Nation roundup for June 17
U.S. retail sales jump 0.6 percent in May on autos
WASHINGTON (AP) — Americans stepped up purchases at retail businesses in May, spending more on cars, home improvements and sporting goods. The gain shows consumers remain resilient despite higher taxes and could drive faster growth later this year.
The Commerce Department said Thursday that retail sales increased 0.6 percent in May from April. That’s up from a 0.1 percent gain the previous month and the fastest pace since February.
The April gain was led by a 1.8 percent jump in auto sales, the biggest increase in six months. Excluding volatile autos, gas and building supplies, core retail sales rose 0.3 percent. That’s slightly higher than the 0.2 percent April increase.
Sales increased at hardware and general merchandise stores, but fell at furniture and appliance stores.
Separately, the Labor Department said the number of Americans seeking unemployment benefits dropped 12,000 last week to a seasonally adjusted 334,000. The decline suggests steady job gains will endure.
The retail sales report is the government’s first look each month at consumer spending, which drives 70 percent of economic activity.
Solid job growth and rising home prices have allowed consumers to withstand an increase this year in Social Security taxes, which has lowered take-home pay for most Americans.
Consumer spending from January through March grew at the fastest pace in more than two years. That helped the economy expand at a solid annual rate of 2.4 percent. Most economists predict that growth is slowing in the April-June quarter to an annual rate of 2 percent or less. But many say growth will likely pick up in the second half of the year.
Paul Dales, senior U.S. economist at Capital Economics, said the May increase in retail spending was stronger than anticipated. Lower gas prices may have helped, he noted.
Even with the gain, he believes consumer spending is slowing from the first quarter’s 3.4 percent annual pace, down to around 2.5 percent or less in the current quarter.
“Households may … be getting over the tax hikes and spending some of the savings from the recent fall in gasoline prices,” Dales said.
There are signs that spending could strengthen in the second half of the year. Consumer confidence rose to five-year high in May. And steady gains in home sales and construction are providing support for the economy even as manufacturing weakens.
At Judy Schumacher Tilton’s two New Jersey Chevrolet dealerships, customers seem more confident than they’ve been in the past few years.
The combination of low interest rates and more fuel-efficient vehicles has lifted May sales well above year-ago levels.
“I feel that auto sales are truly on the upswing,” she said. “It’s like everything’s coming together.”
The gains in home sales and auto sales have been supported by the Federal Reserve’s low interest rate policies. The central bank is buying $85 billion per month in bonds to keep downward pressure on long-term rates. Fed policymakers hold a two-day meeting next week that will be closely watched for signals that the Fed might scale back its bond purchases.
The economy created 175,000 jobs in May, a solid month of hiring in line with the average increase over the previous 12 months.
Excluding autos, retail sales rose 0.3 percent in May. Sales at hardware stores increased 0.9 percent, and sales at sporting goods and general merchandise stores also increased.
Sales fell 0.8 percent at furniture stores and 0.4 percent at electronics and appliance stores.
U.S. unemployment benefit applications fall to 334K
WASHINGTON (AP) — The number of Americans seeking unemployment benefits dropped 12,000 last week to a seasonally adjusted 334,000, a decline that suggests steady job gains will endure.
The less volatile four-week average decreased 7,250 to 345,250, the Labor Department said Thursday. Both figures are roughly 7,000 higher than month-ago levels, which were the lowest in five years.
Applications are a proxy for layoffs. Since January, they fallen 6.5 percent, suggesting employers are cutting fewer jobs.
At the same time, hiring has been steady. Employers added 175,000 jobs in May, the department said last week. That nearly matched the monthly average for the previous year. The unemployment rate ticked up to 7.6 percent, but for a good reason: More Americans were confident they could find work and began searching for a job.
Separately, the Commerce Department said that retail sales rose 0.6 percent in May from April. The gain shows consumers remain resilient despite higher taxes and could drive faster growth later this year.
Economists were encouraged by both reports.
“The retail sales result is a plus, no question,” said Jennifer Lee, an economist at BMO Capital Markets. “And the improving trend in jobless claims is supportive for future spending.”
About 4.5 million people received unemployment benefits in the week that ended May 25, the latest data available. That’s 130,000 fewer than the previous week. The number of people receiving benefits has fallen 29 percent in the past year. Some of those recipients have likely gotten jobs, but many have probably used up all the benefits available to them.
The economy grew at a solid annual rate of 2.4 percent in the first three months of the year. Consumer spending rose at the fastest pace in more than two years.
Economists worry that federal spending cuts and higher Social Security taxes, which started Jan. 1, might be slowing growth in the April-June quarter to an annual rate of 2 percent or less. But the gain in retail spending and declines in unemployment benefit applications show the economy may be stronger than some anticipated.
The department said earlier this week that more Americans quit their jobs in April compared with March. That’s a sign of confidence in the job market, since most workers don’t quit until they have another job or are sure they can find one. More people quitting jobs also opens up jobs for other workers, or the unemployed, to take.
Overall hiring also picked up in April, the department said, as part of its Job Openings and Labor Turnover survey. Top officials at the Federal Reserve have said they are looking at the level of quits and overall hiring as part of their efforts to gauge the health of the job market.
On Wednesday, a survey of chief executives at the largest U.S. companies showed that they are more optimistic about sales in the next six months and plan to add more workers.
The Business Roundtable said its April-June quarterly survey found 32 percent of its members expect to expand payrolls in the next six months. That’s up from 29 percent in the January-March survey. And 78 percent expect their sales to increase. That’s up from 72 percent from the previous survey.
Small business owners are also a bit more optimistic, according to a separate survey by the National Federation of Independent Business, released Tuesday.
Grocers allege potato group pumped up spud prices
BOISE, Idaho (AP) — A battle between grocers and potato growers has been silently hitting shoppers’ pocketbooks, according to a U.S. wholesaler accusing America’s spud farmers of driving up prices while spying on farmers with satellites and aircraft fly-overs to enforce strict limits on how many tubers they can grow.
Associated Wholesale Grocers’ lawsuit against United Potato Growers of America and two dozen other defendants was shifted this week to U.S. District Court in Idaho, America’s top potato-producing state with 30 percent of the nation’s supply.
It’s unclear how much the alleged price-fixing has bumped up the cost of frozen french fries or a steaming spud served with a steak, but the case isn’t small potatoes: They’re America’s most popular vegetable, worth billions in sales each year, and their journey from the field to the table is complex. Farmers trying to make a profit dependent on weather, water and fuel costs are pitted against grocers who worry they’re getting gouged.
And while the U.S. Department of Justice hasn’t joined this case, its lawyers have been examining how large, modern agricultural cooperatives like the United Potato Growers are employing nearly century-old antitrust exemptions to strengthen their hands.
In this lawsuit, the Kansas-based grocers association, a cooperative supplying more than 2,000 stores including IGA, Thriftway and Price Chopper in 24 states, contends potato growers have banded together for a decade to illegally inflate prices in a scheme akin to the petroleum-producing OPEC cartel, reducing planting acreages and destroying potatoes to restrict what is available for sale.
“UPGA utilized predatory conduct and coercive conduct in ensuring compliance with the price-fixing scheme,” according to the lawsuit, which alleges tactics including use of “satellite imagery, fly-overs, GPS systems, and other methods to enforce its agreement to reduce potato supply.”
The grocers are asking for triple damages, likely in the millions, and are focusing on growers of fresh potato varieties found in big bags, as well as potatoes processed into crinkle-cut fries, Tater Tots and other products and sold in freezer sections of the group’s stores.
United Potato Growers of America has organized growers in 15 states — it has members in Alaska, California, Colorado, Florida, Idaho, Kansas, Minnesota, Montana, Nebraska, North Dakota, Oklahoma, Oregon, Texas, Washington and Wisconsin, representing three-quarters of the nation’s fresh potato production.
United Potato Growers of America’s Salt Lake City-based attorney, Randon Wilson, contends his group is shielded by the Capper-Volstead Act. The 1922 federal law was meant as a limited exemption from antitrust rules for agricultural cooperatives, while still aiming to protect consumers from unduly high prices that could accompany a monopoly.
“Right from the beginning, we did everything right, to qualify for Capper-Volstead,” Wilson said. “We know what you have to do to qualify for that limited exemption and we followed all those rules.”
Dell Raybould, an owner of Raybould Farms and a Republican state representative, is a member of the co-op and has also been named in the lawsuit.
Raybould, who grows Russet Burbanks and Norkotah Russets on 850 acres near Rexburg in Idaho’s far east, paints a bleak picture of potato farming before 2004: A haphazard industry where farmers inevitably grew too many tubers, pushing prices into the cellar.
“I can remember when people hauled their potatoes out in the field with the manure spreader, dumped them and plowed them under,” said Raybould, who has been growing potatoes since 1953. “They did try to level out production, so we didn’t have the boom and bust thing all the time. And when they did, the co-op, they went about this the right way. They got the best co-op attorney in the nation, and they did it right.”
However, Associated Wholesale Grocers contends the growers illegally sought to boost the price of potatoes.
At secret meetings in Idaho Falls, according to the complaint, big Idaho growers like Albert Wada and members of the Raybould family, as well as North Dakota ag-multimillionaire Ronald Offutt, worked with Wilson to hatch a far-reaching price-fixing scheme, creating a powerful agricultural juggernaut capable of squeezing buyers.
“None of the defendants … is entitled to the limited protections found in the Capper-Volstead Act for their efforts to restrict potato supply and fix prices,” wrote Patrick J. Stueve, the grocers’ lawyer in Kansas City.
Though the Justice Department didn’t return a phone call seeking comment Thursday, it’s clear Stueve’s basic contention — that Capper-Volstead is being used to illegally inflate potato prices — has emerged as an issue.
The DOJ and U.S. Department of Agriculture held workshops in 2010 on large agricultural cooperatives and their use of the law. Litigation has been mounting, too.
A similar federal lawsuit filed in 2010 targeting potato growers is now advancing in Idaho, a case that may eventually be combined with this one.
Meanwhile, antitrust complaints, including from the DOJ, have been lodged against mushroom growers, dairy farmers, egg producers and the cranberry industry.
Peter Carstensen, a University of Wisconsin Law School professor in Madison who focuses on antitrust cases, said a common gulf separates rival protagonists: On one side, large agricultural producers argue they’re legitimately using the power of the cooperative to create a more efficient market, while grocers and the government contend they’re inappropriately exploiting their antitrust protections.
“Capper-Volstead was designed primarily to facilitate more efficient marketing of agricultural products,” Carstensen said. “There’s an increasing perception that Capper-Volstead is being abused.”
NYC airport builds turtle barrier to guard runway
NEW YORK (AP) — Officials are building a 4,000-foot-long barrier to protect a runway at New York City’s Kennedy Airport.
But the obstacle isn’t for terrorists. It’s for turtles.
The busy airport has been plagued in recent years by waves of Diamondback Terrapins that climb up out of Jamaica Bay looking for a place to nest.
During last year’s mating season, airport employees had to carry 1,300 turtles off the tarmac.
The New York Post reports (http://bit.ly/11GpIYw ) that the Port Authority of New York and New Jersey is hoping an 8-inch-wide barrier made of plastic piping will help keep the turtles off the runway this year.
Hofstra University biologist Russell Burke tells the Post the plan just might work, though he said it is hard to say how the turtles will react.
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