Current Events in February 2016

A smidgeon of inflation on the wholesale level -- that's what we got in January.

According to the Department of Labor (DOL), the Producer Price Index (PPI) for final demand, which measures prices one step shy of the consumer level, was up a seasonally adjusted 0.1% last month. The PPI was down 0.2% in December after posting a 0.4% advance in November.

For the 12 months ended in January, the index is down 0.2%.

Services prices

A 0.5% increase for services was behind the January advance, with nearly half of that attributable to a 4.0% increase in the cost of machinery and equipment wholesaling. Services related to securities brokerage and dealing; loan services (partial); apparel, footwear, and accessories retailing; fuels and lubricants retailing; and airline passenger services also rose.

Prices for food and alcohol retailing declined 4.1%, with health, beauty, optical goods retailing, and physician care also falling.

The cost of goods

Prices for goods were down 0.7% for the second straight month. Energy costs were down 5.0%, thanks to a drop of 8.8% in gasoline prices. Additionally, the cost of for home heating oil, electric power, jet fuel, and basic organic chemicals fell.

Food prices advanced 1.0%, led by a surge of 17% for fresh and dry vegetables. Prices for pharmaceutical preparations and residential natural gas also increased.

The complete report may be found on the DOL website.

Construction of privately-owned housing fell 3.8% in January to a seasonally adjusted annual rate of 1,099,000, according to figures released by the Commerce Department. Nevertheless, housing starts were 1.8% above the rate (1,080,000 ) of the same month a year ago.

The decline was broad-based, with single-family starts down 3.9% -- a rate of 731,000. The rate for units in buildings with five units or more came in at 354,000, down 3.7%.

"Despite the modest dip in starts this month, we expect to see ongoing, gradual growth in housing production in 2016," said National Association of Home Builders (NAHB) Chief Economist David Crowe. "An improving economy, solid job creation and pent-up demand for housing should keep the market moving forward."

Building permits

Authorizations for future construction were also lower last month.

Building permits were down 0.2% at a seasonally adjusted annual rate of 1,202,000, with single-family authorizations off 1.6% and permits for units in buildings with five units or up 2.1% at a rate of 442,000.

NAHB Chairman Ed Brady notes that builders are "being cautious as they face some market uncertainties and supply side constraints."

The complete report is available on the Commerce Department website.

Mortgage applications rose last week, thanks in large part to more applications for refinancing.

The Mortgage Bankers Association (MBA) reports overall applications were up 8.2% in the week ending February 12. The Refinance Index jumped 16% from the previous week, pushing the refinance share of mortgage activity up 3.1% to 64.3% -- its highest level since February 2015.

The adjustable-rate mortgage (ARM) share of activity rose to 6.7% of total applications, the FHA share was 11.5%, the VA share of total applications increased to 11.7% from 11.1% the week before and the USDA share was unchanged at 0.6%.

Contract interest rates

• The average contract interest rate for 30-year fixed-rate mortgages (FRMs) with conforming loan balances ($417,000 or less) fell eight basis points from 3.91% to 3.83% -- its lowest level since last April. Points decreased to 0.36 from 0.41 (including the origination fee) for 80% loan-to-value ratio (LTV) loans, with the effective rate declining from last week.
• The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to its lowest level since December 2012, 3.74 percent, from 3.76 percent, with points decreasing to 0.26 from 0.30 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
• The average contract interest rate for 30-year FRMs backed by the FHA dropped to its lowest level since last April, 3.67%, from 3.72%, with points increasing to 0.34 from 0.33 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
• The average contract interest rate for 15-year FRMs dropped 7 basis points to 3.11% its lowest level since last April, with points decreasing to 0.31 from 0.38 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
• The average contract interest rate for 5/1 ARMs was down to its lowest level since last May -- 2.92% from 2.96%, with points rising to 0.32 from 0.30 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.

The survey covers over 75% of all U.S. retail residential mortgage applications.

FCA US LLC (Chrysler) is recalling 184 model year 2015-2016 Chrysler Town and Country, and 2014-2015 Dodge Grand Caravan vehicles manufactured August 16, 2014, to December 5, 2015.

The windshield on the recalled vehicles may have been installed using expired urethane primer, allowing the windshield to become displaced in the event of a crash. As such, these vehicles fail to comply with the requirements of Federal Motor Vehicle Safety Standard (FMVSS) number 212, "Windshield Mounting."

If the windshield dislodges during a crash, there is an increased risk of occupant injury.

Chrysler will notify owners, and dealers will replace the windshield, free of charge. The recall is expected to begin on March 4, 2016.

Owners may contact Chrysler customer service at 1-800-853-1403. Chrysler's number for this recall is S02.

Whole Foods Market of Austin, Texas, is recalling Pecorino Aged Cheese in Walnut Leaves sold in a store in Florida and one New York City.

The product be contaminated with Listeria monocytogenes.

No illnesses have been reported to date.

The recalled cheese was cut and packaged in clear plastic wrap with scale labels beginning with PLU code 294239 and "sell by" dates of 3/3/16 through 3/8/16 in the New York City store.

In West Palm Beach, Fla., the recalled cheese was sold with scale labels beginning with PLU code 290107 and "sell by" dates of 2/29/16 through 3/8/16.

The recalled cheese was pulled from store shelves and destroyed on Monday, Feb. 8, 2016.

What to do

Customers who purchased this product should discard it and bring their receipt to the store for a full refund.

Consumers with questions should contact their local store or call 512-477-5566 ext. 20060 between 9am and 5pm (CST) Monday through Friday.

General Motors is recalling 179,861 model year 2003-2011 Saab 9-3 vehicles manufactured May 31, 2002, to February 15, 2011; 2010-2011 Saab 9-5 vehicles manufactured June 23, 2010, to February 21, 2011; and 2008-2009 Saturn Astra vehicles manufactured April 11, 2007, to July 24, 2008.

Upon deployment of the driver's-side front air bag, excessive internal pressure may cause the inflator to rupture with metal fragments striking the driver or other occupants resulting in serious injury or death.

GM will notify owners, and dealers will replace the inflator on Saab 9-3 and 9-5 vehicles and will replace the airbag module on Saturn Astra vehicles, free of charge. The manufacturer has not yet provided a notification schedule.

Owners may contact Saab customer service at 1-800-955-9007 or Saturn customer service at 1-800-553-6000. GM's number for this recall is 28810.

Thanks to intense lobbying, many states that have suggested that daily fantasy sports (DFS) sites like DraftKings and FanDuel engage in illegal gambling are now considering laws to allow exceptions.

DFS leagues have gotten around federal gambling statutes because they have been declared games of skill instead of luck. Players choose “teams,” made up of real players, and get points for how well the players perform during a given game.

In illegal gambling, players choose a team and are rewarded if the team wins a particular game, or performs better than expected – beating the odds.

A number of attorneys general have looked at DFS and decided “if it looks like a duck, and walks like a duck, it's probably a duck.”

Illinois declares illegal

In Illinois, Attorney General Lisa Madigan is among them. She issued an opinion in December that declared DFS games to be in violation of the state's gambling laws.

“Absent legislation specifically exempting daily fantasy sports games from the gambling provisions, it is my opinion that daily fantasy sports contests constitute illegal gambling under Illinois law,” Madigan concluded.

In Illinois, and a number of states, legislatures are, in fact, considering measures that would declare that, while DFS might in fact look an awful lot like gambling, it really isn't.

Big spenders

The Wall Street Journal reports that the industry's lobbying arm is spending big – as much as $10 million – to support DFS-friendly legislation in all but 16 states – even states that have not yet taken a position on the legality of DFS.

In late January, the Tampa Bay Times reported legislation to establish the legality of DFS is making progress in the Florida legislature. While most states considering legalization would tax DFS revenue, the Florida legislation would require major DFS companies to pay $500,000 to register with the state.

As we reported back in October, the huge popularity of DFS, the involvement of major media companies and sports leagues, and the mountains of cash involved, all suggested that DFS was already “too big to fail.”

With some states already moving aggressively against the established DFS enterprises – most notably New York and Nevada – it might not be surprising that the industry is moving quickly to shore up its legal position in the rest of the states – perhaps before the start of baseball season.

Backpage.com faces a contempt vote in the U.S. Senate after failing to adequately answer senators' questions about how it screens its classified ads for sex traffickers.

The free-classifieds site, once owned by Village Voice, accounts for 71% of all suspected child sex trafficking, representatives of the National Center for Missing and Exploited Children told Sen. Rob Portman (R-Ohio), who announced the plan for a contempt vote last week.

Portman commented after revealing a 196-page report that includes gruesome details of incidents involving children who were bought and sold for sexual exploitation, allegedly via Backpage ads.  

One minor said she was forced at gunpoint to have sex with 15 different men.

The possible contempt charge stems from Backpage's failure to adequately disclose how it combats and prevents traffickers from advertising on its site, according to a spokesperson for Portman.

Backpage has questioned the government's authority to access its records and says it plans to argue that its activities are protected under the First Amendment.

Consumers with retirement accounts operate under certain assumptions that guide the way they invest and otherwise manage their assets.

In his latest budget proposal, President Obama would make a number of changes that could alter many of those assumptions. While they are unlikely to survive the current budget process, especially in an election year, Morningstar points out that they reflect sentiment in Washington, at least on the Democratic side of the aisle.

These provisions could reappear in other, unrelated legislation down the road, especially when both Democrats and Republicans are looking for ways to add revenue.

In its analysis, Morningstar focuses on proposed changes to the Roth IRA that could result in higher taxes for retirees using that instrument. The Roth IRA is different from the traditional IRA, in that contributions to it are not tax deductible. When you make withdrawals, they aren't taxable income – the way withdrawals from traditional IRAs are.

Grows tax free

The big advantage to a Roth IRA is the money grows tax-free as long as it stays in the account. Morningstar says the Obama administration has two proposals that target wealthy consumers who use Roth IRAs.

The first would curtail the ability to convert traditional IRAs to Roth IRAs, a tool many affluent savers use to get around the Roth's income limits. The second would require funds to be taken out of a Roth at some point. Right now that money can stay in there earning tax free income until it's passed on to an heir.

Does that mean you should shun a Roth IRA? Not necessarily.

Comparison

Fidelity Investments has a chart to help you compare the Roth and Traditional IRAs to determine which is a better fit for you. Just keep in mind that some of the current rules might change in the future if you are an upper income saver.

Bankrate.com reports financial advisors seem to favor the Roth for most people because it potentially has greater tax advantages. If you don't earn a six-figure income, those advantages could very well stay intact for years to come.

Whether it's a Roth or traditional IRA, you should be saving for retirement. If you still aren't sure which way to go, talk to a trusted and objective financial advisor.

ADT Corporation, which provides home security and monitoring services in the U.S., is being acquired by an affiliate of Apollo Global Management, which owns its own security service, Protection 1.

ADT said the two services will merge their operations after the deal closes. Apollo is paying $42 a share to acquire ADT.

“This transaction represents a highly attractive premium for ADT’s shareholders,” Naren Gursahaney, President and CEO of ADT, said in a release. “We’re proud to have strengthened the quality of our customer base, improved service and retention, and extended our leadership in innovative solutions such as our ADT Pulse platform and our new Security-as-a-Service offering, ADT Canopy. By combining Protection 1 with ADT, we will be better positioned to expand the breadth and depth of the services we offer to our customers throughout the United States and Canada.”

Retains the ADT brand

The combined company will be headquartered in Boca Raton, Fla., and will operate under the ADT brand. Timothy J. Whall, President and CEO of Protection 1, will be the CEO of the new combined company, saying it will benefit from the powerful brand and enhanced scale.

“In addition, Protection 1’s robust commercial presence will speed ADT’s expansion into the commercial sector supported by increasing commercial sales and technical skills across a well matched national footprint,” he said.

ADT has been in the security monitoring business since the late 19th century. ADT stands for American District Telegraph, since telegraph wires, not phone lines, were initially used in its monitoring service.

Protection 1 has been around for 26 years, according to the company's web site. It serves nearly two million customers from more than 70 locations.

Burger King has always marched to the beat of its own drummer. Its marketing has always been a little eccentric.

Now, when most fast food restaurants are catering to health-conscious Millennials and trying to show they have some redeeming nutritional value, Burger King appears to be heading in a different direction.

The burger chain, home of the Whopper, hopes to become famous for its grilled hot dogs as well. The company says the new menu item will be available at participating restaurants nationwide, starting February 23rd.

"The introduction of Grilled Dogs just made sense to our guests and for our brand," Alex Macedo, President, North America, for the Burger King brand, said in a release. "We're applying over 60 years of flame-grilling expertise with the Whopper sandwich to make Grilled Dogs the next great American icon."

Nutritional questions aside – and to be honest, there are probably a lot more calorie laden items on the menu than hot dogs – the move appears aimed at enhancing the bottom line. The profit margin in a hot dog is probably huge. It's also easy to prepare. Better still, Burger King will pretty much have the fast food hot dog market to itself.

20 billion dogs a year

And Americans seem to like hot dogs. They're associated with baseball games and the Fourth of July. Burger King estimates that Americans eat over 20 billion hot dogs a year.

The company believes its introduction of Grilled Dogs positions its restaurants to take a large bite out of that market with one of its' biggest launches in recent history.

Burger King says its Grilled Dogs will be available in both the Classic Grilled Dog and the Chili Cheese Grilled Dog. The Classic Grilled Dog is a flame-grilled hot dog made with 100% beef, topped with ketchup, mustard, chopped onions, relish, and served on a baked bun.

The Chili Cheese Grilled Dog is the same beef hot dog topped with warm chili, shredded cheddar cheese, and served on a baked bun. Both are sold separately or as a combo meal.

Snoop Dogg helps launch

Burger King has some marketing firepower behind the launch, enlisting pop culture personality Snoop Dogg to help promote the rollout.

According to CalorieKing, a plain hot dog on a bun has 240 calories. Keep in mind a lot of the calories are in the chili, cheese, and other condiments you pile on.

And the calories may not be the biggest health issue should one adopt a steady hot dog diet.

According to health site LiveStong.com, a beef hot dog contains 13 grams of fat, with about 60% monounsaturated and polyunsaturated fats and 40% saturated fat.

“The American Heart Association recommends that Americans consume no more than 7% of their total caloric intake from saturated fats, as this type of unhealthy fat increases your risk of heart disease,” the site advises.  

Taking a cue from consumers, the confidence of builders in the market for newly-built single-family homes took a hit in February.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) fell three points to 58 from an upwardly revised January reading of 61.

"Builders are reflecting consumers' concerns about recent negative economic trends," said NAHB Chief Economist David Crowe. "However, the fundamentals are in place for continued growth of the housing market. Historically low mortgage rates, steady job gains, improved household formations and significant pent up demand all point to a gradual upward trend for housing in the year ahead."

How they see it

The HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The HMI component measuring sales expectations in the next six months rose one point to 65 in February, while the index measuring current sales condition fell three points to 65 and the component charting buyer traffic dropped five points to 39.

Looking at the three-month moving averages for regional HMI scores, all four regions registered slight declines. The Midwest fell one point to 57, the West registered a three-point drop to 72 and the Northeast and South each posted a two-point decline to 47 and 59, respectively.

"Though builders report the dip in confidence this month is partly attributable to the high cost and lack of availability of lots and labor, they are still positive about the housing market," said NAHB Chairman Ed Brady. "Of note, they expressed optimism that sales will pick up in the coming months."

International Foodsource is recalling various raw pistachio products.

The products may be contaminated with Salmonella

There are no reported illnesses in connection with these products.

The following product, distributed to food service and retail stores nationally, are being recalled:

What to do

Customers who purchased the recalled products should not consume them, but return them to the place of purchase.

Consumers with questions may call customer service at 973-361-7044 from 8:15 am – 4:30 pm, (EST), Monday through Friday.

BMW of North America is recalling 840,000 model year 2008-2013 128i and 135i coupes and convertibles and 1 Series M coupes; 2006-2011 325i, 325xi, 328i, 328xi, 328i xDrive, 330i, 330xi, 335i, 335xi, 335i xDrive Sedans; 2009-2011 335d sedans; 2006-2012 325xiT, 328i and 328xi sports wagons; 2007-2013 328i, 328xi, 328i xDrive, 335i, 335xi, 335i xDrive, 335is and M3 Coupes and Convertibles; 2013-2015 X1 sDrive28i, X1 xDrive28i and X1 xDrive35i SAVs; 2007-2010 X3 xDrive30i SAVs; 2007-2013 X5 xDrive30i, X5 xDrive35i, X5 xDrive48i, X5 xDrive50i and X5 M SAVs; 2009-2013 BMW X5 xDrive35d SAVs; 2008-2014 X6 xDrive35i, X6 xDrive50i, and X6 M SACs; 2010-2011 BMW X6 xDrive50i SACs; and 2008-2011 M3 Sedan vehicles.

Upon deployment of the driver-side front air bag, excessive internal pressure may cause the inflator to rupture with metal fragments striking the driver or other occupants resulting in serious injury or death.

What to do

BMW will notify owners, and dealers will replace the driver's front air bag, free of charge. Parts are not currently available. Owners will be mailed an interim notification beginning March 31, 2016. A second notice will be mailed when remedy parts are available.

Owners may contact BMW customer service at 1-800-525-7417.

American Honda Motor Co. is recalling 2.23 million model year 2007-2011 Honda CR-V; 2011-2015 CR-Z; 2010-2014 FCX Clarity, and Insight; 2009-2013 Fit; 2013-2014 Fit EV; 2007-2014 Ridgeline; 2013-2016 Acura ILX; 2013-2014 Acura ILX Hybrid; 2007-2016 RDX; 2005-2012 Acura RL;2009-2014 Acura TL; and 2010-2013 Acura ZDX vehicles.

The recalled vehicles are equipped with a dual-stage driver front air bag that may be susceptible to moisture intrusion which, over time, could cause the inflator to rupture with metal fragments striking the driver or other occupants resulting in serious injury or death.

What to do

Honda will notify owners, and dealers will replace the inflator, free of charge. Remedy parts are expected to be available in Fall 2016. Interim notices will be mailed to owners beginning on March 14, 2016. Owners will receive a second notice when remedy parts become available.

Owners may contact Honda customer service at 1-888-234-2138. Honda's numbers for this recall are JX2, JX3 and JX4.

Garden of Life is expanding its earlier recall to include additional lots of its Raw Meal Organic Shake & Meal Chocolate, Original, Vanilla and Vanilla Chai products.

An ingredient used in certain lots of the product may be contaminated with Salmonella Virchow.

The following products have been added to the recall:

Consumers can find the lot codes prominently stamped on the underside of the plastic container.

What to do

Customers who have any of the recalled product should return it to the place of purchase for a full refund.

Consumers with questions may contact the company at 1-866-465-0051, Monday-Friday from 9:00 am – 5:00 pm (EST).

That car hurtling at you on the other side of the thin white line? Chances are one in five that it has an outstanding safety recall, according to a recent analysis.

Used-car history provider Carfax says there are more than 47 million cars in the U.S. with "open" recalls -- meaning recalls that have not been completed. That's up 27% from a year ago.

Many, of course, are cars equipped with the dread Takata airbags, but others have problems like hoods that may fly open unexpectedly, fuel pipes that can rupture in a collision, and brake lines that may corrode faster than expected.

Serious problems, in other words.

Work to be done

"Our data shows there's still much hard work to be done in addressing recalls," Larry Gamache, communications director at Carfax, said.

Gamache said it is troubling that the type of vehicle with the highest rate of unfixed safety issues is the family-oriented minivan, with one out of every 4.6 having open recalls.

SUVs are second at one in 5.1 vehicles, followed by pickup trucks and cars, each at one in 5.5 vehicles.

For all vehicles, Carfax said one in 5.4 are operating with an open recall.

The highest rates of unfixed vehicles were, in order, Texas, Mississippi, Alaska, Utah, and West Virginia, Carfax said.

Recalls can be fixed at no cost to the consumer at U.S. dealerships.

What to do

If you have received a recall notice in the mail, you should contact your dealer to have the repairs completed as quickly as possible at no charge. Dealers may sometimes not have the necessary parts on hand and there may be a delay.

Dealers are not required to provide you with a loaner while the repairs are made but it never hurts to ask.

To check whether there are outstanding recalls on your car, check SaferCar.gov or the Carfax recall check page.

As we reported a few weeks ago, Blue Buffalo has agreed to pay $32 million to settle a class action lawsuit that charged its products made pets sick. The settlement administrator has now provided details of how affected consumers can apply for reimbursement.

Consumers eligible for reimbursement must have purchased a Blue Buffalo product in the United States between May 7, 2008 and December 18, 2015. Consumers can receive $5 for each $50 worth of Blue Buffalo products purchased between those dates. 

Consumers must complete a claim form and include either proof of purchase or sign a statement certifying under penalty of perjury how much they spent on Blue Buffalo products.

What to do

Complete details are available on the official settlement site -- https://www.petfoodsettlement.com/. This is the only official site. It includes links to the claim form and other documents. 

Consumers should not contact Blue Buffalo, the court, or ConsumerAffairs. All of the necessary information is on the official settlement site.

Denies wrongdoing

Blue Buffalo has denied any wrongdoing and says health problems encountered by consumers' pets may have been caused by supplier misconduct.

"More than a year ago, we informed our Pet Parents about the misconduct of a former ingredient supplier and a broker. While we will continue to pursue our claims against them, we decided that it is in the best interest of our Pet Parents and our company to resolve the class actions now," said Bill Bishop, chairman and founder of Blue Buffalo.

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