditions, a slew of large-scale job-cut announcements came this week.

On Thursday alone, AT&T (T, Fortune 500), DuPont (DD, Fortune 500), Viacom (VIA), Credit Suisse (CS) and Avis (CAR, Fortune 500) announced cuts that totaled nearly 23,000 cuts, most of which will take place over the next several months.

According to a report by the outsourcing agency Challenger, Gray & Christmas, planned job cut announcements by U.S. employers soared to 181,671 last month, the second-highest total on record.

Temporary employment, including workers employed by temp agencies, fell by 100,700 jobs last month, the highest on records that go back to 1985. That could mean even more full-time payroll reductions to come, as employers often cut temporary workers before they begin cutting permanent staff.

Tig Gilliam, chief executive of placement agency Adecco, the nation's third-largest employment agency, said employers are trying to position their companies to weather the ever intensifying economic storm.

"CEOs are trying to get their businesses better positioned for the start of the year so they're not constantly chasing the slowdown" he said. "December will be another very tough month."

In another sign of weakness, a growing number of workers were unable to find jobs with the amount of hours they want to work. Those working part-time jobs - because they couldn't find full-time work, or their hours had been cut back due to slack conditions - jumped by 621,000 people to 7.3 million, the highest ever on records that date back to 1955.

Underemployment at 12.5%

The so-called under-employment rate, which counts those part-time workers, as well as those without jobs who have become discouraged and stopped looking for work, soared to 12.5% from 11.8%.

But there was hiring in some economic sectors last month. Government hiring has stayed strong throughout the downturn, adding another 7,000 jobs in November. Education and health services also grew payrolls, with a gain of 52,000 employees.

The average hourly work week fell to 33.5 hours last month. Economists expected the workweek to hold at October's level of 33.6 hours. But with a modest 7-cent gain in the average hourly salary, the average weekly paycheck rose by 52 cents to $613.05.

Obama: Time for stimulus

With 2008 already the worst year for jobs since 1982 and on pace to become the worst since 1945 - and second worst on records that date back to 1939 - support for a second stimulus package to boost the job market has grown among economists and lawmakers.

The prior stimulus package, in the spring, sent tax rebate checks to millions of tax filers. It helped the economy grow in the second quarter, but it did little to stem the tide of job loss in the country.

But the proposed stimulus package, supported by President-elect Barack Obama, would focus on aid states and municipalities as well as consumers, adding millions of infrastructure jobs for Americans.

"Our economy has already lost nearly 2 million jobs during this recession, which is why we need an Economic Recovery Plan that will save or create at least 2.5 million more jobs over two years," said Obama in a statement. "There are no quick or easy fixes to this crisis, which has been many years in the making, and it's likely to get worse before it gets better."

Experts say a two-part stimulus package is the right way to stem the tide of mounting job losses.

"First, you have to get consumers to spend, since 70% of the GDP is tied to consumer spending, and then you need job stimulus like highway projects to maintain economic job growth," said Gilliam. "This number is so bad that Obama will have to do something drastic soon."

In the meantime, Bush administration officials say the priority remains restoring liquidity to the financial system.

"We have to get the job done that we can while we have time left in office, and that is restoring credit," Secretary of Commerce Carlos Gutierrez told CNNMoney.com. "This is the key first step to restoring growth and restoring jobs."

The White House echoed the Commerce secretary.

"We need to focus on the causes of the economic downturn in order to reverse this trend in job creation, said Dana Perino, White House press secretary. "We intend to continue our aggressive efforts to restore health to our credit and housing markets." 


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How to spend $350 billion in 77 days

NEW YORK (CNNMoney.com) -- President Bush has grudgingly allowed General Motors and Chrysler to drive away with the last few billion bucks in Treasury's TARP till, which boasted $350 billion a mere 77 days ago.

How did it all slip away so fast?

The money pot -- intended to save the teetering financial system -- was formally proposed in a three-page missive that Treasury sent to Congress on the morning of Saturday, Sept. 20.

Over the course of two weeks, lawmakers debated the potential moral, ethical and financial hazards of handing over unprecedented power and unprecedented sums of taxpayer money to the Treasury. Their responses ranged from gobsmacked to apoplectic.

By Friday, Oct. 3, Congress had passed a 451-page bill that President Bush signed into law within hours. The law granted Treasury up to $700 billion, half of which was made available right away.

Since then, Treasury has:

sent checks totaling $168 billion in varying amounts to 116 banks;committed another $82 billion to capitalize more banks;bought $40 billion in preferred shares of American International Group (AIG, Fortune 500) so the troubled insurer could pay off an earlier loan from the Federal Reserve;committed $20 billion to back any losses that the Federal Reserve Bank of New York might incur in a new program to lend money to owners of securities backed by credit card debt, student loans, auto loans and small business loans;committed to invest $20 billion in Citigroup on top of $25 billion the bank had already received;committed $5 billion as a loan loss backstop to Citigroup;agreed to loan $13.4 billion to GM and Chrysler to get them through the next few months.That next $350B? Maybe not yet, Hank

Now, it's likely that Treasury will ask for the second tranche of $350 billion.

"It's clear Congress will need to release the remainder of the TARP to support financial market stability," Treasury Secretary Henry Paulson said Friday. "I will discuss that process with the congressional leadership and the president-elect's transition team in the near future."

It's not clear, however, whether Paulson will formally ask Congress for the second tranche of TARP money before turning over the keys of the Treasury to his likely successor, Tim Geithner.

Even if Paulson wants to, however, he's likely to face an uphill battle getting it.

"It seems very unlikely that Congress will give the final TARP installment to the Bush administration," said Jaret Seiberg, a financial services analyst at policy research firm Stanford Group.

That's because the apoplexy among those who originally opposed the TARP or who voted for it reluctantly has grown and spread for several reasons.

One cause of Capitol Hill's bailout rage: the Treasury has not used TARP money to help prevent foreclosures. Democratic lawmakers, who crafted the legislation and purposefully included language about foreclosure prevention, beg to differ. They have said repeatedly they will not release any more TARP money until the Treasury commits to use some of it to help troubled homeowners.

Second, lawmakers are not happy Treasury has given so much capital to banks without requiring them to lend more and do more to oversee how the banks are using the money. Paulson has said Treasury told TARP recipients that it expects them to lend. "But it's not practical or prudent for the government to say 'make this loan, don't make that loan,'" he said Thursday, speaking at an event in New York.

And third, Republicans in particular resent what they see as TARP mission creep. House Minority Leader John Boehner, R-Ohio, was one of many who opposed the auto bailout, and the fact that TARP was the source of the bridge loans in particular.

"The use of TARP funds is also regrettable, the latest in a growing list of TARP money uses that were not discussed with or envisioned by Congress when the program was authorized," Boehner said Friday.

House Speaker Nancy Pelosi, D-Calif., has said she is working on a bill to add more guarantees that future TARP funds be used to prevent foreclosures and protect taxpayers. But it's not clear yet how much Democratic support that will get. And there is near total Republican opposition in the House to approve any more TARP funding.

If that remains the case, the Obama team will have to add yet another entry to its ever-growing to-do list when they take power on Jan. 20.

-CNN congressional producer Deirdre Walsh contributed to this report. 


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Failed banks for sale...who's buying?

NEW YORK (CNNMoney.com) -- More banks will certainly fail in the months ahead, but at least regulators shouldn't have any trouble finding buyers.

Last month, two of the nation's top banking regulators - the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency - widened the buyer pool for failed banks by opening up the bidding process to both investor groups and individuals.

Traditionally, this process has been limited to chartered banks and savings institutions. But regulators changed their stance partly in response to strong demand from non-bank investors and expectations that the supply of failed banks will grow in 2009.

So far this year, only 26 of the more than 8,400 FDIC-insured institutions have failed. But with 171 institutions on the FDIC's so-called 'problem bank' list as of the end of the third quarter, it's likely that the assets of many more failed banks will be up for grabs next year.

Waiting for a failure

Despite some high-profile bank mergers in the past few months, there has yet to be a major wave of consolidation in the industry since many banks have been afraid of inheriting another company's troubled loan portfolio.

Instead, many banks have waited for others to fail outright before stepping in. That's because once the FDIC assumes control of the failed bank's troubled assets, an acquirer can get deposits on the cheap and a clean balance sheet.

Officials at the OCC and FDIC were unable to provide any figures as to how many investors have applied to buy failed banks so far. But they said interest in the program has been robust since it first launched.

One firm that has already won conditional approval to bid for a failed bank is Ford Group Holdings, an investment group which includes long-time Texas bank investor Gerald J. Ford.

That interest could extend to wealthy individuals who want to break into the banking game and even private equity players.

Christopher Flowers, who runs the buyout shop J.C. Flowers, scooped up a tiny bank in northern Missouri with $14 million in assets in August. At the time, he hinted at plans to expand.

But private equity investments in the U.S. banking industry have fared poorly this year. The $7 billion stake in embattled savings and loan Washington Mutual taken by private equity giant TPG was wiped out after the savings and loan giant collapsed in late September. So buyout shops may be reluctant to place any more bets.

"I think you have investors sitting on the sidelines saying 'Let's just wait and see how the entire business model shakes out,'" said Jess Varughese, managing partner at Milestone, a New York City-based management consulting firm that focuses on the financial services industry.

Jennifer Thompson, an analyst at the New York-based financial services research firm Portales Partners, added that the move to open up the bidding process for failed banks is largely symbolic anyway since banks themselves already have a hearty appetite for the deposits of failed rivals.

"It is just adding to the perception of liquidity in the market," she said.

Cautionary tale

Nonetheless, regulators have said they hope that by relaxing standards about who can participate in the program, they can fetch a better price for the assets of failed banks and better returns for the FDIC's deposit insurance fund.

The agency estimates that the fund, which is used to guarantee deposits when a bank fails, will suffer about $40 billion in losses through 2013.

Last summer's collapse of the California-based IndyMac wiped out $8.9 billion from the fund. Regulators have yet to announce a buyer for the troubled mortgage lender.

But the program is not without its risks.

Faced with an overwhelming number of bank failures, banking regulators enacted a similar move during the savings and loan crisis of the 1990s. That backfired, however, after a number of failed institutions were sold to developers which used the bank to fund their own businesses.

"The regulatory agencies may be looking at some individuals that are very astute," said one former staffer for the Resolution Trust Corporation, which the federal government created to help handle failed institutions during the savings and loan crisis. "That may look good now, but nobody really knows." 


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Gas prices continue to slip

NEW YORK (CNNMoney.com) -- Gasoline prices dropped for their second day in a row after four straight days of increases, according to a daily survey of gas station credit card swipes.

Regular unleaded fell 0.03 cents to a national average of $1.668 a gallon from the previous day's $1.671, according to motorist group AAA.

Prices started rising a week ago, for their first time in nearly three months, before resuming their slide. Gasoline prices have followed the price of crude oil, which has lost more than $100 a barrel since hitting a record high of $147.27 in July. Gas prices also hit a record of $4.114 a gallon in July.

In the United States, the world's largest oil consumer, drivers have cut back while supplies have risen. According to a Transportation Department report earlier this month, Americans drove 100 billion fewer miles between November 2007 and October 2008, compared with a year earlier.

Local prices: Gas is selling below $2 a gallon in every state in the Lower 48, but in Alaska, prices averaged $2.622 a gallon, and in Hawaii, they were $2.391.

Wyoming continued to post the cheapest prices, at $1.475 a gallon, according to AAA. Other states with gas below $1.50 a gallon included Utah and Missouri.

Out of major U.S. cities, Anchorage, Alaska, had the highest average gas prices, at $2.399 a gallon, according to GasBuddy.com, a service that lets motorists post local fuel prices online. Salt Lake City, Utah, had the lowest average, at $1.383.

Diesel: The price of diesel fuel, which is used in most trucks and commercial vehicles, fell by 0.09 cents from the previous day to a national average of $2.504 a gallon, according to AAA.

Diesel prices have fallen more than $2 a gallon since hitting a record high of $4.845 on July 17.

Ethanol: The price of E85, an 85% ethanol blend made primarily from corn, rose by 0.01 cents to an average of $1.499 a gallon in Saturday's survey, according to AAA.

E85 can be used in place of regular gas in specially configured "flex-fuel" vehicles, but it is not readily available in some states.

The AAA figures are statewide averages based on credit card swipes at up to 100,000 service stations across the nation. GasBuddy prices are averages of local regular unleaded gasoline prices that about 700,000 volunteer gas prices spotters have posted online. Individual drivers may see lower fuel prices in different areas of each state 


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Good news when this bubble pops

NEW YORK (CNNMoney.com) -- The next bubble is here...but this is one many people want to see popped.

Investors are snapping up Treasurys as they seek a safe haven from the market turmoil whipsawing the world. So afraid of anything risky, investors are even willing to give up interest payments to make sure their principal is safe.

Four-week Treasurys offer no yield, while the rates on some longer-term U.S. securities are at their lowest level in decades.

Treasurys are viewed as one of the world's safest investments because they are backed by the U.S. government. Investors, from foreign governments to gray-haired ladies, are stocking up so they can sleep better at night.

This flight to safety has pushed Treasurys to their highest prices and best returns in years. Bond prices move in the opposite direction from yields.

The three-month Treasury bill has returned 1.42% over the past 90 days and 4.01% over the past year, assuming interest is reinvested, as of Dec. 18.

The 10-year Treasury note has returned 11.29% over the past 90 days and 20.4% over the past year, while the 30-year bond has returned 23% over the past three months and 34% over the past year - their best returns since the 1982 recession.

Bubbles usually inspire frenzy and fear. Be it the 17th century tulip bubble, the dot-com bubble of the 1990s or, most recently, the real estate bubble, these manias don't end well. The current so-called Treasury bubble, however, is different.

Bubble like no other

Most bubbles form because investors feel there's lots of money to be made. As new people pile in to a particular asset, the price soars, further fueling the frenzy. When the craze finally ends, the price usually plummets.

Treasurys, however, have soared in popularity recently because people are afraid of other markets. Few investors feel they can make money in Treasurys. They are mainly just trying not to lose money.

"We're seeing more that there is a lot of fear," said Sheryl King, senior U.S. economist at Merrill Lynch, who added that investors are flocking to Treasurys because the market is the most liquid in the world.

When the Treasury bubble does pop, it will likely be a sign that the economy is turning around and that credit is more available again, experts said. People will sell off their Treasury holdings because they think that stocks and corporate bonds will offer better returns.

Ward McCarthy, managing director of Stone & McCarthy Research Associates, thinks a potential sell-off in Treasurys would not "be indicative of trouble in Treasurys, but more an indication of better investment opportunities in other markets."

"We all hope that happens," he said.

Meanwhile, there are benefits to record low interest rates for Treasurys. It means that the U.S. government can borrow money at very low cost, which it will need to do next year since it is likely to spend heavily on infrastructure as part of a new economic stimulus package.

Pain with the pop

The popping of the Treasury bubble will not be pain free, however.

While investors are favoring shorter-term securities, some searching for more yield are piling into Treasurys with longer maturities. The yield on the benchmark 10-year note hit an all-time low of 2.07% Thursday.

But investors could lose money even on super-safe Treasurys. A swift increase in yields would send prices plummeting. For every 1 percentage point increase in yield on a 10-year note, investors would see a corresponding 7 percentage point drop in value, said Eric Jacobson, senior bond fund analyst at Morningstar.

It could happen. A year ago, the yield on a 10-year note was more than twice what it is now and 18 months ago, it was 5.26%

This would leave investors in a tough bind - either hold onto a note with yields that could be far lower than the market rates at the time or sell it at a steep loss.

Also, if rates rise next year, President-elect Barack Obama could find it more difficult to fund his stimulus package, which some say could reach $1 trillion.

"The interest tab on that borrowing could grow," said Jane D'Arista, director of programs at the Financial Markets Center. "It might limit the price tag of what Obama could do." 


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