WORLD ECONOMY HOT NEWS

By MELINDA DESLATTE, Associated Press

BATON ROUGE, La. – A handful of Republican governors are considering turning down some money from the federal stimulus package, a move opponents say puts conservative ideology ahead of the needs of constituents struggling with record foreclosures and soaring unemployment.

Vacancy rates in these spots spell lots of empty neighborhoods.

Call it a modern-day tale of two cities.

For decades, Las Vegas, ripe with new construction and economic development, burgeoned into a shimmering urban carnival. Detroit, once the fulcrum of American industry, sagged and rusted under its own weight.

These days, it's the worst of times for both.

Las Vegas edged Detroit for the title of America's most abandoned city. Atlanta came in third, followed by Greensboro, N.C., and Dayton, Ohio. Our rankings, a combination of rental and homeowner vacancy rates for the 75 largest metropolitan statistical areas in the country, are based on fourth-quarter data released Feb. 3 by the Census Bureau. Each was ranked on rental vacancies and housing vacancies; the final ranking is an average of the two.

Cities like Detroit and Dayton are casualties of America's lengthy industrial decline. Others, like Las Vegas and Orlando, are mostly victims of the recent housing bust. Boston and New York are among the lone bright spots, while Honolulu is the nation's best with a vacancy rate of 5.8% for homes and a scant 0.5% for rentals.

Still, empty neighborhoods are becoming an increasingly daunting problem across the country. The national rental vacancy rate now stands at 10.1%, up from 9.6% a year ago; homeowner vacancy has edged up from 2.8% to 2.9%. Richmond, Va.'s rental vacancy rate of 23.7% is the worst in America, while Orlando's 7.4% rate is lousiest on the homeowner side. Detroit and Las Vegas are among the worst offenders by both measures--the Motor City sports vacancy rates of 19.9% for rentals and 4% for homes; Sin City has rates of 16% and 4.7%, respectively.

"It's a mess," says Vegas developer Laurence Hallier. "Right now, things are just frozen. Everybody's scared."

Hallier, 40, knows from experience. His $600 million Panorama Towers complex was a tremendous success at its inception three years ago. The first of his four planned residential skyscrapers sold out in six months; the second, which opened in 2007, sold out in 12 weeks. As the third tower neared completion last fall, Hallier had sold 92% of its units. Then the recession hit, and only half the units ended up closing. Hallier says it will take years to break even, and plans for the fourth tower have been delayed indefinitely.

There are others who've made--and lost--far worse gambles on Vegas property. In 2007, Israeli billionaire Yitzhak Tshuva and partner Nochi Dankner paid $1.25 billion to buy a 34.5-acre site on the Strip, with plans to build an $8 billion mega-casino modeled after New York's Plaza Hotel. By November, the value of the lot had plummeted to $650 million--half what they paid for it. Groundbreaking on the casino has been pushed back to 2010, and today, the land may be worth less than the $625 million Tshuva and Dankner borrowed to buy it.

The Plaza debacle is emblematic of the problems afflicting millions of property owners in Vegas and around the country--and can explain, in large part, the origins of America's housing crisis.

As real estate prices skyrocketed during the boom, consumers took out massive loans to buy homes, assuming values would continue to rise. Instead they took a nosedive, especially in places like Las Vegas, Florida and Phoenix, where the housing boom had created excess inventory and so-called "bad loans" were rampant. Many homeowners suddenly found themselves with properties worth far less than the mortgages they'd taken out. In the worst cases, banks foreclosed, leaving people without homes--and with more debt than they'd had to begin with.

The situation in places like Las Vegas is bad enough, but Detroit's problems run much deeper. Though its vacancy rates are marginally better than Sin City's, Motown has been on the empty side for decades. An industrial boomtown during the first half of the 20th century, Detroit's population swelled from 285,000 in 1900 to 990,000 in 1920, reaching a peak of 1.8 million in 1950.

But starting in the 1960s, Detroit began a precipitous decline. Detroit's population is now 900,000--half what it was in the middle of the century--and many of its neighborhoods languish in varying states of decay. Most scholars blame rapid suburbanization, outsourcing of manufacturing jobs, and federal programs they say exacerbated the situation by creating a culture of joblessness and dependency.

Yet after more than half a century, countless scholars, politicians, community organizers developers and nonprofit workers have been unable to come up with a solution to fix Detroit.

Will Las Vegas eventually suffer the same fate?

"I don't think Vegas is overbuilt," says Hallier. "Despite what everybody says, Vegas still has 2 million people."

Time will tell if this sort of optimism is warranted. Cynics who've witnessed Detroit's decline might liken Hallier's opinions to another Dickens oeuvre: Great Expectations.

By JEREMIAH MARQUEZ

HONG KONG – Most Asian stock markets fell Monday, as new figures showed Japan's economy contracted the most in 35 years and Group of Seven finance ministers warned the global slump will drag on through most of the year.

The fourth quarter GDP numbers out of Japan, worse than many forecasts, was a sobering reminder of the toll on Asia's export-driven countries as world demand collapses amid the worst economic downturn in decades. According to the government, the world's second-biggest economy shrank 3.3 percent from the previous quarter, or at an annual pace of 12.7 percent.

Investors also seemed disappointed after finance chiefs from the Group of Seven developed countries finished their meeting in Rome with pledges to work together to boost growth and unemployment, but stopped short of concrete measures.

Increasingly, investors are unconvinced governments around the world are acting quick enough to solve the credit crisis, plummeting consumer demand and other problems at the heart of the economic slowdown, analysts said.

"The global recession is deeper than anticipated. At the same time policy makers are failing to deliver measures to address the problems," said Dariusz Kowalczyk, chief investment strategist for SJS Markets in Hong Kong. "It seems that what they're doing is too little too late."

Japan's Nikkei 225 stock average edged down 22.45 points, or 0.3 percent, to 7,756.95, and Hong Kong's Hang Seng Index dropped 231.84 points, or 1.7 percent, to 13,322.83. South Korea's Kospi lost 1.4 percent to 1,176.23.

Markets in Australia, India and Singapore also declined, while benchmarks in Shanghai and Taiwan gained.

In Japan, exporters were down on data showing the economy sank deeper into recession.

The result represents the steepest drop for Japan since the oil shock of 1974 and outpaced annual pace declines of 3.8 percent in the U.S. and 1.1 percent in the euro zone. A survey of economists by Kyodo news agency had projected an 11.6 percent contraction.

"It's clearly very shocking data," said Clive McDonnell, head of Asia strategy at BNP Paribas Securities in Hong Kong. "The drop is certainly beyond our own quite negative expectations. (Japan's) policy response has not been as effective."

Shares in Toyota Motor Corp. lost 1 percent, while electronics heavyweight Canon Inc. slid 1.8 percent.

Also weighing on markets were declines on Wall Street last week.

Friday, the Dow fell 82.35, or 1.04 percent, to 7,850.41, its lowest close since Nov. 20. Broader stock indicators also fell, with the Standard & Poor's 500 index down 8.35, or 1.00 percent, to 826.84. The S&P 500 ended the week off 4.8 percent.

U.S. markets are closed Monday for Presidents Day.

In the coming days, investors will be watching President Barack Obama, expected to sign the country's $787 billion economic stimulus measure on Tuesday. He plans to outline steps to stem home foreclosures on Wednesday, though analysts say investor enthusiasm surrounding the pending announcement is fairly low

In currencies, the dollar weakened to 91.74 yen, down from 91.87 yen late Friday. The euro fell to $1.2760 compared to $1.2860.

Oil prices were steady after soaring 10 percent last week, trading 12 cents higher at $37.63 for a barrel of light, sweet crude for March delivery. The contract rose $3.53 to settle at $37.51 a barrel on the New York Mercantile Exchange on Friday.

WASHINGTON – U.S. retail sales jumped 1 percent in January, reversing a six-month declining trend and defying economists' expectations by posting the biggest increase in 14 months.

But higher gasoline prices and sales, and buyers snapping up other items on post-holiday discounts appeared to aid last month's results. Analysts cautioned that the relief is unlikely to last.

The Commerce Department reported Thursday that January retail sales rose 1 percent from December after having fallen for six straight months. Wall Street economists surveyed by Thomson Reuters had expected January sales to show a drop of 0.8 percent. They plunged a revised lower 3 percent in December, which marked the weakest holiday selling season since at least 1969.

"This is a big surprise, though the net rise in sales is less impressive than it looks because (December and November) were revised down by 0.3 percent each," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a research note. "The headline relief today is welcome but it is unlikely to last."

The January report shows strong increases in sales of automobiles and in general merchandise stores — the "big box" outlets — though sales by department stores, carrying fewer varieties of items, posted a decline. Wal-Mart Stores Inc., the world's largest retailer, is an example of a discounter that has benefited from strapped consumers' focus on necessities like groceries and on bargains for other items.

Sales at gas stations jumped 2.6 percent in January — the biggest increase since June, while sales of autos and parts rose 1.6 percent.

Total retail sales excluding autos and parts still rose 0.9 percent, which again easily beat estimates by economists who expected a decline of 0.5 percent.

Nonstore retailers, such as Internet and mail-order shopping, advanced 2.7 percent in January, while sales of food and beverages rose 2.1 percent. Health and personal care stores registered flat sales last month.

Despite the leap last month, retail sales were down 9.7 percent from January 2008, amid the ravages of the recession, thousands of job losses and falling home prices.

Many of the nation's retailers last week reported sales declines for January. The Labor Department said retailers slashed about 45,000 jobs last month as they closed stores and tried to preserve cash while consumers curtailed spending.

Wal-Mart said Tuesday it will cut 700 to 800 jobs at its Arkansas headquarters as it builds fewer new stores this year and makes other operational changes. The cuts are coming in Wal-Mart's real estate, apparel, and health and wellness departments.

Macy's Inc. last week said it will eliminate 7,000 jobs, or almost 4 percent of its work force, while Bon-Ton Stores Inc. and apparel maker Liz Claiborne Inc. also disclosed major job cuts.

By ELAINE KURTENBACH, AP Business Writer

SHANGHAI – China's monthly vehicle sales surpassed those in the United States for the first time in January, moving this country closer to becoming the world's biggest auto market, data released Tuesday showed.

With its growing middle class and vast potential as a consumer market, China is vital for General Motors, Volkswagen and Toyota as they count on demand here to offset weakness in the U.S. and elsewhere.

But China's ascent in the global auto market has been hastened by the plunge in U.S. auto sales, which tumbled 37 percent in January to a 26-year low of 656,976 units.

Chinese vehicle sales also have cooled, but hardly as dramatically. In January, 735,000 vehicles were sold, down 14.4 percent from a monthly record 860,000 last January, the China Association of Automobile Manufacturers said.

Mike DiGiovanni, General Motors Corp.'s executive director of global market and industry analysis, said last week he expected Chinese auto sales could hit 10.7 million units in 2009, more than his estimate of 9.8 million unit sales in the U.S. this year. Autodata forecasts 2009 U.S. sales at 9.57 million.

China's vehicle market has grown dramatically in recent years, overtaking Japan in 2006 to become the world's second-largest by annual sales. With 1.3 billion people, China will inevitably leapfrog the U.S., with a population of 300 million, into the No. 1 spot, industry experts say.

Still, if American car demand revives in coming months, the United States will remain the world's largest market by annual sales — at least for another year.

China's best-selling automakers are GM and Germany's Volkswagen AG but its own ambitious producers, such as Chery Automobile Co., are growing fast.

General Motors says it sold a record 1.09 million vehicles in China, up 6 percent from 2008.

January sales in China were 0.8 percent below those in December and well below the 790,000 some analysts had anticipated.

To spur the slowing auto market here, the government has rolled out measures to help boost vehicle sales as part of a multibillion-dollar economic stimulus package while it also tries to promote cleaner, more energy-efficient engines.

The sales tax on cars with engines less than 1.6 liters has been cut by half to 5 percent through the end of the year. The government also is spending 5 billion yuan (about $730 million) on subsidies to farmers to replace three-wheeled vehicles or outdated trucks with small, 1.3-liter or less vehicles.

Another 10 billion yuan ($1.5 billion) is going into upgrading automakers' technology and developing alternative energy vehicles.

In 2008, China's auto sales grew 6.7 percent from the previous to 9.38 million units — the first time growth has fallen below 10 percent since 1999.

Trucks and buses make up a larger share of China's sales than those of the United States or Japan. Some observers say that makes direct comparisons misleading. But many rural Chinese use such commercial vehicles for everyday family use.