WASHINGTON (AP) — Orders to U.S. factories for big-ticket durable goods plunged in June by the largest amount in five months, reflecting the continuing troubles in the auto industry and a steep drop in demand for commercial aircraft.
The Commerce Department said Wednesday that orders for durable goods fell 2.5 percent last month, much larger than the 0.6 percent decline that economists had expected. It was the biggest setback since a 7.8 percent fall in January.
Much of the weakness reflected a 38.5 percent decline in orders for commercial aircraft, an industry that has been hurt by the global recession, which has crimped air travel and triggered some airlines to cancel existing orders for planes.
Orders for motor vehicles and parts fell by 1 percent in June after an even larger 8.7 percent drop in May. The weakness reflected the disruptions caused by the bankruptcy filings of General Motors Corp. and Chrysler LLC, which shut their plants for most of June, plus the need for the entire industry to work down a backlog of unsold cars.
Excluding the volatile transportation sector, orders for durable goods were actually up by 1.1 percent in June, a better performance than the flat reading economists had expected.
The strength last month came in demand for primary metals such as steel, which rose by 8.9 percent, and industrial machinery, which was up 4.4 percent.
The strength outside of transportation could be a harbinger of better days ahead for manufacturing, which has struggled to cope with the severe U.S. recession plus the worst global downturn since the Great Depression, weakness that has severely dampened demand in many of America’s major export markets.
The U.S. economy has been mired in its longest recession since the end of World War II but there have been increasing signs that the worst of the downturn may be over. The government is scheduled on Friday to report on overall economic output, as measured by the gross domestic product, for the April-June quarter.
The expectation was that GDP fell at an annual rate of 1.5 percent during that period, a much smaller decline than the 5.5 percent rate of decline in the first three months of this year.
Many economists believe that the economy will resume growing in the current July-September quarter although they expect unemployment, now at a 26-year high of 9.5 percent, to keep rising until early next year.

By Rachel Pritchett
rpritchett@kitsapsun.com
SILVERDALE
The three candidates for the District 1 seat on the Port of Bremerton commission circled and chased each other’s tails a bit Tuesday during a debate at the Silverdale Community Center.
When self-described taxpayers’ watchdog Gene Hart said that with him, there would be no new taxes without a public vote, former Bremerton mayor Lynn Horton told members of the host Kitsap Alliance of Property Owners, “I am a fiscal conservative.” Soon, research scientist Roger Zabinski said the port has to be careful not to overextend itself on projects.
“First and foremost, we need to make practical decisions,” he said.
When Zabinski said more should be done for public recreation on port shorelines, Horton agreed. So did Navy retiree Hart, who called for more festivals to create interest in the Bremerton Marina.
When Horton called for a new strategic plan to guide the port through future endeavors, Zabinski made the same call, too.
And when Hart called for openness in port business, Zabinski said so also. And so did Horton.
“For years now, the port has operated in a vacuum, and I think it’s time they come out from hiding,” Horton said.
When Horton suggested the port fill an expensive new building that stands empty before building more, Zabinski took that idea and ran with it, suggesting the port hire a commercial real-estate company to find tenants.
But if the candidates were chasing tails, they all laid down and chomped the same bone when it came to the subject of the port’s fading Sustainable Energy and Economic Development program.
When asked to give a simple yes or no on whether they supported it, all declared no, though Horton and Zabinski gingerly said in front of the keenly listening group there were good aspects of the program that could be brought forward.
Zabinski said that with his background in science and technology, he was the right person to promote clean-technology development at the port.
Horton leaned on her long career as mayor and a member of the Bremerton Housing Authority board as her qualifying ticket. She recalled her role in laying the groundwork for redevelopment of the Bremerton waterfront and Westpark, and for expanding Evergreen-Rotary Park.
“I’m the known quantity here,” she said.
Hart issued his “report” on port performance, saying it is bleeding $8,000 a day in red ink through running its taxpayer-subsidized airport, marinas and industrial park.
“That means thousands of our property taxes per day are traded for losses,” he said.
A lifelong Seabeck resident in the audience thanked Hart for remembering “we the people.”

CANDIDATES to DEBATE AGAIN
The candidates for the Port of Bremerton Commissioner District 1 seat will meet again to debate from 7 to 8:30 p.m. on Tuesday at the Norm Dicks Government Center, 345 Sixth St., Bremerton. It is sponsored by the League of Women Voters of Kitsap County.

By Rachel Pritchett
rpritchett@kitsapsun.com
SILVERDALE
The three candidates for the District 1 seat on the Port of Bremerton commission circled and chased each other’s tails a bit Tuesday during a debate at the Silverdale Community Center.
When self-described taxpayers’ watchdog Gene Hart said that with him, there would be no new taxes without a public vote, former Bremerton mayor Lynn Horton told members of the host Kitsap Alliance of Property Owners, “I am a fiscal conservative.” Soon, research scientist Roger Zabinski said the port has to be careful not to overextend itself on projects.
“First and foremost, we need to make practical decisions,” he said.
When Zabinski said more should be done for public recreation on port shorelines, Horton agreed. So did Navy retiree Hart, who called for more festivals to create interest in the Bremerton Marina.
When Horton called for a new strategic plan to guide the port through future endeavors, Zabinski made the same call, too.
And when Hart called for openness in port business, Zabinski said so also. And so did Horton.
“For years now, the port has operated in a vacuum, and I think it’s time they come out from hiding,” Horton said.
When Horton suggested the port fill an expensive new building that stands empty before building more, Zabinski took that idea and ran with it, suggesting the port hire a commercial real-estate company to find tenants.
But if the candidates were chasing tails, they all laid down and chomped the same bone when it came to the subject of the port’s fading Sustainable Energy and Economic Development program.
When asked to give a simple yes or no on whether they supported it, all declared no, though Horton and Zabinski gingerly said in front of the keenly listening group there were good aspects of the program that could be brought forward.
Zabinski said that with his background in science and technology, he was the right person to promote clean-technology development at the port.
Horton leaned on her long career as mayor and a member of the Bremerton Housing Authority board as her qualifying ticket. She recalled her role in laying the groundwork for redevelopment of the Bremerton waterfront and Westpark, and for expanding Evergreen-Rotary Park.
“I’m the known quantity here,” she said.
Hart issued his “report” on port performance, saying it is bleeding $8,000 a day in red ink through running its taxpayer-subsidized airport, marinas and industrial park.
“That means thousands of our property taxes per day are traded for losses,” he said.
A lifelong Seabeck resident in the audience thanked Hart for remembering “we the people.”

CANDIDATES to DEBATE AGAIN
The candidates for the Port of Bremerton Commissioner District 1 seat will meet again to debate from 7 to 8:30 p.m. on Tuesday at the Norm Dicks Government Center, 345 Sixth St., Bremerton. It is sponsored by the League of Women Voters of Kitsap County.

By Rachel Pritchett
rpritchett@kitsapsun.com
BREMERTON
A clean audit report for 2008 has been issued to the Port of Bremerton by the Washington State Auditor’s Office.
The port operates Bremerton National airport, a nearby business and industrial park, and marinas in Port Orchard and Bremerton.
The annual report released Monday showed that while the port’s operating revenues fell 9 percent below projections, its expenses fell at a faster clip, 14 percent.
Lower operating revenues were due to a new, large building port leaders had hoped to lease in 2008 but did not, and an industrial park lease that fell into default.
Also contributing to lower than expected operating revenues were cut fuel sales from an out-of-commission diesel tank at the Port Orchard Marina, and lower than expected moorage rates.
Fewer expenses than anticipated were due to lower maintenance costs at the airport, and industrial park operations that fell below budget. Also, harbor staff wages and benefits were less than anticipated, as was spending on the fading Sustainable Energy and Economic Development program.
The port’s total assets in 2008 came to $73.3 million, and total liabilities were at $16.6 million. The port had $14.5 million in bond debt last year.
“In the areas we examined, the port’s internal controls were adequate to safeguard public assets,” the report stated.
The Port of Bremerton, started in 1913, is the fourth oldest port in the state. It has about 33 employees. Its finances are overseen by Chief Financial Officer Becky Swanson.

Partial closures of the runway at Bremerton National Airport will take place between Aug. 5 and Oct. 29 so upgrading work can take place.
Workers will add a 3-inch-thick fresh asphalt layer to the runway, and improve nearby drainage. The cost of the project is $4 million, paid for mostly by the Federal Aviation Administration.
Pilots can read specifics on the closures at the port’s Web site, www.portofbremerton.org.
– Rachel Pritchett

I’ll see you at 7 p.m. tonight at the Silverdale Community Center to hear Roger Zabinski, Lynn Horton and Gene Hart go at each other at the event sponsored by the Kitsap Alliance of Property Owners. Post your thoughts on who’d make the best commissioner. Rachel Pritchett

The Associated Press
While manufacturers shuttered factories and Americans cut way back on travel, oil prices surged a stunning 124 percent during a long stretch earlier this year. Gas prices followed, rising nearly a dollar a gallon, with price increases every day for almost two months.
What happened? Shouldn’t fuel get cheaper when there’s less demand for it?
The U.S. Commodity Futures Trading Commission hopes to get some answers this week as it starts a series of public hearings on oil trading. Government economists are suspicious of a flood of money from pension funds, hedge funds and other speculative investments, though they can’t say for sure how much this affects energy prices.
Here are some questions and answers about who may be influencing oil prices, and why they’re so hard to track.
Q: What is a speculator?
A: A speculator is loosely defined as anyone who invests in something simply to profit off fluctuations in its market value. With oil, speculators buy and sell contracts for oil barrels (to be delivered later) without any intention of using the oil.
The New York Mercantile Exchange is dominated by this kind of trading. Less than 1 percent of all futures trading results in someone actually receiving barrels of oil.
Q: Who is a speculator?
A: They’re hardly the faceless poachers that Congress and trade groups made them out to be last year when oil prices spiked. The speculator could very well be you, and you don’t even know it. Pension funds, mutual funds and hedge funds are all players in energy commodities.
One of those investors is the California Public Employees’ Retirement System (CalPERS), which provides retirement and health benefits to 1.6 million people.
CalPERS started dipping into energy commodities two years ago with $500 million in commodity investments. As the price of oil started rising in early 2007, CalPERS spokesman Brad W. Pacheco said “the staff saw it as an opportunity.”
That initial investment increased by $100 million due to the rise in commodity prices.
Others can invest in oil through the stock market by buying shares the United States Oil Fund and other exchange-traded funds. USO uses those funds to buy oil contracts, which are 1,000 barrels of oil each. The share price moves with the price of oil. Recently, money has been flowing into these funds at a blistering pace.
Market researcher Morningstar Inc. estimates that since the beginning of the year, the amount of assets plowed into energy ETFs doubled to more than $8 billion.
Q: What influence do speculators have on the price of oil?
A: CFTC Commissioner Bart Chilton said speculators may have helped oil prices soar above $147 a barrel last summer. That belief was fortified this spring when oil prices spiked again, this time with both declining demand and a glut of surplus crude in U.S. inventories.
“Something’s going on in these markets,” Chilton said. “Any high school civics class would tell you the price should be going down.”
But it’s nearly impossible to say how much speculators affect oil prices since the government doesn’t track them very closely.
“A lot of these trades are occurring in markets that we don’t regulate,” Chilton said.
Investors have been moving huge sums of money into oil and other commodities through over-the-counter trades. These are considered “dark” markets because the CFTC hasn’t been empowered to watch them. Anyone can agree to an oil contract on their own without listing it with any market.
The commission is expected to release a report on oil speculation next month. But the report, which has yet to be completed, will not calculate how much speculators are influencing oil prices, Chilton said.
“It’s unquantified to a large extent because we can’t see these markets,” he said.
The government does keep track of some speculative money. An analysis of those records by The Associated Press found that speculators have bet consistently that oil prices would go higher since September 2003.
They were especially enthusiastic in the first seven months of 2007, a period in which oil prices went from about $60 to $80 a barrel. CFTC data showed that speculators held “long” positions — a bet that oil prices would rise — equivalent to 15 million barrels of oil in January 2007. By the end of July 2007, their overall holdings were equivalent to more than 170 million barrels.
Some economists say this kind of enthusiasm can boost oil prices the same way an influx of new buyers forced home prices higher a few years ago. But others aren’t so sure.
Francisco Blanch, a commodity strategist with Bank of America Merrill Lynch who has studied the role of speculation in energy, said investors tend to jump on a commodity after it already is starting to get more expensive.
“High prices cause people to invest in commodities,” Blanch said. “On the other hand, we haven’t found that higher investment causes higher prices.”
Q: Why would any of this matter when I fill up my car?
A: While the jury is still out on the exact role speculators play in commodities markets, regulators and trade groups say their presence is certainly felt at the gas pump.
Speculators buy gasoline contracts too. And trade groups say that petroleum refiners watch the swings in oil and gas contracts when setting their prices.
If the crude oil contract goes up by $1, “the wholesale prices for gasoline, diesel and heating oil will most likely go up between 3 to 5 cents in five hours,” said Dan Gilligan, president of the Petroleum Marketers Association of America. “It happens that quick.”
A jump in wholesale prices may not immediately affect pump prices, but they eventually force gas station owners to raise their price too, Gilligan said. There was evidence of that this spring, when oil prices doubled from February to June. Retail gas prices followed with the national average rising for 54 consecutive days, cresting at just above $2.69 a gallon on June 21.
Q: Would regulation effectively rein in speculation in oil markets?
A: Probably not. Crude oil is traded around the world, and while the CFTC may be able to influence the benchmark contract here, it has no jurisdiction over markets in other countries.
British Prime Minister Gordon Brown and French President Nicolas Sarkozy addressed the issue earlier this month, calling for greater transparency and supervision in oil futures markets around the world.
If an international consensus isn’t reached, traders say speculators will simply move to the markets that allow them to continue to place aggressive bets on oil. And that will still affect U.S. gas prices, since most of the country’s petroleum is imported.
“If you start to restrict the market, it’s hard to see what that achieves,” said Morgan Downey, a commodities trader for Standard Chartered Bank. “I think the market is working fine. People don’t like to see the prices, but the market is working fine.”

Dow now at 9,096, down 11 points.

Stocks end flat on mixed economic data, earnings
NEW YORK (AP) — An economic reality check is cooling the stock market’s rally.
Stocks ended mixed but little changed Tuesday as a key barometer of consumer confidence and a handful of disappointing corporate profit reports reminded investors that a recovery in the economy this year remains far from assured. The Dow slipped 12 points but the Nasdaq composite index posted a modest gain.
Major indexes held to a tight range for the third straight day. Investors remain cautious but still aren’t willing to give up on a rally that has propelled stocks up 11 percent in little more than two weeks.
Corporate earnings reports, which beat relatively meager expectations earlier this month, disappointed on Tuesday and brought reminders that many people remain unwilling or unable to spend. Office Depot Inc. and handbag maker Coach Inc. had trouble drawing in customers during the second quarter.
The unease grew after the Conference Board’s consumer confidence index fell more than expected, fanning worries that bleak expectations and a rising unemployment rate would hamper the economy’s ability to rebound from the longest recession since World War II.
If consumers don’t step up spending, companies will find it hard to boost revenue. The recent string of stronger corporate profits have come from deep cost-cutting, which can only be used to lift earnings for so long. Companies need to start showing they’re bringing in more sales and revenue.
The third upbeat reading on the housing market since last week and dealmaking in the technology industry helped temper the market’s disappointment.
Even without the latest worries about consumers, analysts have been anticipating some pause in buying after this month’s surge, which restarted a massive spring rally that began in March. That advance fizzled in mid-June on lackluster economic reports.
John Merrill, chief investment officer of Tanglewood Wealth Management in Houston, said some institutional investors are being forced to pour money into stocks to try to keep pace with a rally of 44.8 percent in the S&P 500 index since March 9. Others who might already be invested don’t want to miss out on other gains.
“That kind of gives a nice give and take with nobody motivated to strongly sell and nobody strong motivated to strongly buy,” he said.
According to preliminary calculations, the Dow slipped 11.79, or 0.1 percent, to 9,096.72 after being down as much as 101 points. The broader Standard & Poor’s 500 index fell 2.56, or 0.3 percent, to 979.62. The Nasdaq composite index rose 7.62, or 0.4 percent, to 1,975.51 after several technology companies announced acquisitions.

Since pets can get sunstroke and heatstroke just like humans during this scorcher, the Kitsap Humane Society has issued these safety reminders:
n Don’t leave pets in parked cars. Inside temperatures can easily go to 120 degrees and kill them.
n If pets stay outdoors, make sure there is adequate shelter for shady protection from midday sun and heat.
n Makes sure fresh water is available in a shady place where the sun can’t heat it up more.
n Avoid excessive exercise during the hottest times of the day.

By Rachel Pritchett
rpritchett@kitsapsun.com
BREMERTON
The call from his security company came at 2 a.m.
By 2:04, Ralph Erickson had raced from his home to Arnold’s Home Furnishings, where he watched incredulously as the venerable landmark where he worked the past 58 years transmogrified into a giant and unstoppable fireball.
As morning broke and a good portion of the 66,000-square-foot store stood in charred ruin, Erickson, part-owner and general manager of Arnold’s, paced the perimeter. A long line of fire investigators, insurance adjusters, lawyers and employees trailed after him, all with pressing business.
He had few words about the future of a store beloved by generations of customers not just in Bremerton, but everywhere between Port Angeles and Gig Harbor.
“I can’t make a decision now. I don’t know,” Erickson said when asked about rebuilding or relocating the region’s oldest furniture store, which has been at its site on Kitsap Way since 1951. As the morning wore on, he managed to meet with many of the store’s 25 employees who had come to see what had happened, and to cry.
Their future, too, is uncertain.
Arnold’s deliveryman John Aguihon of Silverdale was about to leave his house for work when he got the call.
“I was all ready, still tired. Next thing you know, ‘Hey, don’t bother coming in. Your store’s crispy critters,’ ” he was told.
Other Arnold’s delivery-truck drivers who had arrived in the middle of the night managed to make it out with their Monday loads before the inferno spread. They were delivering furniture all day Monday.
Barbara Sperry of Poulsbo, the store’s housekeeper who polished the burnished coffee tables and vacuumed the luxurious upholstered fabrics, choked back sobs from behind the foot-thick yellow hoses stretched across Kitsap Way.
“All that beautiful furniture. It’s just devastating, devastating,” she said.
The blaze came within mere feet of a home on Morgan Road and was perilously close to a Kitsap Bank on Marine Drive.
As Monday grew into a scorcher, a woman from a nearby Subway wheeled a cart stuffed with sandwiches and cold drinks to prostrated firefighters who had come from as far as Tacoma and Bainbridge Island to try to save Arnold’s.
A battery-operated alarm dinged out of control as yellow smoke rose up from what was now mostly ashes. Water ran down from the devastation to Bertha Avenue, where crews, calf-deep in water, shoveled gunk out of drains beneath a haze of stinking smoke.
Moving through the small crowd with a brave and comforting smile was Betty Arnold, 91, who founded Arnold’s with husband Wendell. This has been a tough year for her. Her husband of 72 years died in March. But she grasped the hands of employees, firefighters and police and thanked them. She was frustrated she might miss someone.
“I just want to thank everybody who has done anything,” she said.
Arnold admitted she was “devastated,” but added, “You know what? Nobody was hurt,” she said.
Arnold is president of Arnold’s Inc., the company that owns Arnold’s, and she still dropped in at the store until the end. She, too, was vague on rebuilding.
“It’s too early to say. We’ll do everything we can do, but we’re not quitters,” she said.
The only thing standing unscathed at the site was the “Arnold’s Home Furnishing” sign near the road.
Interior designer Kayse Oesterhaus, a 21-year employee, said the family built the business by putting customers first.
“We had a good, better, best philosophy,” she said.
Young wives would buy what they could afford, and trade up over the years. It was not uncommon, Oesterhaus said, to have four generations of a family visit the store.
It’s that loyalty that allowed Arnold’s to survive through decades of recessions, as well as the arrival of many more furniture stores on the scene.
“It knew its roots and it wasn’t going to outgrow the needs that people had here,” Oesterhaus said.
Erickson, the store manager, signed on when the Arnolds first opened the store. He was an Olympic College student and happy for the work.
“We were a pretty small store, so we all did everything,” he said.
He, wife Susan and the Arnolds combined as owners in 1957, and built what’s now the Broyhill addition in 1994.
The Arnold’s fire undoubtedly will go down as one of the largest and most devastating fires in Bremerton history. It has a connection with another one no one will ever forget, the 1997 Kona Village Apartments blaze. That’s when Arnold’s, working with the American Red Cross, made sure burned-out residents got furniture.
“All got beds, all got dressers. Chairs and sofas after that,” Oesterhaus said. The business quietly supported the community, including the Bremerton High School band and
anti-drug program.
Oesterhaus said customers who had orders pending will be taken care of.
That’s the way it’s always been with Arnold’s. Customers first.
“Everybody with a home in Kitsap County has shopped in a delightful place like this. How lucky they’ve been,” Oesterhaus said.