Finance and Economic

Construction spending jumped in November as builders spent more on single-family homes, apartments and remodeling projects.

The Commerce Department said Tuesday that spending on construction projects rose 1.2 percent in November, following a revised 0.2 percent drop in October. The increase was the third in four months and the largest since a 2.2 percent rise in August.

The November increase pushed spending to a seasonally adjusted annual rate of $807.1 billion, still barely half the $1.5 trillion that economists consider healthy. Analysts say it could be four years before construction returns to health levels.

Home construction has begun a gradual rebound and likely added to the nation’s economic growth in 2011. The chief reason is apartments are being built almost twice as fast as two years ago. Renting is the only option for many people who have lost their jobs, their homes or both.

For November, private residential construction increased 2 percent in November to a seasonally adjusted $522.3 billion. It was the fifth consecutive gain.

Single-family construction rose 1.5 percent while multi-family construction including apartments rose 1.3 percent. The category that covers home remodeling rose 9.5 percent.

Nonresidential construction was unchanged at an annual rate of $243.7 billion, Spending on hotels and hospitals rose but those gains were offset by weakness in other areas. Spending on office buildings dropped 1.3 percent and the category that includes shopping centers fell 0.8 percent.

Spending on government projects rose 1.7 percent to an annual rate of $284.9 billion. That followed a 1.8 percent drop in October. State and local construction gained 1.3 percent and federal building activity increased 5.3 percent. But even with those gains, activity in the government sector was down 5.3 percent from a year ago.

The construction industry was hit hard by the housing bust and has had trouble recovering since the recession ended more than two years ago.

Severe budget problems have squeezed state and local governments while the federal government has come under pressure to get control of soaring budget deficits.

Private builders haven’t fared much better. While their spending increased, they have scaled back on construction plans and are working from depressed levels.

Builders in November broke ground on homes at a seasonally adjusted annual rate of 685,000. That was a 9.3 percent jump from October and the fastest pace since April 2010.

Builders should start at least 600,000 homes this year. That’s up from 587,000 last year and 554,000 in 2009 _ the worst year on record. Still, that’s half the number that economists expect in a healthy market.

While construction may be turning around, home sales are still weak. This year will likely end up as the worst for new-home sales in history.

While new homes represent less than one-fifth the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.

Builders are struggling to compete with weak demand because of still-high unemployment and a glut of homes on the market because of foreclosures and short sales _ where lenders accept less for a house than the mortgage on the home is worth. Those homes are selling for at an average discount of 20 percent, which is lowering neighboring home values.

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Big Oil continued to make big money in the second quarter.

Industry giants Exxon Mobil and Royal Dutch Shell on Thursday reported a surge in earnings, helped by higher prices for oil, gasoline and other fuels. Even BP, still paying for the Gulf oil spill, made more than $5 billion in the quarter.

The windfall drew jeers from environmental groups that oppose tax subsidies for the industry. They said it shows the industry doesn’t need extra help from the government, especially at a time when lawmakers need to chop billions of dollars from the budget.

“Why should those who are posting record profits be exempt from sharing the sacrifices we all will be making?” said Jacqueline Savitz, senior campaign director for Oceana, an environmental advocacy group.

President Obama said in April that he wanted to cut roughly $4 billion in government subsidies for oil companies. The industry argues that doing so will discourage oil companies from developing fields in the U.S.

Argus Research analyst Phil Weiss noted that oil profits appear huge in comparison to almost any other industry, but they’re relatively tame when considering how expensive it is to extract oil from the ground no credit check payday loans. Exxon, for example, earned $10.7 billion after taking in a whopping $125.5 billion from April to June. That’s a profit margin of less than 10 percent, much lower than margins for pharmaceutical, technology or service companies, Weiss said.

“Those businesses have much richer bottom lines,” he said.

As they announced their quarterly profits, oil executives said they’ll devote billions of dollars more to finding new deposits that will eventually bring more supply to the market. Much of that attention will be focused on the U.S.

In the April-June period, Exxon’s profits jumped 41 percent. Shell’s net income nearly doubled to $8.7 billion and BP earned $5.6 billion compared with a loss of $17.2 billion last year. All three missed Wall Street expectations, however, as they reported weaker oil production from fields outside the U.S. Foreign entitlement contracts force them to take less oil as prices rise, analysts said.

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Viva Del Taco?

On Sunday, the owner of the old Del Taco building in Midtown backed off plans to knock it down, saying he would explore a range of other alternatives before seeking a demolition permit from the city.

After weeks of silence on his plan to bulldoze the saucer-shaped landmark at South Grand and Forest Park boulevards near St. Louis University, developer Rick Yackey sent a statement to the Post-Dispatch pledging to hire an architect, talk with potential tenants and hold a community meeting to explore possible uses of the building.

“I am a developer, not a demolition man,” Yackey wrote, noting that he has performed more than 2 million square feet worth of historic rehabs in the city, been honored by the Landmarks Association of St. Louis and never once applied for a demolition permit.

Yet demolition was to be the fate of the Del Taco building, according to plans filed with the city last month. Yackey, who owns the structure and neighboring Council Plaza, indicated he would knock down the 1967-built former gas station and replace it with new buildings for retail tenants.

That news prompted a flurry of protests from fans of both the restaurant and the building’s funky midcentury architecture. Even as the Del Taco itself closed, thousands of people signed online petitions to save the structure. Supporters held rallies. Mayor Francis Slay weighed in, urging reuse. Eventually, aldermen changed the redevelopment plan to require review by the city’s Preservation Board before any demolition permit could be issued. That’s where things stand now.

Yackey said his goal is an “economically viable” project that fits in with the neighbors. Demolition was always a last resort, he said, but the existing structure, just 2,000 square feet under a vast cement canopy, has very little leasable space payday loan lenders.

“This isn’t about disliking the building,” he said. “It’s about things being functionally obsolete.”

But after the uproar, and after talking with Slay and Alderman Marlene Davis, Yackey decided to see whether he can keep the building. He has hired an architect to study adding on to the ground floor, and he’s talking with the owner of a neighboring property about swapping some land for more parking spaces.

That is great news both for the Del Taco building itself and for the broader cause of preservation in St. Louis, said Randy Vines, who helped organize rallies in support of the building. The outpouring of support shows that people care about distinctive buildings, even if they’re just a few decades old, he said. And the protesters tried hard to keep a positive tone.

“We’ve done our best to offer solutions,” Vines said. “Certainly this is a building that can be adapted to another use.”

Yackey said he’s talking with potential tenants already. He wouldn’t say who, but Kaldi’s Coffee and local pizza chain Pi confirmed last week that they’re interested. Yackey also plans to hold a “community meeting to explore reuse and redevelopment ideas.”

And, Yackey said, he won’t rush to knock the building down.

“I have not applied for and will not apply for a demolition permit until completing this investigative process,” Yackey wrote. He said he expects that will take two or three months.

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Fitch ratings agency said Friday that it will put a default rating on Greece’s government bonds as a result of the eurozone’s new plan to get banks to share the burden of helping the country.

The eurozone plan says banks will be asked to contribute billions to Greece by rolling over debt, swapping bonds or selling them back at low prices.

As expected, Fitch said that because that would mean a loss for those banks, it will lower Greece’s rating to “restricted rating.” That rating could be lifted, however, as soon as Greece issues new bonds to the banks.

Those new bonds would be guaranteed by eurozone governments.

The banks’ contribution is part of a broad deal to help Greece.

The country will get euro109 billion ($156 billion) in new financing in a complex package that includes new loans, buybacks of Greek debt, and credit guarantees under the deal agreed Thursday by the leaders of the 17 countries that use the euro.

The European plan will help ease Greece’s burden by cutting interest rates and extending repayment on bailout loans, and by asking Greek bondholders such as banks and investment and pension funds to accept less than the full value of their investments through bond swaps and rollovers. Those transactions will give them bonds that pay less interest _ around 4.5 percent on average _ over a much longer period of 30 years.

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CALGARY

Racing the debt clock, Congress is working on dual tracks while President Barack Obama appeals to the public in hopes of influencing a deal that talks have failed to produce so far.

“We have to ask everyone to play their part because we are all part of the same country,” Obama said Saturday, pushing a combination of spending cuts and tax increases that has met stiff resistance from Republicans. “We are all in this together.”

In his weekly radio and Internet address, Obama said the wealthiest must “pay their fair share.” He invoked budget deals negotiated by GOP President Ronald Reagan and Democratic House Speaker Tip O’Neill, and Democratic President Bill Clinton and Republican Speaker Newt Gingrich.

“You sent us to Washington to do the tough things, the right things,” he said. “Not just for some of us, but for all of us.”

As a critical Aug. 2 deadline approached, the chances that Obama would get $4 trillion or even $2 trillion in deficit reduction on terms he preferred were quickly fading as Congress moved to take control of the debate.

House Republicans prepared to vote this coming week on allowing an increase in the government’s borrowing limit through 2012 as long as Congress approved a balanced-budget constitutional amendment, which is highly unlikely.

In the Senate, the Republican and Democratic leaders worked on a bipartisan plan that would allow Obama to raise the debt limit without a prior vote by lawmakers. The talks focused on how to address long-term deficit reduction in the proposal in hopes of satisfying House Republicans.

In the Republicans’ address Saturday, Sen. Orrin Hatch of Utah argued for passage of a balanced-budget amendment. He blamed Democrats for failing to embrace adequate budget cuts and said “the solution to a spending crisis is not tax increases.”

An amendment that requires a balanced budget, he said, “would put us on a path to fiscal health and would prevent this White House or any future White House from forcing more debt on the American people faxless cash advance.”

The government said Friday it was using its last stopgap measure to avoid exceeding the current $14.3 trillion debt limit. Administration officials, economists and the financial markets have warned that missing the Aug. 2 deadline and precipitating a government default would send convulsions through an already weakened economy.

In a news conference Friday, the president argued that he had the public on his side as in calling for a large deficit reduction package that included spending cuts and increased tax revenues. But Republicans have flatly rejected any proposal from Obama that contains additional revenue from closing tax loopholes, restricting the value of deductions for the rich, increasing tax rates for hedge fund managers or ending oil and gas subsidies.

“This is not a matter of the American people knowing what the right thing to do is,” Obama said. “It’s a matter of Congress doing the right thing and reflecting the will of the American people.”

Obama had held five straight days of meeting with congressional leaders at the White House, but none of the three options he proposed _ deficit cuts of $4 trillion, $2 trillion or $1.5 trillion over 10 years _ were unlocking enough support to increase the debt ceiling by the $2.4 trillion Obama wants to make it last beyond the 2012 elections.

Essentially declaring those discussions over, Senate Republican leader Mitch McConnell said Friday: “”Now the debate will move from a room in the White House to the House and Senate floors.”

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Australia and Japan sparred verbally Tuesday at a meeting of the International Whaling Commission, after Japan called on Australia to better protect its whaling ships from sabotage raids by anti-whaling activists.

Confrontations with activists forced Japan to cut short its annual hunt south of Australia this year. Protesters threw paint, smoke bombs and rancid butter in bottles toward the Japanese whaling ships. They also got a rope entangled in the propeller on a harpoon vessel, causing it to slow down.

Australia rebuffed Japan’s request, with Environment Minister Tony Burke saying that while Australia would abide by the principles of safety at sea and international maritime law, his country “simply can’t agree” to providing more protection to Japanese ships than other vessels operating in the area.

Japanese whalers regularly hunt in Antarctic waters south of Australia, a feeding ground for 80 percent of the world’s whales, and the commission has no enforcement powers to stop them. Japan insists the hunt is for scientific research, something anti-whaling nations dispute.

“This so-called scientific whaling lacks any scientific argument behind it,” Burke said. “What’s going on there is commercial whaling. Australia is opposed to commercial whaling.”

Australia has launched a complaint against Japanese whaling at the International Court of Justice in The Hague, the U.N.’s highest court.

Commercial whaling is banned by a 1986 moratorium. Talks on allowing limited commercial whaling broke down last year, and no breakthroughs are expected at IWC talks in Jersey.

Britain has proposed reforms to make the commission more transparent and effective, including by forcing governments to pay their membership fees by bank transfers, which can be easily traced, instead of cash or checks.

The move comes in the wake of allegations last year that Japan has been using aid money and personal favors to buy votes, which Japan denies.

“I still hear that people are paying their dues in cash. I think that’s unacceptable … and leaves an organization open to accusations,” British Fisheries minister Richard Benyon said. “These may be perceptions not reality, but it’s something this organization has to tackle.”

The British proposal was held up by procedural issues Tuesday and will be re-tabled Wednesday.

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At the center of the down payment debate in Washington are rules about what constitutes a “qualifying residential mortgage,” or QRM.

Under the Dodd-Frank Wall Street Reform Act, a QRM would constitute a gold standard for home loans, and mortgages that meet it would be exempt from rules requiring the bank that generates a loan to keep at least 5 percent of the loan’s value on its books

The South Grand Del Taco may have more than 12,000 fans on Facebook, but one powerful priest across the street is decidedly not among them.

St. Louis University President Father Lawrence Biondi last week sent a letter to St. Louis Mayor Francis Slay voicing his support for plans to demolish the saucer-shaped taco stand and replace it with new buildings.

In his letter, a copy of which was obtained by the Post-Dispatch, Biondi said “the site has attracted unwanted criminal activity and has generated numerous traffic issues over the years.”

“With so many Saint Louis University students living so close to this property, this property’s land use is cause for concern for parents, students, faculty and staff,” he wrote. “I also can tell you that student leaders support Mr. Yackey’s redevelopment efforts.”

Biondi has no official say in the matter - it’s in the hands of the Board of Aldermen and then, likely, the city’s Preservation Board - but he’s clearly a heavyweight in Midtown development business cards design. His university has bought up lots of land in the neighborhood and launched several large-scale projects. And, he says, Yackey’s project is the kind of thing Midtown needs more of.

“It is our belief that we should not stand in the way of this progress,” he wrote.

The Del Taco itself, which had been under Chapter 11 bankruptcy protection since late 2009, closed last week. The building itself still stands, with St. Louis Aldermen set to make a final vote Friday on a blighting and redevelopment plan for the site.

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Businesses requested more airplanes, autos, and oil drilling equipment in May. The jump in factory orders after a sluggish spring suggests supply disruptions stemming from the Japan crisis are fading.

Factory orders rose 0.8 percent in May, the Commerce Department said Tuesday. That followed a downwardly revised drop of 0.9 percent in April.

The increase pushed factory orders to $445.3 billion. That’s almost 32 percent higher than the low point during the recession, reached in March 2009.

Much of the increase was driven by a 36.5 percent increase in orders for aircraft, a volatile category. But there were also signs of strength in areas that had slowed sharply in the previous month.

Auto and auto parts orders rose 2 percent. And a measure of business investment rose 1.6 percent, after falling 0.4 percent the previous month. Companies invested more in computers and equipment.

Orders for so-called nondurable goods, such as food, clothing, oil, and plastics, fell 0.2 percent in May. But that was partly because oil prices dropped.

Until this spring, manufacturing had been one of the strongest sectors of the economy since the recession ended two years ago.

Economists largely blamed the weak period on high gas prices and the impact of the earthquake in Japan, which led to a parts shortage that has hampered U.S. manufacturers. Those factors appear to be easing. Gas prices have come down since peaking in early May. And the manufacturing sector expanded at a faster pace in June after slowing sharply in May, according to the Institute of Supply Management.

“There are encouraging signs that the second half will likely get better, particularly for manufacturers,” said Ryan Sweet, an economist at Moody’s Analytics short term personal loan.

A recovery in the auto sector is one reason production is picking up. Japanese automakers with plants in the U.S., such as Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co., sharply cut production in the spring. But they are restoring output. Toyota executives say their North American factories will be back to 100 percent by September.

Busier auto plants would help boost the economy in the second half of this year. The economy grew at a 1.9 percent annual pace in the January-March quarter. Most economists expect a similarly weak pace of growth in the April-June quarter.

The economy is expected to grow at a 3.2 percent in the second half of this year, according to an Associated Press survey of 38 top economists.

Growth must be stronger to significantly lower the unemployment rate, which was 9.1 percent last month. The economy would need to grow 5 percent for a whole year to significantly bring down the unemployment rate. Economic growth of just 3 percent a year would hold the unemployment steady and keep up with population growth.

Employers added only 54,000 net new jobs in May, much slower than the average gain of 220,000 per month in the previous three months.

The government reports Friday on hiring data in June. Economists expect the economy added only 90,000 jobs and the unemployment rate was unchanged, according to survey by FactSet.

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