TOP 10 STORIES / AUG. 12-17

Consumers Say ‘Buy Buy’ to Recession

The first tax rebates and falling gasoline prices helped encourage consumers to keep up spending in July, continuing the phenomenon that’s largely responsible so far for keeping the moribund economy out of recession.

Americans bought more of just about everything except autos, according to retail sales data released by the Commerce Department. A relatively low unemployment rate, rising wages and the increasing use of home equity loans to fund purchases are adding fuel to spending.

Retailers are attracting shoppers with huge markdowns to move goods out of their stores. The promotions are taking a bite out of some retailers’ profits, however, as several earnings reports showed.

Warren Vieth

Consumer Prices Show Sharp Drop

Big declines in the cost of gasoline and other types of energy in July fueled the largest drop in consumer prices in 15 years, suggesting that inflation remains a distant threat.

The core inflation rate, which excludes energy and food prices, rose 0.2%, but economists said the unexpectedly large dip of 0.3% in the overall consumer price index gives the Federal Reserve plenty of room to reduce interest rates Tuesday.

In the Southern California area, consumer prices also fell 0.3% in July, the first decline in seven months, mostly due to lower prices for gasoline and natural gas. Electricity prices, however, continued to ratchet upward, particularly in California.

Abigail Goldman

Major Studios to Offer Movie Downloads

Five major Hollywood studios decided to combat the proliferation of bootleg movies on the Internet by launching an online film venture of their own.

Sony Pictures Entertainment, Metro-Goldwyn-Mayer, Paramount Pictures, Universal Studios and Warner Bros. said their service will offer 100 films that consumers will be able to download to their personal computers with high-speed Internet connections in 40 minutes or less. Then customers will be able to watch those movies on their PC monitors or on their television sets. The as-yet-unnamed venture could be up and running by the end of the year.

Analysts praised the move as an effective way to combat the online piracy that has plagued the music industry. Karen Kaplan

Industry Standard Ceases Publication

The Industry Standard rose to prominence as the magazine that did the best job of tracking the exploding dot-com economy. Last week, with that economy in ruins and no recovery in sight, the Standard gave up, becoming the downturn’s biggest media casualty. With liabilities of more than $60 million, the Standard’s management said it probably would enter into bankruptcy.

It’s an inglorious end to a publication that, at its peak, was more than a magazine: The Standard defined and shaped Silicon Valley culture.

But as a headline on the cover of the Standard’s final issue has it, “The party’s over.”

David Streitfeld

Mexico Sees No Quick End to Recession

The Mexican economy registered its third straight quarter of recession, pulled down by a sluggish U.S. economy, the final destination for one quarter of the goods and services Mexico produces.

Although President Vicente Fox enjoys high approval ratings at home and on Wall Street, analysts worry that continued problems could hurt his reform programs and drive more Mexicans to emigrate to the U.S. to seek a living wage.

Economists expect Mexico’s job base this year to fall far short of the additional 1.3 million new jobs that Fox promised upon taking office. In fact, total jobs are down 200,000 so far this year.

Chris Kraul

Enron’s Stock Rocked by CEO’s Resignation

With an eroding stock price calling its bold business model into question, energy-trading giant Enron Corp. was rocked by Tuesday’s surprise resignation of Chief Executive Jeffrey K. Skilling. Although Skilling, 47, said during a press conference that his decision was “purely personal,” he acknowledged later to the Wall Street Journal that the strain of watching the stock slump to half its value during his six-month tenure weighed heavily on him.

Enron Chairman Kenneth L. Lay resumes the chief executive post he handed off to Skilling in February. Among other problems, Lay must deal with accusations by California officials that his Houston-based company profited from the state’s misery by manipulating power prices during California’s electricity crisis.

Thomas S. Mulligan

Bank of America Quits Subprime Lending

Bank of America Corp. said it will stop making real estate loans to less-credit-worthy borrowers, becoming the latest lender to report big problems with so-called subprime loans. The nation’s third-largest bank also will exit the car-leasing business, which has suffered amid plunging prices for used cars.

The news comes two weeks after the failure of Chicago’s Superior Bank. That institution was a big lender to subprime borrowers, a sector many lenders courted in the late-1990s amid the economic boom.

As the economy weakened, many lenders found servicing such high-risk loans more troublesome and expensive.

Debra Vrana

MTV Accused of Unfair Booking Practices

Don Cornelius, the creator of black music showcase “Soul Train,” said the talent-booking tactics of much bigger rival MTV are unfair. Cornelius said MTV, which requires acts performing on its “Video Music Awards” not to play on other programs during the 30 days preceding the show, is in essence pressuring artists not to appear on his “Lady of Soul Awards.”

MTV said it makes the same requirements of all performers on the program, and the policy has become a way to protect against the rise of competing shows in recent years. The tug of war is especially ironic because MTV, in its early years, refused to play music videos by black artists, saying it was a rock-oriented channel.

Jeff Leeds

Chuck Philips

Panel OKs Amgen’s Arthritis Medicine

A Food and Drug Administration panel endorsed a rheumatoid arthritis drug from Amgen Inc. despite safety concerns about it, moving the Thousand Oaks-based company closer to entering the $6.9-billion market.

Kineret, which works by suppressing the immune system, is not as effective as existing treatments and increases patients’ risk of infections. But the panel said patients need an alternative because competing drugs don’t work for everyone. The FDA usually follows the advice of its committees.

Denise Gellene

F-22 Production OKd for Takeoff

The U.S. Air Force finally got the nod to begin production of the controversial F-22 Raptor fighter jet, nearly two decades after the idea for the plane was conceived. The Pentagon’s decision to begin low-rated production of 10 F-22 planes for $2.1 billion was made despite the department’s acknowledgment that fewer planes could be built because of cost overruns.

Lockheed Martin Co. will produce the plane at its plant in Marietta, Ga. But the Pentagon’s decision is a significant boost to Southern California’s aerospace industry, which has about 250 contractors that make up a large share of the work on the F-22. Peter Pae

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Please see Monday’s Business section for a preview of the week’s events.