Morning Business Memo:
If you’ve driven past a gas station you may have noticed prices are even higher than they were last week. Yesterday drivers in much of the country were hit with the biggest one-day jump in gasoline prices in 18 months. The price shock comes just as the last heavy driving weekend of the summer approaches. Hurricane Isaac shut down most oil production and refining along the Gulf coast. Gasbuddy.com says the national average price of a gallon of gas jumped almost 5 cents in one day to $3.80. Prices are expected to continue to climb through Labor Day weekend. In all, Isaac knocked out about 1.3 million barrels per day of refining capacity. As the storm fades, the summer driving season ends, and refiners switch to cheaper winter blends of gasoline, prices should start to drop. When Hurricane Katrina hit in 2005, the national average for gas spiked 40 cents in six days, but Isaac in not expected to cause such a dramatic rise.
It’s hardly the stuff of dramatic headlines, but slowly and surely American households are chipping away at their debt – and that may add fuel to the recovery. The Federal Reserve says delinquency rates for mortgages, auto loans and credit cards decreased in the second quarter compared with the first three months of this year. Total household debt fell 0.5 percent, and has decreased by a whopping $1.3 trillion since its peak in the fall of 2008, as the financial mess reached its climax. The Fed says “the reduction was led by a decline in real estate-related debt.” Student loan debt is the big exception to the trend, and rose again during the second quarter.
Five out of America’s six biggest banks have reduced the balances of many struggling homeowners – by $1.3 billion after a settlement reached with those banks earlier this year. The monitor overseeing the agreement says $10.6 billion has been spent overall, most of it in the form of short sales. Lenders accepted less than what the seller owes with the mortgage. The foreclosure listing firm RealtyTrac says foreclosure sales dropped in the second quarter – down 22 percent from a year earlier. This trend is helping the housing market start to turnaround in many places. The Federal Reserve says the number of properties entering foreclosure fell by 12 percent in the 2nd quarter to the lowest level in five years.
Citigroup has agreed to pay a fine of $590 million over claims it deceived investors by hiding its exposure to toxic subprime mortgage debt. The bank denied misleading investors, but The Wall Street Journal reports this is “one of the largest settlements of suits tied to the financial crisis.”
Yelp shares jumped more than 22 percent Wednesday – a major test for the online review site. The stock rose as lockups expired for insider investors. Most early shareholders kept their stake in the firm in what amounts to a vote of confidence. That contrasts with the sharp stock drop after many Facebook shares hit the market this month.
Richard Davies Business Correspondent ABC NEWS Radio ABCNews.com twitter.com/daviesabc