Good Signs for the Economy

WASHINGTON (Reuters) -- An index gauging the U.S. economy's prospects increased for a third straight month in June, suggesting the recession was drawing to a close, a private research firm said Monday.

The index of leading economic indicators, which is supposed to forecast economic trends six to nine months ahead, rose 0.7% in June following a revised 1.3% gain in May, the New York-based Conference Board said.

Wall Street economists had forecast a rise of 0.5% after an initial 1.2% May increase.

Over the first half of the year, the index has increased at a 4.1% annual rate, the research group said.

"The recession has been losing steam since the spring, although very large job losses continue," Ken Goldstein, a Conference Board economist, said in a statement. "Nevertheless, confidence is slowly rebuilding."

"If these trends continue, expect a slow recovery this autumn," he said.

Debt Buster:Jayden James

U.S. Auto Sales Show Signs of Stabilizing

DETROIT (AP) - U.S. car and truck sales showed signs of stabilizing in June after a year of sharp declines, but every major automaker except Honda Motor Co. reported lower sales than in May.

Still, year-over-year declines last month slowed for four of the six major carmakers, with Ford Motor Co. reporting the smallest drop in a year at 10.7 percent when compared with June of 2008.

Even Chrysler, which emerged from bankruptcy protection early in June, saw its year-over-year sales decline shrink, and analysts say that's among the signs that an auto industry slump that began with $4 per gallon gasoline last summer could be leveling off.

"It is unlikely things will get any worse," said Jesse Toprak, executive director of industry analysis for the auto Web site Edmunds.com.

Factors such as a slowly improving economy and government incentives of up to $4,500 to trade in inefficient clunkers for new vehicles could lead to modest improvements in the second half of the year, he said.

And while Chrysler's sales results were dismal, the figures were roughly in line with analyst estimates and reflect a company that is in a major transition following bankruptcy protection and new focus on more fuel efficient vehicles.

"At a time when they are emerging from bankruptcy and trying to reinvent themselves, it is not a huge surprise," Toprak said.

Toprak said affordability and gas prices that rose from $2.28 per gallon in May to $2.64 in June boosted sales of sales of compact cars, hybrids and compact sport utility vehicles.

Families and consumers looking for larger vehicles are also leaning more toward minivans because of the practicality when compared to alternatives like low gas mileage SUVs, he said.

Economists say there are signs that the economy is recovering, with housing starts rising more than expected in May and wholesale prices remaining in check. But the Conference Board reported Wednesday that consumer confidence fell unexpectedly in June.

"We're making steady progress," Jim Farley, the company's group vice president of marketing, said in a statement. "We remain grounded, however, given challenging industry and economic conditions."

Ford's year-over-year sales drop was the smallest of the six largest automakers. General Motors Corp. sales slid 33.4 percent despite incentives and discounts on its Pontiac brand, while Toyota Motor Corp. sales were off 32 percent. Honda Motor Co. saw a 30 percent decline because of extremely strong small-car sales last June when gasoline was above $4 per gallon. Nissan Motor Co. reported a narrower decline than in previous months, down only 23 percent.

GM's decline improved when compared with previous months even though it entered Chapter 11 bankruptcy protection on June 1. GM plans to sell or close Pontiac, Saturn, Hummer and Saab to focus on four core brands — Chevrolet, Cadillac, GMC and Buick.

At Chrysler, though, the company sold only 68,297 cars and trucks last month as it emerged from bankruptcy protection, and many of those were due to strong incentives of more than $4,800 per car, according to Edmunds.

Analysts predict that June sales, adjusted for seasonal variances and multiplied to determine an annual rate, could top the 10 million mark for the first time this year. During several months earlier in 2009, U.S. car and truck sales dropped to a rate of about 9 million vehicles, a huge reduction from more than 16 million as recently as 2007.

But any jump in the annual rate could be fueled by fire-sale prices at 789 Chrysler dealers that were fired by the company during the bankruptcy process and told to get rid of their inventory by June 9. Also, with GM dropping its Pontiac brand, incentives will rise on those models.

Toyota's top-selling Camry midsize sedan saw sales fall 37 percent while Corolla compact sales plunged 53 percent.

One bright spot for Toyota was its recently released third-generation Prius, which saw sales rise 10 percent. Prius sales had suffered in recent months as gas prices plunged from more than $4 per gallon last summer to below $2 a gallon in the winter.

Nissan's decline narrowed largely because of stronger sales of its top-selling Altima midsize sedan. The automaker sold 2,137 units of its boxy Nissan Cube in its first month of sales.

Dearborn, Mich.-based Ford 154,873 cars and light trucks last month, with strength in its midsize Fusion and the Flex crossover vehicle. That was still less than the 161,197 sold in May, traditionally a stronger sales month than June.

Chrysler said it sold only 68,297 vehicles last month, despite fire-sale prices at 789 dealerships that the company terminated.

Ford's surprisingly low decline came after a string of months in which it and other automakers reported year-over-year drops of more than 40 percent. Ford's sales were down 24 percent in May and off 37 percent for the first five months of the year.

Ford is the sole U.S. automaker to avoid bankruptcy protection and it's the only one not receiving government loans to keep from running out of money. GM and Chrysler are receiving billions in loans, and GM inching its way closer to escaping Chapter 11.

In anticipation of increased traffic at dealers and higher sales later in the year, Ford announced Monday that it would boost its third-quarter production by 25,000 vehicles.

Money Motivator:Kagney Linn Karter

Mortgage Rates Rise

June 11 (Bloomberg) -- Fixed U.S. mortgage rates rose to the highest since November, signaling that the Federal Reserve’s plan to lower borrowing cost is stalling.

The average 30-year rate jumped to 5.59 percent from 5.29 percent a week earlier, Freddie Mac, the McLean, Virginia-based mortgage buyer, said today in a statement. The 15-year rate averaged 5.06 percent.

Rising rates may deepen the U.S. housing slump by sidelining people who want to refinance or purchase a house. U.S. mortgage applications fell last week to the lowest since February and shares of the largest homebuilders have dropped 11 percent since May 1 on concern more expensive home loan payments will turn away prospective buyers.

“The economy doesn’t need higher mortgage rates because that will depress the level of home sales, cut off refinancing, and keep consumer spending sluggish,” said Patrick Newport, an economist with Lexington, Massachusetts-based IHS Global Insight.

The increase in rates announced today was the biggest weekly jump since October. Rates were last higher in the week ended Nov. 27, when they were 5.97 percent.

The Federal Reserve said March 18 it would purchase as much as $1.25 trillion in securities from mortgage-buyers Fannie Mae and Freddie Mac to help drive borrowing costs lower. Yields on Fannie Mae and Freddie Mac mortgage securities rose yesterday to a level not seen since the Fed announced its plan. The program helped push rates to a record low 4.78 percent twice in April.

Now rates are climbing along with Treasury yields on investor concern that a greater supply of government debt being sold to fund federal spending will fuel inflation.

Buying Program

The central bank’s purchases of mortgage bonds guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae initially brought down the yields on those securities, allowing lenders to reduce rates on new loans and still sell them at a profit.

The Fed has bought a net $507.1 billion of mortgage bonds so far, including $25.5 billion in the week ended May 27, according to Bloomberg data.

Rates are rising as home prices continue to drop and foreclosures rise. U.S. foreclosure filings surpassed 300,000 for the third straight month in May and may hit a record 1.8 million by the first half of the year, RealtyTrac Inc. said today.

A total of 321,480 properties received a default or auction notice or were repossessed last month, up 18 percent from a year earlier, the Irvine, California-based seller of default data said in a statement. One in 398 U.S. households received a filing last month.

Home prices in 20 major metropolitan areas fell more than forecast in March as defaults surged. The S&P/Case-Shiller home- price index decreased 18.7 percent from March 2008, matching the drop in the year ended in February. The measure declined 19 percent in January, the most since data began in 2001.

The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan dropped 7.2 percent to 611 in the week ended June 5. Purchase applications rose 1.1 percent while requests to refinance fell 12 percent.

10 Tips for a better Savings Account

1. Know where to investigate. Go to Bankrate.com and click on “Compare rates.” Select “Checking & Savings” as the product you want to check, then click on “MMAs/Savings Accounts,” then “Search by 100 Highest Yields.” Keep choosing MMAs and savings accounts as you click through, and you’ll arrive at a list of banks offering above-average yields.

2. Check the safety rating. Some banks offer unusually high yields because they’re trying to drum up business and increase deposits. To make sure you’re dealing with a financial institution that isn’t too shaky, check the “Safe & Sound” rating it’s been given by Bankrate.com.(You’ll also see “Safe & Sound” ratings in the form of a star system in the overall bank list mentioned in Tip No. 1. One star is the lowest rating; five stars means “superior.”)

3. Look for government-backed insurance. Opt for an institution that is insured by the Federal Deposit Insurance Corp. (FDIC) or the National Credit Union Share Insurance Fund (NCUSIF). That means up to $100,000 of the money you deposit will be insured by the federal government.

4. Understand how it works. Online banks and bank divisions save millions on operating expenses because they don’t have branches to maintain. They are able to pass that savings on to customers in the form of higher yields on deposits.

5. Don’t be duped. Online divisions of well-known banks should be federally insured, but it’s still a good idea to check. Some sneaky copycat sites look and feel similar to the sites of real banks, so examine the bank’s name carefully and make sure it’s legitimate, with headquarters based at a real, verifiable address.

6. Prepare to link up to your checking account. If you open an online savings or money market account, you won’t need to cancel or close your existing accounts at your current bank. In fact, the online entity most likely will want to link your new account to your existing checking account so you can transfer money back and forth with ease.

7. Don’t get too hung up on precise rates – unless they won’t last. You could spend a lot of time and energy hunting down an interest rate that is, say, 0.03 percent higher than another rate, but that won’t make a huge difference in your overall yield. Just try to get a big enough rate bump that you’re losing less money to inflation every year. Here’s one rate-related detail that really does matter, though: Make sure you’re not being seduced by a high teaser rate that will plummet in three months or so. The idea is to keep the higher yields rolling in month after month.

8. Examine the fees. Some online accounts require high minimum balances to avoid monthly fees. Be certain you’ll be able to deposit enough money – and keep enough money in your account – to avoid getting walloped. Also check to see whether you’ll be hit with fees when you make deposits at a brick-and-mortar bank branch or use an ATM card to withdraw cash.

9. Choose challenging passwords. When selecting passwords for your online accounts, avoid obvious ones such as your mother’s maiden name, your date of birth, the last four digits of your Social Security number or a series of consecutive numbers. Opt for a hard-to-guess combination of letters and numbers.

10. Be a savvy computer user. Update your virus protection software regularly, don’t download files or click on hyperlinks sent to you by people you don’t know, use a firewall program and use a secure browser for online transactions. Also, avoid storing financial information on your laptop. (Laptops are much too easy to steal.)

GM Says Bankruptcy want affect the Volt

As General Motors finally caved this morning, waved the white flag and filed for bankruptcy, those following electric cars immediately wondered what this all would mean for the long-awaited Volt. For years now, GM has steadfastly affirmed that it was moving forward with production regardless of what else was going on within the company and the economy at large. According to Technology Review, a GM spokesperson confirmed again this morning that 'the filing will have no impact on the company's plans to start selling the Volt at the end of next year.' That said, we have to wonder how much such a statement really means; reports have stated that the US government may up holding as much as 60 percent of the company, and if the primary goal is to bring the outfit back to profitability as soon as possible, Obama and Company may not feel that pouring even more into the high-priced Volt is a good idea.