New home construction surges 41%

Economists were expecting housing starts to jump to 655,000.

New construction of single-family homes, the key sector of the housing market, rose 10.2% over the month to an annual rate of 593,000.

New construction of multi-family homes -- buildings with 5 or more units -- was 68,000.

April was the last month in which sales to first-time home buyers could qualify for a federal tax credit of up to $8,000. Earlier this year lawmakers extended the deadline through April 30 and added a new credit of up to $6,500 for some existing home owners who move.

"The increase in demand prompted by the tax credit has lifted construction," wrote Ian Shepherdson, economist at High Frequency Economics, in a research note.

"But the expiration of the credit ... has made homebuilders wary about continuing to add new homes during the summer," he said.

Building permits: That's probably why applications for building permits, a gauge of future construction activity, sank in April. Permits fell to a seasonally adjusted annual rate of 606,000 last month, down 11.5% from a revised 685,000 in March.

Economists were expecting 680,000 permits. But despite this month's sharp drop, permits were still up 15.9% from April 2009.

"In the near-term the drop in permits clearly signals falling starts ahead," Shepherdson wrote. 

Consumer credit drop resumesEconomy picks up with service sector growth, more home contracts

Retail Sales

Economists surveyed by Briefing.com had anticipated that sales would rise 1.2% in the month.

March retail sales surged 7.6% compared to the same month in 2009.

Sales excluding autos and auto parts rose 0.6% last month, also topping forecasts. A consensus of economists had projected sales excluding autos to edge up 0.5% in March.

Sales of motor vehicles and parts posted a strong 6.7% gain, while sales of electronics and appliances fell 1.3%.

"This is another good reading," said Adam York, an economist at Wells Fargo. "But we're not out of the woods yet."

York said March sales benefited from promotions tied to the Easter holiday, which came earlier than usual this year. He said some of those gains may be shifted over to the April report.

"These are decent numbers," he said. "It suggests that the consumer is recovering, but by no means are we looking at a strong economic recovery."

The rebound in retail sales comes as the labor market has shown tentative signs of improvement. The Labor Department said earlier this month that the economy gained more jobs in March than any other month in the last three years.

0:00/1:48Job growth ... now what?

Sales at many of the nation's retail chains reported strong sales in March due to unusually warm weather, Easter shopping and improved consumer confidence.

Thomson Reuters, which tracks monthly same-store sales for 30 chains including Costco (COST, Fortune 500) and Target (TGT, Fortune 500), said last week that chain stores posted the biggest single monthly sales gain on record in March, extending a run of seven straight monthly increases.

All of this bodes well for the economy, which is driven mainly by consumer spending.

After a prolonged slump, U.S. gross domestic product, the broadest measure of economic activity, turned positive in the second half of 2009. But the subsequent gains in GDP have been driven mostly by reductions in business inventories and government stimulus.

The economy remains vulnerable enough for policymakers at the Federal Reserve to maintain interest rates near historic lows to help boost activity.

The Fed will release its latest report on regional economic activity later Wednesday. Separately, Fed chairman Ben Bernanke will testify before a joint session of Congress on the economic outlook.  

Sweet incentives lift auto sales in MarchRetail Sales

Washington pushes for free credit scores

The credit score, however, has not been made available for free. It is a numerical representation of the information in a consumer's credit report, which covers a consumer's entire credit history -- all debts, payment habits, and jobs held. The credit score is widely used as a shortcut by lenders, so monitoring it is crucial.

But options for getting a credit score have been limited to many "for-fee" sites. Some have lured consumers in by offering a "free" score in return for signing up to a credit monitoring service that could cost $14.95 a month or more, if consumers don't opt out before the end of the trial period.

The amendment "dramatically increases the number of people getting this critical piece of information," said Jennifer Talhelm, a spokeswoman for Sen. Mark Udall, D-Colo., who is sponsoring the effort.

A recent survey from the National Foundation for Credit Counseling found that some 65% of adults have not checked their reports in the past year. And nearly one-third of adults don't know their credit score.

Your credit score is used to determine far more than the cost of borrowing money.

Finding a job. More and more often, employers are using credit reports to help make decisions about job applicants. Employers conducted credit checks on 60% of job candidates in 2009, according to a recent survey from the Society of Human Resource Management, looking for top red flags such as bankruptcies or accounts that are in debt collection. By law, your employer must inform you if you're denied a job because of your credit history.

Buying a house. The consumer credit rating agencies use different numerical scoring systems, but generally speaking a 680 and above sits within the "good to excellent" range, while scores below 680 are labeled "ok to poor."

Only a credit score of 740 or better get the best mortgage rates, according to Greg McBride, senior financial analyst for Bankrate.com. A score between 700 and 740 could jack up interest rates by 0.5% to 0.8% on average. Anything less than 700 could be problematic in today's tight credit market.

Credit cards and student loans. If your credit score is 700 or better, you're in great shape to get the most competitive credit card rates, which average about 14% for a variable rate card. For those with marginal or poor credit, it will be more difficult to get a card at all. And those who do qualify will see lower credit limits, rates in the high teens to low 20% range, and more credit card fees, said McBride.

Even college students need to pay close attention to their credit scores because it's the primary factor in determining the rate on private student loans, which can range anywhere from 5% to 13% these days.

Auto insurance premiums. Insurers look at things like payment patterns, length of credit history, and the number of new applications for credit when calculating their risk formulas.

Not only can credit problems signal that you have little cash on hand to absorb the cost of an accident, making you more likely to file a claim, but studies have shown a correlation between bad credit and accidents. This could translate into higher premiums.

0:00/2:05The dangers of debt consolidation

Consumers should not apply for loans, just to get their scores. Multiple "inquiries" on your credit report can lower your overall credit score.

Although experts say Udall's bill is a step in the right direction, some are concerned that it will fall flat if it doesn't address the fact that lenders use multiple scores to assess creditworthiness.

"The most widely used score is the FICO," says Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling, "but the top three bureaus' are proprietary scores based on their information."

And some say that without context, including credit score ranges and scores relative to other credit rating agencies, consumers will not gain much.

"That's the type of context consumers will need to get the most benefit from having this type of information," said McBride. "Otherwise, [the credit score] is just a 3-digit number, which wouldn't be terribly meaningful to many consumers."

Still the bill may open the door to wider availability of free credit scores - for example, not just when you're denied credit, but perhaps once a year as is the case with your credit report.

"The government's website (annualcreditreport.com) started much in the same way, where consumers got their free credit report when denied credit," said Cunningham. "This may be a first step toward universally providing free credit scores to consumers."  

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Euro's woes a win for U.S. tourists

In the past six months alone, the euro has dropped nearly 17% against the buck, making travel more affordable for visitors with U.S. dollars.

"This is a rare chance for U.S. travelers to take advantage of a weak euro and a weak economy," said Kathy Lien, director of currency research at Global Forex Trading.

Not only will you get more for your buck, but now is a great time to book hotels, buy plane tickets and find shopping bargains because of the euro zone's down economy.

"The savings you'll get are incredible and because of the stronger dollar, you'll have a lot more day-to-day cash to play with while you're there," said Vassilis Comitis, commercial director at Fantasy Travel, a travel agency based in Athens.

Getting there: While plane tickets right now are significantly more expensive than last year's recession-era fares, that doesn't mean you can't find a good deal on a ticket this summer, said Rick Seaney, co-founder and CEO of FareCompare.com.

Seaney said he expects ticket fares to edge lower over the next few weeks and recommends buying a ticket no later than mid-June, since that's the time of year that ticket prices tend to jump.

And if you're looking for a real steal, tickets to Ireland and Portugal are the best deals right now with below average prices, said Jennifer Gaines, contributing editor of Travelocity.

Plus, the strong dollar will make your trip to Europe well worth the higher fare, said Seaney.

"If you look at all the costs for everything and for doing activities once you get there, it's probably even more optimal a bargain than it was last year when airline tickets were so low," said Seaney. "Most people get bogged down with airfare but should be looking at total trip costs."

Sleep tight: While you may have to fork over more than you would like for a plane ticket, you'll be able to find steeply discounted European lodging as hotels lower their prices to attract tourists, said Gaines.

"Relatively low hotel rates coupled with a stronger U.S. dollar helps to make Europe more affordable than in years past," she said. "While airline capacity cuts and higher fuel costs have driven the cost of airfare up, hotel rates have been slower to recover because, unlike the airlines, they do not have the option to cut capacity, and they still need to fill rooms."

As travelers worry about the euro zone's economic stability and pull back on discretionary spending, hotels need to cut prices to attract guests.

For example, a king-sized room at Rome's 5-Star hotel, Ambasciatori Palace, cost $310 per person last year, but can now be snagged for $205 a night through Central Holidays travel agency.

In Barcelona, where hotels rates are an average of $222 a night during the summer, you can find a room for $89 per night at the 3-star Hotel Onix Fira or a $113 per night room at the 4-star Novotel Barcelona Cornella, said Gaines.

The stronger dollar will also bring rates down significantly, said Lien of Global Forex Trading.

If you traveled to Europe six months ago, a 5-night stay in a hotel room at a rate of 100 euros per night would cost 500 euros or about $750. But if you travel there now, that same stay would cost you only $620.

Bargain shopping: Though some travel destinations in Europe are known for expensive department stores and gourmet food and wine, unexpected bargains are now seeping into even the most upscale stores.

In addition to the stronger dollar buying more, the weak economies of many European nations have forced store owners to stay competitive by steeply discounting their products and services.

For example, George Zarifopoulos, owner of jewelry shop Byzantino Jewelry in Athens, will offer a 20% discount from June to September in the hope of bringing in summer travelers.

And as more deals arise, Americans are heading to Europe just to splurge on luxury items that would have broken the bank only a couple years ago.

"For a while, people from Europe were bringing over empty suitcases to fill up with cheap things once they got to the U.S.," said Seaney of FareCompare.com, "but now it's Americans' turn to go over there and fill their suitcases with bargains."  

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Doctors' Medicare payouts to be cut 21% June 1

If the proposed cuts go through, physicians are worried their practices will be so strapped that they'll have to drop some of the 43 million Americans who are covered under Medicare.

But, of course, on the other side of the issue is cost to the government at a time when the federal budget is tight.

Federal law currently requires that the payment rates for doctors who accept Medicare be adjusted annually based on a formula that's tied to the health of the economy.

"The current formula is absolutely broken," said James Rohack, president of the American Medical Association. "Congress is in a hole, and instead of climbing out they keep digging deeper."

That formula was established in 1997, andthe law says rates should be cut every year to keep Medicare in the black.

But Congress has blocked those cuts in seven of the last eight years, setting up nine temporary patches often referred to as the "doc fix" -- three of which were in 2010 alone.

"It's hard to imagine this 21% cut actually being allowed to go through," said Patricia Neuman, a vice president at the nonpartisan analysis group Kaiser Family Foundation. "A cut of this magnitude would have a chilling effect on physicians."

'Annual agony'

Of course, delaying cuts merely kicks an existing problem down the road.

"This annual agony must end," said Lori Heim, president of the American Academy of Family Physicians, in a statement. "Postponing a permanent solution is false economy."

One possibleoutcome of the congressional wrangling is a five-year delay in the 21% cut in Medicare fees. That option, the most-discussed so far, would cost about $80 billion.

That spending would be exempt from a "pay as you go" law enacted in February that requires lawmakers to find ways to offset certain spending increases or tax cuts.

0:00/3:17Doctors opt out of Medicare

Other options include delaying cuts by a fewer number of years, but at higher reimbursement rates, provided that the cost is capped at $80 billion.

But the AMA's Rohack says he wants "a new formula that actually reflects the true cost of care." Lawmakers counter that repealing the current setup would cost $210 billion over 10 years.

The massive cost of retooling Medicare is the reason such a measure wasn't included in the new health care reform law.

"Like so many things, this is a fiscal issue -- it all gets down to money," Neuman said. "There's a lot of interest in changing the formula, but it's not so straightforward, especially from a budgetary point of view."

The AMA is pushing for a total Medicare overhaul because the years of temporary patches have created uncertainty for physicians and consumers alike, Rohack said.

"There will be letters saying, 'Dear Mrs. Jones, I'm closing my practice because I can't afford it anymore,' " Rohack said. "I'm worried they won't even be able to recommend other physicians because no one else in the community is accepting Medicare either."

A permanent fix would remove physician uncertainty, restore consumer faith and ultimately save money, Rohack said, adding that a permanent fix in 2007 would have cost just $49 billion.

"If they'd fixed this permanently years ago, it would have been a tadpole-sized problem," Rohack said. "Now, it's become a bullfrog -- and eventually it'll be Jabba the Hutt." 

To fix deficit, Congress needs the will to cutGM expects to pay off loans years early

Wall Street reform finale expected this week

The legislation, which has been through numerous ups and downs over many months, remains a moving target. But many lobbyists and veteran congressional watchers say they expect it to pass the Senate by Friday.

If that happens, leaders of the Senate and House -- which passed its own bill in December -- would likely hole up behind closed doors to negotiate differences between the two bills next week. The Senate and House would have to then each vote on the legislation one last time before President Obama signs it.

A couple hundred amendments have been filed to the already massive Senate bill, but most will not be considered.

0:00/4:13Enter bank reform, exit profits

The Senate may work well into the evening several days this week. On Monday night, lawmakers approved an amendment mandating that credit bureaus provide free credit scores to consumers in some cases.

Later in the week, the Senate will likely vote to strip the bill of a provision that would bar banks from trading derivatives if they want access to cheap emergency loans that the Federal Reserve makes available.

The Senate is also expected to vote on a controversial amendment that would exempt auto loans from tougher rules governing other consumer financial products.

The bill would establish a consumer financial protection regulatory agency that could write new rules to protect consumers from unfair or abusive mortgages and credit cards.

It would also create a council of regulators that would sound an alarm before companies are in position to trigger a financial crisis. Finally, the bill would establish new procedures for shutting down giant financial firms that are collapsing. 

Bills ignore ratings agenciesWall Street reform odyssey begins in Senate

Inflation (CPI)

The core CPI, which economists eye closely because it strips out volatile food and energy prices, was up 1.1% from a year earlier. In February, it inched 1.3% higher year over year.

March: Overall prices inched up 0.1% in the month, as rising costs for electricity were offset by declines in gasoline prices. The increase was in line with the 0.1% gain projected by economists. Prices did not budge in February.

Core CPI for the month of March was unchanged, compared to a 0.1% increase in February. Economists had forecast a 0.1% bump up.

"The rate of inflation was very low this month and still somewhat below the historical average," said Andres Carbacho-Burgos, an economist for Moody's Economy.com.

Historically, CPI stood between an annual rate of 2.4% to 2.5% and core CPI ran from 1.7% to 1.8% annually, he added.

The run-up in March CPI was driven in part by a 2.1% increase in electricity costs, which was offset slightly by a dip in home gas prices. Overall food prices edged up 0.2% during the month.

According to Carbacho-Burgos, the "abnormal" run-up in electricity prices could be related to "some unseasonable variation" in the price of coal, a key component in electricity creation, due to February's volatile weather.

Prices for new and used cars and trucks, airline fares and medical care costs were higher, with medical costs rising for the third straight month. Conversely, the costs for housing and clothing fell.

Interest rates: The low inflation supports the Federal Reserve's decision to keep its key interest rate near zero for some time. Recently, Fed Chairman Ben Bernanke has said that the economy is "far from being out of the woods."

Carbacho-Burgos says inflation doesn't look like a serious problem, even considering volatile energy. When the recovery gains full steam, he doesn't expect inflation rates to exceed normal levels. This should keep Fed policy stable for now.

"We don't see the Fed moving to stop inflation until year-end at the earliest, but they might hold off raising rates until the first meeting in 2011," said Carbacho-Burgos. 

Inflation (CPI)Consumer confidence nearly doubles locally