Kitsap Business and Economy

NEW YORK (AP) — Danish Modern furniture. Flat-screen TVs. Free wi-fi.
You want fries with that?
A McDonald’s in midtown Manhattan became the first in the U.S. this fall to undergo a sleek, European-style makeover similar to what McDonald’s has done at thousands of outlets around in France and the United Kingdom.
The eatery is outfitted with outlets for plugging in laptops, upholstered vinyl chairs instead of Fiberglas seats bolted to the floor, subdued lighting and employees whose all-black uniforms suggest a hip boutique.
“It’s like a lounge,” said Kimberly Burgess, one of many patrons who did a double-take after entering the newly renovated restaurant in Manhattan’s Chelsea section. “It’s so different from all the other McDonald’s. It’s beautiful.”
Franchise owner Paul Hendel said customers have settled down in a restaurant not known for patrons lingering over lunch.
“We’re becoming a more relevant type of restaurant for the younger crowd,” he said. “They don’t feel rushed. They’re reading the newspaper, relaxed.”
McDonald’s Corp. spokeswoman Danya Proud said that while thousands of the chain’s 14,000 restaurants have been updated over the last few years, the Chelsea location is the first “urban redesign” in the U.S. She said “we’ll continue to evaluate” whether more might follow.
Proud said the redesign was intended “to give our customers more of a reason to make McDonald’s a destination.”
“People are using our restaurants differently today than they did five, 10, 20 years ago,” she said. “People are multi-tasking, doing more on a given day. … You want to be able to open your laptop, log on and get some work done while you’re eating.”
Proud said the that the redesigned European restaurants — along with menu items geared toward the customer base in different countries — have been responsible for McDonald’s growth in Europe.
McDonald’s has experienced strong sales in the U.S. during the recession, though the chain said this week that its monthly sales growth edged down in October in the U.S. European sales were up 6.4 percent for the month.
McDonald’s does not release sales figures for individual restaurants.
The menu at the 186-seat Chelsea outlet is the same as any other McDonald’s. But the differences are stark. The walls are decorated with bold vertical stripes or with what looks like a zebra design but is actually French architect Philippe Avanzi’s magnified thumbprint. Tables are of different sizes to accommodate small groups or an informal business meeting — and Hendel said nearby workers have started meeting there.
There are reproductions of Danish designer Arne Jacobsen’s chairs including the Egg chair, a classic of midcentury functionality that would look right at home on “The Jetsons.”
When McDonald’s first hired Avanzi in 2006 to help redesign its European outlets, Avanzi brought in Danish furniture producer Fritz Hansen to supply authentic Jacobsen chairs.
But Hansen, the sole licensed manufacturer of Jacobsen chairs, ended the partnership because McDonald’s was also buying unauthorized copies.
Proud said the chairs at the New York store are “modeled after” Jacobsen’s designs.
Darren Tristano, executive vice president of Technomic Inc., a Chicago-based food industry consulting group, said McDonald’s franchise owners have wide discretion in how they decorate their restaurants as long as brand elements like the golden arches are present.
“There is a lot of flexibility,” he said.
Another New York City McDonald’s has a grand piano visible from the street through a second-floor window.
McDonald’s is not alone in seeking to update its image. Rival Burger King announced plans last month to overhaul its 12,000 locations with industrial-inspired corrugated metal and brick walls.
Proud said McDonald’s upscale Chelsea eatery is not a reaction to anything planned by another chain.
“This isn’t about any other brand,” she said. “This is about McDonald’s.”

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Dow now at 10,396, a drop of 40 points.

NEW YORK (AP) — Investors turned cautious Wednesday as an unexpected drop in home construction and disappointing forecasts from technology companies raised concerns about the pace of the economy’s recovery.
The modest drop came a day after major stock indicators closed at 13-month highs, including the Dow Jones industrial average, which has risen 9 of the past 10 days. Analysts said the quick ascent means the market is due for a rest.
John Brady, senior vice president of global interest rate products at MF Global in Chicago, said as the end of the year approaches traders are looking foremost at preserving the gains amassed in an eight-month rally that has given the benchmark Standard & Poor’s 500 index a gain of 22.9 percent for the year.
“It’s a bit of a consolidation trade,” he said. “Traders are scared to go out too far out on a limb here and do anything too risky late in the year.”
The day’s economic news added to investors’ caution. The Commerce Department said construction of homes and apartments fell 10.6 percent in October to an annual rate of 529,000, well below the pace of 600,000 that economists polled by Thomson Reuters expected.
Joe Heider, president of Dawson Wealth Management in Cleveland, said the disappointing results “will push against what was a very bullish attitude on Wall Street.”
Heider said investors were trying to determine whether the slowdown signaled weakness in the economy or a reluctance among builders to break ground when the future of a homebuyers’ tax credit was uncertain. Lawmakers extended a tax credit for first-time homebuyers that was set to end this month through June.
Building permits, a key indication for future activity, slid 4 percent to an annual rate of 552,000, also below the rate of 580,000 that analysts had forecast.
Technology shares fell after BMO Capital Markets said Blackberry maker Research in Motion Ltd. faces increased competition as consumers opt for less expensive phones. Meanwhile, forecasts from software makers Autodesk Inc. and Salesforce.com fell short of analysts expectations.
In midafternoon trading, the Dow fell 42.40, or 0.4 percent, to 10,395.02. The broader S&P 500 index fell 3.19, or 0.3 percent, to 1,107.13, while the technology-heavy Nasdaq composite index fell 16.69, or 0.8 percent, to 2,187.09.
There was little reaction to a report that found inflation at the retail level remained tame as rising unemployment, nervous consumers and tight credit keep prices stable.
The Labor Department said consumer prices rose 0.3 percent in October, slightly above the 0.2 percent economists expected. Core inflation, which excludes volatile energy and food prices, rose 0.2 percent, compared to expectations of a 0.1 percent rise.
A report released Tuesday on prices at the wholesale level showed rapid inflation was not imminent, supporting comments from Federal Reserve Chairman Ben Bernanke’s earlier in the week.
Investors are looking for any signals of further improvement in the economy to justify the gains that pulled major stock indexes off 12-year lows in March. Rising unemployment and tepid retail sales have some analysts worried that investors might have been too quick to place bets on a recovery.
President Barack Obama told Fox News on Wednesday that he is worried that spending too much to help boost the economy could invite a second recession because rising deficits could sap confidence.
The dollar mostly fell against other major currencies, while gold rose.
The drop in the dollar offered modest support to stocks. The market often moves opposite the dollar as weakness in the currency boosts demand for commodities. That, in turn, strengthens shares of energy and materials companies as well as exporters whose goods become cheaper to foreign buyers.
Bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.37 percent from 3.33 percent late Tuesday.
Crude oil rose 25 cents to $79.39 per barrel on the New York Mercantile Exchange.
Among tech stocks, Research in Motion fell $1.91, or 3.1 percent, to $59.49, while Autodesk slid $2.94, or 10.9 percent, to $24.06. Salesforce.com fell $2.07, or 3.2 percent, to $63.54.
Three stocks fell for every two that rose on the New York Stock Exchange, where volume came to 630.3 million shares compared with 564.4 million shares traded at the same point Tuesday.
The Russell 2000 index of smaller companies fell 4.89, or 0.8 percent, to 597.45.
Overseas, Britain’s FTSE 100 fell 0.1 percent, Germany’s DAX index gained 0.2 percent, and France’s CAC-40 slipped less than 0.1 percent. Japan’s Nikkei stock average fell 0.6 percent.

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By Rachel Pritchett

Some rebuilding is now under way at Arnold’s Home Furnishing in Bremerton, but a decision has not yet been made to replace the entire 66,000-square-foot structure.
Work to restore the warehouse in the back of the structure is under way. Refurbishing work also is under way on the portion of the building that housed the Broyhill line of furniture before the July 27 fire.
But no decision has yet been made to rebuild the remaining portion of the building that was burned to the ground, according to Ralph Erickson, Arnold’s vice president.
Meanwhile, the business continues to operate a temporary showroom and warehouse nearby at 1305 Marine Drive.
Erickson said he hoped to get back to the former site by late spring of next year.
“We just want to get back in that location as quick as possible,” he said.
James H. Robinson Co. of Bremerton is the contractor.

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POULSBO
Pope Resources has announced plans to continue cutting fewer trees in 2010, as dampened demand for wood products persists.
The Poulsbo-based company announced it will harvest 32 million board feet of timber next year, about the same amount it intends to harvest this year.
Earlier, the company estimate it would harvest 37 million board feet in 2009.
A company statement blamed market conditions.
“The drop-off in housing starts has curtailed demand for solid wood products and, rather than absorb materially lower log prices, we are opting instead to allow 47 percent of our annual sustainable harvest to continue to grow,” a company statement announced.
Pope Resources announced a 2009 fourth-quarter dividend of 10 cents per unit, down from an earlier announcement of 20 cents per unit.
The company and its subsidiaries own or manage 152,000 acres of timberland and development property in Washington and Oregon.

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By Rachel Pritchett
rpritchett@kitsapsun.com
BREMERTON NATIONAL AIRPORT
The Port of Bremerton has received recognition from the Kitsap County Health District for its environmental efforts at its airport and industrial park.
The health district gave the port a five-star rating as part of its EnviroStars program, meant to encourages businesses to think green.
In an evaluation that lead to the rating, the health district found that the Bremerton National Airport and the Olympic View Business and Industrial Parks were doing a good job managing and handling hazardous wastes. Training to deal with hazardous-waste spills, was found to be good, as well.
The port’s re-use of waste oil to heat the airport and a maintenance shop caught the health district’s eye, as did an ongoing energy audit of the airport’s terminal building.

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Kitsap unleaded per gallon 65 cents higher than a year ago.

Gasoline prices remain near 2009 high
The Associated Press
Gasoline prices remained near their highs for the year on Monday as a weaker dollar and rising global stock markets boosted oil prices.
Prices at the pump fell 0.4 cents overnight to $2.631 a gallon, according to AAA, Wright Express and Oil Price Information Service. That is down 6 cents from the peak of $2.691 reached Oct. 30.
But the gap between now and a year ago continues to widen. Prices are now 52.6 cents higher than last year at this time when gasoline prices slid along with oil prices as the recession took hold.
Higher prices for gasoline come even as demand for oil and gasoline remain soft.
For most of this year, oil prices surged as investors pumped money into crude contracts to protect themselves from a weaker dollar. Oil was seen as a safer bet with demand expected to rise next year as the world’s economies begin to recover.
After hitting their lowest level in a month, oil prices bounced back on Monday. Benchmark crude for December delivery rose $2.55 to settle at $78.90 a barrel on the New York Mercantile Exchange.
U.S. stock markets rose to highs for the year after retail sales rebounded more than expected in October because of a boost in auto sales.
Stock markets in Asia and Europe rose as well Monday as Japan reported its economy expanded at an annual rate of 4.8 percent in the third quarter. That was the second straight quarter of expansion and the biggest rise since 2007.
At the same time, the euro pushed back toward the $1.50 level against the dollar. Commodities such as oil and gold are priced in dollars so they become cheaper when the dollar falls.
Crude prices fell last week and U.S. stock markets rose as investors started to focus more on the continued weak demand for oil.
“That could be the beginning of the disconnect as the fundamentals weigh on oil,” said Jim Ritterbusch of Ritterbusch and Associates.
In other Nymex trading, heating oil rose 6.59 cents to settle at $2.0320 a gallon. Gasoline for December delivery gained 7.06 cents to settle at $1.9868 a gallon. Natural gas for December delivery advanced 22.2 cents to settle at $4.614 per 1,000 cubic feet.

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Down now up to 10,392, a rise of 121 points this morning.

NEW YORK (AP) — Investors kept the stock market’s upward momentum going Monday, sending shares sharply higher after retail sales rebounded more than expected in October and the dollar extended its slide.
Major stock indexes rose more than 1 percent to new 13-month highs, including the Dow Jones industrial average, which jumped 145 points. The Standard & Poor’s 500 index topped 1,110, the first convincing move above 1,100 after hovering around that level for the past month.
The Commerce Department said retail sales rose 1.4 percent in October, easily surpassing the 0.8 percent increase forecast by economists polled by Thomson Reuters. It was a sharp rebound following the 2.3 percent drop in September. Excluding the gain from autos, however, sales rose just 0.2 percent, half of what economists predicted.
Jamie Cox, a managing partner at Harris Financial Group, said the sales growth was a good sign heading into the holiday shopping season, especially because the data were not affected by factors such as sales tax holidays and government stimulus programs that had been present in the preceding months.
The weaker dollar lifted gold to a new record and pumped up prices of other commodities, including oil. That, in turn, helped shares of energy and materials companies.
Stocks briefly pared their gains after Federal Reserve Chairman Ben Bernanke said policymakers would monitor the dollar while at the same time repeating that the Fed will hold interest rates low until the economy strengthens. That gave a short-lived boost to the dollar.
The market’s own dynamics fed some of the day’s gains, analysts said.
Dan Deming, a trader with Stutland Equities, said the S&P 500’s move above 1,100 gave some investors a shot of confidence and led to short-covering, which tends to amplify gains in the market. Short-covering occurs when investors have to buy stock after having earlier sold borrowed shares in a bet they would fall.
“We’re breaking through the 1,100 mark, which is psychologically significant, and the market is seeing a little pop from that,” Deming said.
In midafternoon trading, the Dow rose 154.86, or 1.5 percent, to 10,425.33. The broader S&P 500 index rose 19.28, or 1.8 percent, to 1,112.76. It traded above 1,100 in mid-October but hasn’t closed above that benchmark since October last year. The S&P 500 index first finished above 1,100 more than a decade ago, in March 1998.
The Nasdaq composite index rose 34.52, or 1.6 percent, to 2,202.40.
The Russell 2000 index of smaller companies advanced 17.21, or 2.9 percent, to 603.49.
The ICE Futures US dollar index, which measures the dollar against other currencies, fell 0.6 percent. Gold reached a record $1,143.40 an ounce.
Investors have been using the weak dollar to finance purchases of higher-yielding assets. The move, what’s known as a “carry trade,” can further weaken the dollar.
Bond prices rose, pushing down yields. The yield on the benchmark 10-year Treasury note fell to 3.37 percent from 3.42 percent late Friday.
General Motors Co. said it lost $1.2 billion in the period since emerging from bankruptcy and the end of the third quarter on Sept. 30. Despite the loss, GM said it will begin to repay $6.7 billion in government loans and was seeing a stabilization in its business.
Home improvement retailer Lowe’s Cos. reported lower profits that matched analysts’ expectations and said it was seeing stabilization in some of the hardest hit housing markets. The company’s shares fell 6 cents to $21.79.
Investors will get more insight into consumer spending from retailers Home Depot Inc., Target Corp. and TJX Cos., which are due to report earnings Tuesday.
Cox said the wide range of retailers reporting earnings during the week will provide signals into whether shoppers are willing to step up their spending and move back toward more expensive goods. Investors will be parsing any updated forecasts from the companies ahead of the holiday shopping season.
The stock market is coming off a strong week, which added more than 2 percent to major indexes. On Friday the market was buoyed by encouraging earnings reports and outlooks from major retailers Abercrombie & Fitch Co. and J.C. Penney Co. as well as The Walt Disney Co.
Crude oil rose $2.84 to $79.19 per barrel on the New York Mercantile Exchange.
Energy stocks rose. Baker Hughes Inc. rose $2.37, or 5.7 percent, to $43.82, while Devon Energy Corp. advanced $3.93, or 5.8 percent, to $71.66.
Freeport-McMoRan Copper & Gold Inc. rose $3.37, or 4.1 percent, to $84.94.
Ten stocks rose for every one that fell on the New York Stock Exchange, where volume came to 624.9 million shares compared with 557.4 million shares traded at the same point Friday.
Overseas, Japan’s Nikkei stock average rose 0.2 percent after that country’s economy grew for the second straight quarter, marking an end to the recession there.
Investors also drew confidence from the results of the 21-member Asia-Pacific Economic Cooperation forum, which said it would maintain stimulus spending until a global economic recovery is at hand.
Britain’s FTSE 100 rose 1.6 percent, Germany’s DAX index gained 2.1 percent, and France’s CAC-40 rose 1.5 percent.

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Bloggers,

Earlier, I blogged about a problem I and other audience members were having hearing Port of Bremerton study sessions held occasionally among commissioners and port staff. The sessions were taking place without benefit of microphone.

Since then, the problem has been solved. Staff and commissioners now are using the mics, and so everyone can hear now.

Rachel Pritchett, reporter
475-3783
rpritchett@kitsapsun.com

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By Rachel Pritchett
rpritchett@kitsapsun.com
BREMERTON
Port of Bremerton commissioners on Tuesday approved a 2010 budget they hope will push its enterprises closer to profitability.
Currently, taxpayers subsidize 51 percent of the cost of running the port’s biggest facilities — marinas in Bremerton and Port Orchard, the Bremerton National Airport, and the Olympic View Business and Industrial Parks. The new $16.6 million budget aims to cut that dependence to 33 percent.
That bold directive has put pressure on overseers of those enterprises, especially Marine Facilities Director Steve Slaton, who is now out marketing the Bremerton Marina hard.
His talking it up while out on the Northwest yacht club circuit has resulted in some payoff. The Tacoma Yacht Club just signed an agreement with the port to reserve 285 feet of the marina’s north breakwater for its exclusive use.
With the Bremerton Marina occupancy rate slipping to 
28 percent, Slaton has priced its moorage cheaper than marinas on the east side of Puget Sound, as an incentive for boaters to head west.
And he’s dangled some other carrots to get new tenants and keep them.
Current tenants who stay a year get a half-month’s free rent. There is also an incentive for boaters who recruit new tenants to the marina.
New tenants who pay for six months’ moorage upfront get $100 fuel vouchers; if they sign up for a year, they get a free month.
“We consider word-of-mouth the best way to sell anything,” Slaton said.
Before the end of the year, the port will have a Web site dedicated to creating buzz about the Bremerton Marina. A new e-newsletter to boating clubs and marinas is soon to start.
Ads have appeared in regional and West Coast boating magazines; radio and television spots are planned, too.
The 2010 budget is pared down from when it was first proposed as port leaders bowed to public pressure to keep costs down.
It no longer calls for a property-tax increase, though commissioners left open the possibility of seeking one later.
“We don’t have the ability to predict the future,” Becky Swanson, chief financial officer, told them.
The budget blueprint no longer calls for a soccer field, remodel of an airport restaurant building, or preparatory work for a proposed storage lot for recreational vehicles.
It does call for $5.8 million in capital projects, including a new road that will open up the undeveloped South Kitsap Industrial Area; another small new road at the existing business park; and floating restrooms at both marinas.
Eighty-eight percent of the capital projects are to be paid by grants and bond proceeds.
In other port news, CEO Cary Bozeman told commissioners Tuesday that a comprehensive communications strategy is the only way to build goodwill with a public still feeling burned by the controversial Bremerton Marina tax.
“The pushback is severe, it’s real and its out there,” he said.
The key to building goodwill, he said, is to have residents understand and believe in what the port does. Bozeman said he wants the new plan in place by January, when a new communications staffer comes onboard.
“I think it’s really critical,” Bozeman said.
Meanwhile, Commissioner Larry Stokes questioned how much goodwill was generated by a recent economic-development summit that cost the port $10,000.
The summit resulted in Bozeman volunteering the port to do groundwork on a branding campaign to sell Kitsap County. That idea was later abandoned so as not to interfere with one being undertaken by a local visitors’ bureau.
“You stop shooting yourself in the foot,” Stokes said.
Bozeman said the summit was a “darn good investment.”

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WASHINGTON (AP) — Unemployment likely will remain high for the next several years because the economic recovery won’t be strong enough to spur robust hiring, Federal Reserve officials warned Tuesday.
The cautionary note struck by the presidents of regional Fed banks were the first public remarks by Fed officials since the government reported last week that the nation’s jobless rate bolted to 10.2 percent in October. It marked only the second time in the post-World War II period that the rate surpassed 10 percent.
In separate speeches, Janet Yellen, president of the Federal Reserve Bank of San Francisco, and Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, warned that rising unemployment could crimp consumers, restraining the recovery. Consumer spending accounts for about 70 percent of economic activity.
“With such a slow rebound, unemployment could well stay high for several years to come,” Yellen said. “In other words, our recovery is likely to feel like something well short of good times.”
Yellen envisions the shape of the recovery kind of like an “L” with a gradual upward tilt of the base.
Lockhart said “very slow net job gains” may occur “sometime next year.”
Troubles in the commercial real estate market and the plight of small businesses also will weigh on the recovery, they said.
Small businesses — which held up reasonably well in the 2001 recession — have been clobbered by the downturn, accounting for about 45 percent of net job losses through the end of 2008, Lockhart said. During the last two economic recoveries, small businesses contributed about one-third of net job growth. Lockhart said he doubted that would be the case this time.
That’s because many small businesses rely on smaller banks for credit. But troubled commercial real estate loans are concentrated at those banks, hobbling the flow of credit. Lockhart said he is “particularly concerned” about that linkage.
Meanwhile, Eric Rosengren, president of the Federal Reserve Bank of Boston, weighed in on a different hot-button issue for Congress: how best to handle huge financial companies whose failure could endanger the economy.
Rosengren endorsed “living wills” that outline wind-down arrangements in the event of failure, rather than having the government restrict the size or activities of financial firms. “I am skeptical such dramatic action would significantly limit systemic risk,” he said in a speech in London.
The Obama administration has called on Congress to set up a mechanism to safely dismantle failed financial companies — along the lines of what the Federal Deposit Insurance Corp. does for collapsed banks. Although key legislative proposals revamping the nation’s financial rules contain such a provision, some lawmakers and others have expressed interest in limiting the size of colossal firms or breaking them up if they get too big.
Richard Fisher, president of the Federal Reserve Bank of Dallas, told an Austin audience Tuesday evening that consumer spending is growing, but that he doubts it will recover its pre-recession vigor “for some time to come.” He also said there is no imminent willingness by businesses to rehire or expand capital expenditures during the recovery.
“It may be some time before significant job growth occurs and it’ll be even longer before a meaningful decline in unemployment takes place,” Fisher said.
“It will take some time, in my opinion, to get back on a steady pathway to a pace of growth that will result in significant job creation for Americans. We are in for a very slow slog and a long slog,” he said. “We have too much of everything in America, and we over-consumed,” he added, saying it’s not surprising there has been a contraction.
Fisher added that he believes inflation is likely to remain subdued and that the Federal Reserve’s current monetary policy is appropriate.

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