Week in Review

Inflation Stages Return in a Stronger Economy

The Bureau of Labor Statistics reported that its most closely watched measure of inflation rose 0.5% in March. And in the first three months of the year, the consumer price index surged at an annual rate of 5.1%, compared with the 1.9% pace it averaged throughout 2003.

Although most of the attention has been captured by the run-up in gasoline prices -- they shot up 5.5% last month after climbing 2.5% in February and 8.5% in January -- the bureau’s data provide evidence that a growing number of goods and services cost more.

In the last six months, food has become steadily more expensive, according to the government data. The year-over-year rise in seasonally adjusted prices for groceries has averaged more than 3.9% in that period.

The core inflation rate, which excludes energy and food costs, jumped 0.4% in March and was running at a 2.9% annual rate through the first quarter.

Many economists believe some pickup in prices could help the economy by making companies more profitable.

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State Legislature Passes Workers’ Comp Bill

In a big win for Gov. Arnold Schwarzenegger, the Legislature approved a landmark workers’ compensation bill, which the governor said he would sign into law Monday. The Senate passed the bill 33 to 3, after a 77-3 vote in the Assembly.

The governor said an overhaul was necessary to keep businesses in California. He said the bill would drop the nation’s highest rates for workers’ comp insurance by 25% to 30% while boosting some of the nation’s lowest rates paid to injured workers. California’s workers’ compensation costs had soared from $6.4 billion in claims paid in 1997 to an estimated $17.9 billion paid last year.

Assembly Democrats also passed a bill, 47 to 32, to make the state regulate workers’ comp insurance rates for two years. The bill will go to the Senate; it faces a likely Schwarzenegger veto if passed there.

Lawmakers acted to meet a deadline set by Schwarzenegger, who vowed to put an even tougher measure on the Nov. 2 ballot if they didn’t pass the bill.

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Home Prices Soar in Los Angeles County

Home values in Los Angeles County posted the biggest year-over-year increase in at least 15 years in March as frenetic buying activity pushed the median sale price up 29% to a record $375,000, according to DataQuick Information Systems.

Sales jumped 12% from a year ago to 10,875 new and resold houses and condos. Analysts and brokers said heavy demand was driven by anxious consumers paying more than the asking price to get in the market before interest rates rise and supplies thin further.

The accelerating home prices are boosting consumer spending in the county and providing a lift to the economy. But the rapid run-up is making it tough for many families to become homeowners. About 50% of the households in the county are renters, according to the Census Bureau.

L.A. County’s rate of appreciation in recent months has outpaced other areas in the region, such as Orange and San Diego counties, as well as nearly everywhere else in the country.

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Tenet Faces Two New Federal Investigations

Santa Barbara-based Tenet Healthcare Corp., which is trying to reach a settlement over myriad federal investigations into its hospital operations, said federal prosecutors had opened two new probes involving two Tenet hospitals in Southern California. The new investigations are expected to strengthen the government’s position in settlement talks, analysts said.

One new probe, which could result in criminal charges, involves Centinela Hospital Medical Center in Inglewood and an independent contractor. Investigators are looking into a possible kickback scheme, a source said.

The second inquiry is civil and focuses on billing practices at the Comprehensive Cancer Center at Tenet’s Desert Regional Medical Center in Palm Springs. Prosecutors have asked Tenet to supply documents and information for the last 11 years, as well as records on 353 patients, the company said.

A Tenet spokesman said the company was complying with requests for information.

Also, Tenet said it agreed to sell its Redding Medical Center to a private firm whose partners include a group of local doctors.

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Lockyer Calls for Tougher Energy Laws

California Atty. Gen. Bill Lockyer criticized federal laws and regulatory agencies that he said “sheltered wrongdoers” during the energy crisis and called for changes to prevent a repeat of the state’s experience.

In a report to Congress, the California Legislature, Gov. Arnold Schwarzenegger and federal and state regulators, Lockyer pushes for an overhaul of a legal framework that the report says continues to provide incentives for electricity market abuse and hinders the push for refunds from companies involved in the 2000-01 energy meltdown.

Lockyer, in a statement, stressed the need for substantial reforms in federal and state regulations to strengthen enforcement powers.

A spokesman for the Federal Energy Regulatory Commission labeled the report “a political stunt designed to generate headlines, not solutions to California’s problems.”

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Retrial of Frank Quattrone Is Underway

The retrial of Frank Quattrone began with prosecutors saying he impeded government investigations that threatened his lucrative investment-banking job, and the defense countering that he never considered the probes when sending a brief e-mail that is at the heart of the case against him.

Opening arguments followed broadly similar outlines as those of the first trial, which ended in a mistrial in October. However, the defense gave no indication as to whether Quattrone would take the stand.

In the first trial, the defense promised Quattrone would testify, a strategy that later seemed to backfire. At least one juror said after the trial that Quattrone’s elliptical answers during cross-examination convinced some jurors that he was guilty and barred what otherwise might have been an acquittal.

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Intel Profit Rises 89% as Chip Demand Grows

Santa Clara, Calif.-based chip maker Intel Corp. said profit nearly doubled in its first quarter. Earnings reached $1.73 billion, or 26 cents a share, up 89% from $915 million, or 14 cents, a year earlier. Revenue rose 21% to $8.1 billion.

Intel said second-quarter revenue would be $7.6 billion to $8.2 billion. But investors had hoped for a more upbeat forecast from the company.

Chief Financial Officer Andy Bryant told analysts that the company had made “superb progress” in improving gross profit margins. In the first quarter, Intel benefited from a new manufacturing process that made producing chips cheaper.

Intel’s main business unit, computer processors, saw revenue rise to $7 billion from $5.8 billion. Operating profit jumped to $3 billion from $1.9 billion.

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Apple’s Earnings Triple as Revenue Jumps 29%

Profit for Apple Computer Inc. more than tripled in its fiscal second quarter as the company’s popular iPod digital music player outsold its Macintosh computers for the first time.

Cupertino, Calif.-based Apple said its net income for the quarter ended March 27 was $46 million, or 12 cents a share, up from $14 million, or 4 cents, a year earlier. Revenue was $1.91 billion, up 29%.

Chief Financial Officer Fred Anderson told analysts that the company would probably see revenue of $1.93 billion in the current quarter and earn 12 to 13 cents a share, well above analyst estimates of 9 cents a share.

Revenue from iPods zoomed to $264 million from $31 million a year earlier.

The quarter’s results included a charge of 2 cents a share because of the closure of a manufacturing facility in Sacramento.

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Amazon.com Enters Online-Search Market

A unit of Amazon.com Inc. introduced an Internet search engine, highlighting the growing urgency among the Internet’s biggest players to control the online search market.

The search engine from 6-month-old A9.com Inc. builds on technology licensed from Google Inc. but adds features pulled from Amazon’s bag of tricks, such as letting users post reviews of websites. Amazon had previously revealed almost nothing about A9 or its operations.

Seattle-based Amazon set up A9 in Palo Alto, creating speculation that it was gunning for Silicon Valley darlings Google and Yahoo Inc. But Amazon’s use of Google’s technology raises questions about whether the two firms are cooperating or competing.

The A9 operation is headed by former Yahoo technologist Udi Manber.