Contacts in many industries expressed concerns about high or rising costs. Increased costs led to higher selling prices at some firms, but many said that stiff competition was limiting their ability to increase prices. Input costs are up for a number of products, including energy, fuel, health insurance, shipping, lumber, paper, metals and property insurance. Prices are up for most construction-related materials. Home builders report higher costs for steel, concrete, copper, roofing and framing, and say that home prices are not rising as fast as they'd like. Agricultural producers expressed concern about high fuel, fertilizer and chemical costs.
Energy prices remain high by historical standards. Cold weather in the northern United States led to gains in heating oil and natural gas prices in December. Reduced consumption and warmer weather pushed natural gas prices down sharply in January. Natural gas and crude oil inventories are high. After falling steadily through mid-December, retail gasoline prices were pushed up at the end of December by rising crude prices and fears that MTBE regulation could reduce supply.
Prices are lower for most petrochemical products, including styrene, polystyrene, polypropylene, bottle resins, benzene, and ethylene glycol. Contract ethylene prices have held up, but spot prices are down significantly.
The labor market continues to slowly tighten, with more reports of hiring and rising wages. Workers with specialized skills remain in short supply, such as to supply the energy industry, trucking and some areas of manufacturing and information technology. Temporary service firms say a very high percentage of workers are obtaining full time positions from initial short term contracts.
Manufacturing activity strengthened. Unusually warm, dry weather led to very strong demand for construction-related products, such as brick and stone. Demand is up for fabricated metals compared to last quarter and last year. Primary metals producers reported strong demand, stimulated by home building and exports, and some said inventories were low. Food producers reported little change in sales. Demand for paper and lumber was also unchanged. Lumber producers say inventories are up.
High-tech manufacturers reported steady to slightly higher growth in orders and sales since the last survey. Semiconductor orders accelerated some, according to contacts, who say the outlook has improved. Semiconductor inventories are lean, and replenishing of inventories over the next several quarters is expected. Communications equipment manufacturers reported steady growth in orders.
Petrochemical demand and prices weakened from very strong levels. Downstream processors did not want to build inventory because they sense price reductions ahead, while producers held back on building inventories for year-end tax purposes. Significant levels of imports have been entering the country for polyethylene, bottle resins and other plastics. Contacts expect imports to continue as a hedge against hurricane-like disruptions.
Refinery margins, which were unusually high, began a sharp and consistent decline in early October that continued through November. Margins stabilized at relatively high levels in December. Gulf Coast capacity utilization rose from 78 to 85 percent in recent weeks. Two refineries are still out of operation due to hurricane damage and three others are operating on at a reduced level. Suppliers to the industry say most refineries are operating again but continue to struggle to stay up and to run at full capacity.
The service sector appears to have accelerated slightly. Accounting firms still report very strong activity, and demand has increased for firms that supply temporary workers. Temporary agencies say new business is mostly to supply firms that manufacture durables, which they attribute to business attracted by the low cost of doing business. Demand at legal firms has been mostly unchanged, with the strongest activity related to transactions, taxation, and real estate. Contacts say work to support transactions in the oil and gas sector has been especially profitable and strong.
Transportation firms reported continued strong demand. Cargo volume is up slightly over the past month, with growth mostly from international demand. Trucking firms say sales to the private sector are up. Wage and fuel costs have risen faster than shipping rates, they say, particularly for contracts with state and federal government where some rates were set three or four years ago.
Railroads report higher demand, with more shipments of coke, motor vehicles, crushed stone and ethanol. Contacts say shipments are lower for chemicals and grain, which they attribute to continued hurricane disruptions. There have also been fewer shipments of wood and metallic ores. The industry is working near capacity, and there are plans to add rail lines and purchase locomotives this year. Airlines report that demand has increased and is growing faster than capacity domestically. This has allowed carriers to increase prices and profits.
Retail sales have been reported as "good" but not "great." Sales continued to be strong in areas that have become home for hurricane evacuees. Contacts say that price competition is fierce, cutting into profits. A few retailers reported pockets of high inventory, but most said inventories are at good levels, although some retailers discounted to clear the merchandise. Contacts have now turned their focus to gift cards, which they hope will be used to purchase goods at full price leading to greater profit margins. Retailers expressed concern that new rules requiring higher minimum credit card payments will restrain spending by already strapped consumers. Auto dealers report that sales have improved some from a sluggish level.
Construction and Real Estate
Office markets continue to gradually improve. Vacancies are edging down, and there are reports that concessions are being reduced or eliminated. Commercial construction continued to rise. Industrial demand and construction was unchanged. New home demand is still strong, according to builders, who said prices have not risen as much as they would like despite increases in raw material costs. Demand for existing homes was still strong, with sales up over last year's record levels in most major metros. Demand for apartments grew steadily over the past six weeks.
Financial services respondents continued to report good credit quality and intense competition in pricing loans. Deposit growth is pretty strong, they say, but there is increased pressure to raise interest rates on deposits.
Energy activity has been strong. The domestic rig count was unchanged, but this was largely due to capacity constraints. There are still shortages of labor, equipment and materials, such as sand for fracturing and cement. Oil service firms report extremely strong demand and long backlogs. Equipment manufacturers are encouraging customers to order early and carry large inventories.
Day rates for rigs in the Gulf of Mexico are up sharply, partly because of hurricane-related losses but also because some rigs are leaving the Gulf for more lucrative markets overseas. The rig count is rising outside the U.S., and contacts say that service demand has been increasing rapidly because this drilling is complex and expensive.
Repairs are still bringing production back on line following the hurricanes. Twenty six percent of oil production in the Gulf of Mexico was off line on December 22, down from 46 percent on November 15. Nineteen percent of natural gas production was out of service on December 22, down from 37 percent on November 15. The recovery is expected to slow over the next several months, because several large outages will take months more to repair.
Conditions are very dry and subsoil moisture is low in parts of the District. Poor water supplies and pasture conditions have led some ranchers to reduce herds. Many ranchers are purchasing feed grains for their livestock because corn production was down 7 to 10 percent from the prior year. The Texas 2005 cotton crop was large, thanks to spring rains, hot weather and eradication of the boll weevil. Citrus producers benefited from high selling prices following wide spread hurricane damage to the crop in Florida. Ranchers are pleased that Japan lifted its ban on U.S. beef imports, although they expect a delay before producers regain market share. Japan had been the leading importer of U.S. beef.
Rep. Jim Dunnam (D-Waco) held a news conference today to urge Gov. Rick Perry to cancel the state’s lobby contract with Drew Maloney and his firm, the Federalist Group. Maloney is former chief of staff to Tom DeLay. “Governor Perry should not continue to waste huge sums of taxpayer money to fund the unnecessary lobby contract of another man who is directly involved in the unseemly activities of Tom DeLay,” said Dunnam. “Why do we need to spend over $1.1 million state tax dollars on lobbyists when Texas is home to 32 Congressmen and women, 2 Senators, and the President of the United States?” Dunnam took particular exception to the campaign donation practices of Maloney, stating that he has given money only to Republicans and even gave money to the opponent of an incumbent Democratic congressman. During the 2005 legislative session, Dunnam offered an amendment to cut the budget of the Office of State-Federal Relations and redirect that money to Texas veterans. The House did not pass the Dunnam amendment.
Perry’s staff said Dunnam’s press conference was “a baseless partisan attack.” Perry spokeswoman Rachael Novier told LSR that the Office of State-Federal Relation’s budget contains 15 percent less general revenue than it did in the 2000-01 biennium (when Perry became governor). She also said the contracts were competitively bid and the final decision on the contractor was made by staff at the Office of State-Federal Relations, not the Office of the Governor.
Novier also said that Texas gets more federal money than it has in the past. During the news conference Dunnam waived press releases from U.S. Sen. Kay Bailey Hutchison and U.S. Rep. Kevin Brady taking credit for federal money given to Texas to address relief of Hurricane Katrina victims. When asked whether the Texas congressional delegation deserves credit for increased federal money, Novier responded “Like everything that happens in Washington, it takes a team effort to get things done.”
During the press conference, Dunnam referenced a Houston Chronicle article that states that Maloney met with Rep. Tom Craddick (R-Midland) in May 2002. Craddick later became speaker. Today, Craddick issued a statement reiterating his opposition to hiring outside lobbyists. "I never agreed with the decision of the Office of State-Federal Relations (OSFR) to hire outside lobbyists,” Craddick said. “I never approved of these contracts, I did not recommend these lobbyist groups, and I have publicly stated that I am against this decision. The board on which I serve is explicitly an advisory board and the power to make those decisions ultimately rests in the hands of the Governor." Craddick also distributed a Nov. 3, 2005 letter to Perry stating his opposition to the contracts. A copy of the Craddick letter is posted below.
Sitting as I did today through a slate of meetings, my thoughts naturally turned to suicide.
No no - I wasn't thinking about it as a personal option even if one of the TV reporters was using way too much aftershave. Talk radio was awash today with people yapping about the recent Supreme Court ruling on Oregon's assisted suicide law.
One constant refrain from talkers seemed to be that while they disagreed with assisted suicide for terminal patients, they, like the majority of the court, agreed that it should be a state and not federal matter.
All well and good, as a rule of thumb. The more power in the hands of the states, the less the feds have. It's easier for you and me to have an effect on what happens in Austin than in Washington, D.C.
But really, should it be a decision for the state, either? At that F.A. Hayek, Ayn Randian base level my brain operates at, I am compelled to ask:
Just who exactly owns my life? Me? Or the state?
Because while I certainly recognize we have an obligation to protect mentally ill people from hurting themselves (and others), if a person is of sound mind but lousy body and wishes to end his or her life, why is that anyone else's business?
A person is not property of the state. (Nothing chills my blood so much as hearing a politican call children a national "resource.") We don't exist to serve the state.
Sure, if I go cuckoo-bananas and start hurting other people (i.e. violating their individual rights) that's where the state is supposed to step in. But if I am just choosing to bring my own life to an end -- and by the way that ain't going to happen, I demand heroic, nay valiant, efforts if I'm ever on the operating table -- but if I choose to end my own life, I'm not violating anyone else's rights.
G.K. Chesterton was a heck of a lot wiser than I'll ever be, and he said something in a broadcast talk in 1935 that stuck with me ever since the first time I heard it.
"The free man owns himself. He can damage himself with either eating or drinking; he can ruin himself with gambling. If he does he is certainly a damn fool, and he might possibly be a damned soul; but if he may not, he is not a free man any more than a dog."
Mary Mapes, the former CBS News producer who, depending on your political outlook, was either A) properly fired after her sleazy, sloppy partisan smear piece on 60 Minutes II, or B) was the noble journalist who became a scapegoat for a gutless network intimidated by an imperial presidency, will be at Borders at 3600 McKinney Ave. on Monday, Jan. 23, at 7 p.m.
Mapes, who lives in Dallas, will be signing "Truth and Duty," her account of the events surrounding that fateful pre-election broadcast questioning President Bush's military service, a report that hinged on the use of forged documents.
The council met Wednesday to discuss - at merciless length - the agenda for the Jan. 25 full city council meeting, and the items on the agenda that raised the most interest had to do with red lights, auto insurance and the development of a potential billion-dollar bond program for the November ballot.
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On the bond issue, the council has to decide whether to put together a $500 million, $1 billion or $1.5 billion package to address what it calls $7 billion in needs.
No one could satisfactorily define "needs" but in part, that's what's to be hashed out, in addition to exactly how big the bond measure will be. But among other items vying for new funds are streets, libraries, parks, police recruitment and compensation, infrastructure development. The list goes on and will likely dominate the retreat and several future council meetings.
The bottom line effect for homeowners is that they could see property taxes go up by anywhere from about $90 to $160 on $150,000 of assessed value, depending on the final amount of the bond.
Mayor Laura Miller noted that at the informal consensus asking amount of $1 billion, the coming measure would be twice "the size of the largest bond program we’ve ever had."
The council looks likely to approve next week a proposal to tow and impound the cars of uninsured motorists who get in traffic accidents.
A few council members expressed concern that a policy targeting people without insurance would unfairly target, um, people without insurance, and while no one said the words "illegal aliens" the word hung in the air. Opponents also worried this would tie up limited police resources.
But other council members - notably councilman Bill Blaydes who said he has been hit four times by uninsured motorists "and you ask me if I'm in favor of this?" - said they were more concerned with insured motorists who get hit, injured and possibly killed by people driving without liability insurance.
Mayor Pro Tem Don Hill wisely proposed the policy be put in place for a period of about two years, and then have the Dallas Police Department report to the council the effectiveness of the program in hard numbers before it is renewed. He noted that, given this is the same council that once approved the measure to issue fines to people who have no address or money (the anti-panhandling ordinance), it would be smart to actually measure the policy's effectiveness and cost before making it permanent.
By the numbers:
Dallas Police respond to 28,000 motor vehicle accidents a year involving 57,000 drivers.
30 percent of those drivers do not have liability insurance as required by state law.
The impounding of uninsured vehicles has been upheld by the US District Court.
Arlington, Irving, DeSoto, Mesquite and Haltom City all tow and impound uninsured vehicles, whether involved in traffic accidents or as the result of a routine stop.
Plano currently tows and impounds only uninsured vehicles involved in accidents.
DPD estimates the policy, if approved, will result in an additional 30 cars a day being impounded, costing an additional five man-hours per day for the police department.
The Dallas impound lot has a max capacity of 2,500 vehicles
Towing fee - $95
Impound fee - $20
Storage fee per day - $20
One less POS on the road - priceless
Red Light RFP Green Lighted
The council also have the go-ahead Wednesday for the city staff to send out RFPs for the installment and operation of red light cameras. The full on battle over the issue is yet to come, but it, too is likely to go ahead next Wednesday.
City Council Planning Retreat Schedule
Pack your NoDoz and your Jolt cola and join them at the Aboretum starting at 8:30 a.m. each day as the mayor and the council set the course for 2006.
The event is open to the media and the public.
Thursday's agenda for the overall 2006 strategic plan is scheduled to cover the following:
Trinity River Corridor
Friday's agenda should cover the more broadly undefined topics of:
Culture, Recreation and Education
Health and Dignity
Setting the Price of City Government
It is still a couple of months from serious tornado weather but the Dallas News today carries a story about a Weather Channel special that analyzes an F5 tornado (winds of up to 316 mph) strike on downtown Dallas. Given that what amounted to an F1 hit downtown Fort Worth a few years back and really tore the place up a direct tornado strike is worth considering. I saw this show awhile back and it wasn't something Victory is likely to put in a sales video. But the odds are indeed pretty small.
Of course, you would probably have a few minutes warning and unless Mayor Miller succeeds in closing them, there is a vast tunnel system in downtown that would allow most residents and office workers to seek safety.
What might be a more frightening scenario would be a strike on the Fort Worth's Texas Motor Speedway in middle of its April Samsung/Radio Shack 500 weekend race. That would be in early April this year a bit before the height of tornado season for north Texas. But April 7 was when the last big tornado hit Dallas. There would be a quarter million people there, tens of thousands of parked cars all around the track and almost nowhere to hide. There would be hundreds of air-borne cars and thousands of bodies. Getting in and out is a time consuming challenge under normal conditions. It would take emergency workers a long time.
Maybe Eddie Gossage and the folks at the TMS should be giving the weather some thought.
A close look at recent candidate campaign finance filings presents some clear views on who is supporting who in the governor’s race.
Walter UmphreyFirst, Republican/Independent candidate for governor, Carole Keeton Strayhorn, the state incumbent Comptroller reported she had $8.1 million on New Year’s Day. The report indicates some interesting contributors for a Republican of any stripe: Marquee name trial lawyers. Walter Umphrey of Beaumont kicked in $100,000 as did John E. Williams of Houston. Two other notable trial lawyers, Mike Gallagher and Mark Lanier, both of Houston, contributed $50,000 each.
Strayhorn and Perry both have their gambling interests on the list. Coastal Development, a company with gambling interests in Florida gave the Comptroller $75,000. Perry got $50,000 from Big City Capital of Dallas which promoted legalized slot machines in the last legislative session.
Strayhorn’s largest contributor was Dallas based Ryan Accounting which counts among its partners former Comptroller, and chairman of Gov. Perry’s Tax Reform Commission, John Sharp. While Sharp gave no money to any candidate the firm and its partners ponies up $400,000 to the Comptroller. The Comptroller had provided favorable rulings to the Ryan firm in the past according to the State Auditor. The Auditor charged no illegal activity.
Perry generally raked in big money from a range of business interests including large construction firms. These included $50,000 from Houston based Royce Builders and $35,000 from James Pitcock CEO of Williams Brothers Construction. San Antonio based AT&T was major contributor to Perry who recently signed into law a bill that allows the company to compete with cable companies in offering TV programming.
The Democrats in the race were distant also-rans. Democrat Chris Bell of Houston had a mere $165,000 available on the first, while late-come Bob Gammage reported about $53,000 on hand. Independent/independent Kinky Friedman had $269,000 left from a claimed $1.5 million raised since last July 1st.
The most interesting factor is clearly the entry of big name trial lawyers into the ranks of Strayhorn’s funders. Perry and his supporters are sure to use this as an issue by claiming that the Comptroller would roll-back hard won tort reforms. Perry is also sure to use the Comptroller’s Trial Lawyer support to raise more money from business supporters of trial lawyers. Combined with the next-to-nothing showing of the two Democrats may make Strayhorn the de facto Democratic candidates in the November race.
Early indications are that the two Democrats may find it all but impossible to raise meaningful amounts of cash to wage primary campaigns and may find that the normal deep pockets available to Democrats may be writing checks to Strayhorn. That could mean a Democrat in fourth place behind Kinky Friedman.
The U.S. manufacturing sector is in critical decline due to inability to compete with foreign producers and U.S. production relocated abroad. The U.S. currently has a trade deficit totaling 6 percent of GDP, reflecting a deficit with virtually every trade competitor and in every class of goods. The U.S. now produces only $2 worth of every $3 of goods Americans consume.
The precipitous decline of manufacturing employment’s share of U.S. employment is a principal cause for declining middle and blue collar share of U.S. incomes. Just since 1998 manufacturing employment has declined 20 percent, the worst layoff since the Great Depression. Despite doubling manufacturing productivity since 1978, the real factory wage has declined 11 percent. A similar trend to manufacturing appears to be developing in the business services sector due to foreign outsourcing, although not yet as severe.
The U.S. manufacturing crisis began soon after foreign replacement of radically reduced tariffs with border adjusted value added taxes (VATs) on tradable goods not provided U.S. manufacturers by the federal tax code. Starting with France and the EU, all OECD competitors have adopted VATs averaging 18 percent abated on their exports to the U.S., and 18 percent levied upon imports from the U.S. not matched by abated U.S. taxes. The transition from U.S. trade surpluses in goods to huge deficits coincides with previous adoption of border adjusted VATs, by foreign competitors which in effect replaced tariffs.
The relentless growth of the U.S. trade deficit has not provided evidently beneficial investment of the resulting "foreign capital surplus". Virtually all foreign investment has been in existing rather than new productive assets; instead, the U.S. trade deficit has been reflected in excessive consumption at the expense of U.S. saving for investment.
The U.S. trade deficit will not be successfully resolved without border adjusted federal tax reform which equalizes competitive terms of foreign taxation. This 18 cents on the dollar advantage for foreign producers cannot be overcome by innovation and productivity given the rapid rate of diffusion abroad (and by U.S. firms which move abroad) or by devaluation. Nor will devaluation of the dollar provide more than temporary relief at an excessive price. What is required is border adjusted and consumption based federal tax reform if the U.S. is to restore competitiveness.
The Business Transfer Tax is the most efficient and competitive alternative for federal tax reform. As a tax on the entire Gross Domestic Product after expensing of Private Commercial Investment and on Imports, but not on Exports, it will restore competitive U.S. terms of trade for U.S. manufacturers as well as territorial taxation of corporations to restore the U.S. as the preferred location for headquarters. A 17.5 percent BTT will replace all federal income taxes, including personal, corporate, employer share of social insurance, and the "death" taxes; except for personal share of social insurance. Rebates will replace exemptions, deductions, and credits in order to prevent regressivity. Transition costs can be funded from making foreign trade subject to the BTT and from increased growth due to BTT tax reform.
The U.S. needs to confront the reality that since the industrial revolution all major powers have been leaders in manufacturing as the source of competitive advantage in growth of incomes, wealth, and military strength. Preservation and restoration of the manufacturing sector is vital to U.S. national interests, and adoption of border adjusted, consumption based BTT taxation is the vital condition for this remediation. The BTT is the optimal basis for fundamental federal tax reform enabling equitable and competitive taxation of consumption, growth of investment and income, and restoration of the U.S. economy as the leader of free enterprise and freedom.