Your update of the most important business news from dozens of respected news sources, selected by the editors of BusinessWeek.

Weekend Edition August 29 2008 at 01:51 PM Chi-Chu Tschang and Harry Maurer

Top Stories of the Week

Spending Less, Paying More

Their tax rebates largely spent, U.S. shoppers slacked off a bit in July. Consumer spending rose just 0.2% after a 0.6% increase in June, said the Commerce Dept. The rise matched economists' expectations and added weight to predictions that the economy will slow sharply in the second half of the year. Incomes dipped 0.7%, mostly because of the effect of the rebates the month before.

Perhaps more alarming, the report's price gauge tied to spending jumped 4.5% from July 2007. That's the biggest rise since 1991. Excluding volatile food and energy, prices were up 2.4%.

Source: Blooomberg

Dell Shares Dive

Following its report of a lackluster second quarter, the computer maker saw its shares dive as much as 13%. Dell said its profit dropped by 17%, and gross margins eroded to 17.2% from 20%.

Source: MarketWatch

GM Official Wants Loan Guarantees

Robert Lutz, vice-chairman of General Motors, said Thursday that the federal government should offer up to $50 billion in loan guarantees to U.S. carmakers to offset the costs of building more fuel-efficient vehicles. Lutz said Detroit needs large amounts of capital to retool plants but probably won't be able to raise it because of the credit crunch.

Source: New York Times

Obama Spells Out His Economic Plans

Barak Obama formally accepted the Democratic presidential nomination with a drive to convince American voters that he can deliver solutions to the economic woes. "Unlike John McCain, I will stop giving tax breaks to corporations that ship our jobs overseas, and I will start giving them to companies that create good jobs right here in America," Obama said. With the convention behind him, Obama has to confront some unpleasant realities. He hasn't capitalized on the economy's distress to build a sweet electoral lead. At the moment voters rank Obama and Republican rival McCain equally on their ability to address the economy's troubles.

Source: BusinessWeek

Rules May Loosen on Private Equity Investment in Banks

Regulators may relax rules that have deterred private equity firms from investing in banks and thrifts. An unnamed lawyer who has spoken with regulator on the matter said the U.S. Federal Reserve could clarify rules governing minority investments of less than 25% as early as next month and that could lead to more private equity stakes in banks and thrifts, and even prompt takeovers. Buyout shops are also optimistic that regulators, on a case-by-case basis, will be more open than they were even six months ago to deals involving a change of control.

Source: Reuters

AT&T's Rivals Exploit iPhone's Network Woes

Apple's July introduction of the iPhone 3G has been a public relations headache for AT&T, with eager buyers complaining about dropped calls and poor network connections. AT&T's rivals are happy to exploit the discontent. A Verizon executive has sent an e-mail to Wall Street analysts: "So much for a 'new' way of doing business at the old AT&T - your father's phone company."

New York Times

Abysmal Auto Industry Imperils Delphi

Odds are growing that Delphi will be liquidated, with former parent GM taking over some U.S. plants. GM's financial obligation could grow by billions of dollars, according to people involved in the bankruptcy process. Delphi's bankruptcy financing expires at year end, and its pension plan will need a large cash infusion or need GM to take over some of it.

Source: Wall Street Journal

The Dreamliner's Cost to Boeing

Boeing presented a final offer to machinists, dropping proposals to end some retiree medical benefits and scrapping a traditional pension program-terms the International Association of Machinists had said were deal-breakers. Boeing can ill afford a work disruption in view of huge costs involved in the delay for more than a year of its new 787. By the time Boeing puts its first Dreamliner into the air this fall, the company will have racked up extra costs that may top $2 billion.

Source: BusinessWeek

A Stronger Second Quarter

The U.S. economy may have been faring better than many think. Revised figures from the Commerce Dept. show that gross domestic product grew at a 3.3% annual rate in the second quarter, considerably faster than the 1.9% rate initially reported. Economists had predicted a revision to 2.7% growth. A surge in exports, which brought about the smallest trade gap in eight years, was responsible for most of the upward revision. The trade gap narrowed to a $373.6 billion annual pace, and trade added 3.1 percentage points to the growth rate. Excluding trade, the economy would have grown at just a 0.2% rate. And many economists figure that growth will slow sharply in the second half, as pinched consumers and a lackluster job market rein in spending. The Labor Dept. reported that initial jobless claims dropped slightly to 425,000 last week, but that's still well above the 321,000 average for last year.

Source: BusinessWeek

Mattel Gets Less than Expected in Bratz Case

A California jury on Aug. 26 awarded Mattel $100 million in damages in the copyright infringement case it launched against MGA Entertainment, maker of the Bratz line of dolls. Mattel had been hoping for a settlement in the billions.

Source: Reuters

Wind Energy Stymied by Grid Limits

The U.S.' outdated and fragmented electricity transmission grid with over 200,000 miles of power lines owned by some 500 different owners, is inhibiting the development of wind energy and other alternatives including solar. "We need an interstate transmission superhighway system," said Suedeen G. Kelly, of the Federal Energy Regulatory Commission.

Source: New York Times

More Banks in Trouble Reports FDIC

The Federal Deposit Insurance Corp (FDIC) reported Tuesday that as of June 30 the number of banks on its 'problem list" had risen 30% to 117. "The results were pretty dismal," FDIC Chairwoman Sheila C. Bair said at a news conference.

Source: Los Angeles Times

Consumer Confidence Inches Up Again

"A little bit of the gloom is lifting," said one economist in reaction to the Conference Board's report of a second straight monthly rise in U.S. consumer confidence. The index rose to 56.9 in August, up from 51.9 in July. That's a bigger boost than analysts expected. And why are consumers feeling a tad cheerier? For one thing, gasoline prices have fallen from a peak average of $4.11 on July 16 to $3.67 yesterday. And housing prices are sliding at a slower rate. The S&P/Case-Shiller index showed that prices in 20 metropolitan areas dropped by 0.5% in June from the previous month and are down 15.9% from last year. Economists had predicted a 16.2% drop. Prices in the second quarter sank 2.3% from the previous quarter, compared with a 6.8% drop in the first quarter from the fourth quarter of 2007. The Commerce Dept. also said that new-home sales hit a three-month high in July.

Source: Bloomberg

Conversation of the Day: GEORGIA-RUSSIA CONFLICT

Reader Wim Roffel Writes: "It looks like Georgia will be in the world's top 10 aid receivers for a long time. To achieve that, its relations with Russia will stay bad for a long time."

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