The Economic Data Global Express (e-EDGE)

v.4 n.48       Released Nov. 27, 2000 
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

BIG TRADE GAP CAN HURT U.S. DOLLAR

     The U.S. trade deficit on goods and services for September was $35.4 billion, $3.5 billion greater than the August deficit.  U.S. imports increased in September over August by 2.7%, while exports actually declined by 1.1% due to slowing of economic growth in some regions of the world.  Based on 9 months of actual data, the deficit for all of 2000 is estimated to come in at $350 billion.  Chances are good that 2001 will see the deficit climb even higher.  What impact will this development have on the U.S. economy?
     As long as foreign investment in U.S. assets continues at high levels, the impact of the trade deficit will remain muted.   However, it is helpful to consider a scenario for next year in which: (a) foreigners limit their purchases of U.S. stocks and bonds, (b) there are fewer acquisitions of U.S. companies by foreign firms, and (c) investment markets in Europe, Asia, and Latin America are perceived as  more attractive than the U.S.  Under these circumstances, the looming trade deficit could precipitate a fall in the value of the dollar in 2001
     A modest decline of the dollar, say 5%, will not require major adjustments for the U.S. economy, but much more than that would trigger several unwelcome outcomes.  Such a change in foreign exchange rates would help to revive the euro, cause U.S. import prices to rise, and even delay easing of interest rates by the Federal Reserve.  (Ken Ackbarali)
 

NEW FISCAL YEAR BEGINS WITH A BUDGET DEFICIT

     The U.S. government's budget registered a deficit of $11.3 billion in October compared to September's surplus of $65.6 billion and a deficit of $26.3 billion in October 1999.  September revenues were swollen by quarterly income tax payments; so the year-to-year comparison is more appropriate.  Revenues rose by 11.6% year over year while outlays edged down by 0.6%.  October's receipts were boosted by a 19.6% surge in personal income tax payments, the government's largest single revenue source.  Meanwhile, corporate profits taxes dropped by 21.6%. (This decline may be a sign of slowing profitability, but it's too soon to tell.)
     This fall's gridlock in Washington has prevented the passage of all the required discretionary spending bills for fiscal year 2001 which began in October.  The lack of an official 2001 budget probably held back Federal spending somewhat last month.  For example, defense spending fell by 11.1% and non-defense outlays rose by only 1.3% compared to last year.  Among the entitlement categories, Social Security payments increased by 5.6%, while spending for Medicaid and Medicare was up by double digits, probably due to calendar effects.  Meanwhile, interest payments rose by only 2.0%.
     The latest official estimates by the Clinton Administration's Office of Management and Budget (OMB) put the expected fiscal 2001 budget surplus at $248 billion compared to $237 billion in the fiscal year just ended.  Based on current trends, this figure looks conservative.  The surplus for the 12 months ended in October was $252 billion.  However, some of these trends may not make it through the next 12 months.  U.S. economic growth may slow, for instance, or the stock market might continue its recent decline, reducing income tax revenues.  On the spending side of the budget, this fall's gridlock may well be broken in favor of substantial spending increases.  If so, OMB might end up right on target.  Stay tuned.  (Nancy D. Sidhu)
 

OCTOBER RESALE HOUSING TRENDS -- MORE OF THE SAME

     The California Association of Realtors (CAR) has just released their October data, and it's more of the same.  Prices are up sharply over the year, while unit sales activity is uneven.  The state saw unit sales inch ahead 0.3% over the year, while the median price  jumped 17.0% to $252,510.   CAR's Unsold Inventory Index (the number of months needed to deplete the current supply of homes on the market) was 3.6 months compared with 4.1 months a year ago.
     In Los Angeles County, the median price advanced 12.7% to $219,830, but unit sales were down by 1.8% (there's no inventory to speak of).  In Orange County, the median price marched ahead by 15.7% to $321,150, while unit sales increased by 5.3%.   The Riverside-San Bernardino area saw the median price move up by 10.1% to $144,210, while unit sales increased 7.5% over the year.  In San Diego county, the October median price jumped 18.8% to $279,060, while unit sales inched up by 1.4%.  In Ventura County, the median price was up 15.3% to $303,400, but unit sales dropped by 3.0% over the year.
     There's a strange market in the Bay Area.  Santa Clara County's median price boomed ahead by 34.2% to $530,000, while unit sales increased by 4.8%.  In the San Francisco area, prices jumped by 25.9% to $463,990, while unit sales advanced by 3.0%.  This is interesting, as there is obviously no price resistance.  However, on the west side of Los Angeles County, buyer's are balking at some of the prices.  (Jack Kyser)
PR: http://www.car.org/newsstand/news/nov00-4.html
 

RETAIL E-COMMERCE SALES SOAR AHEAD

     Retail e-commerce sales during 3Q00 were estimated to be around $6.37 billion, up 15.3% from 2Q00's $5.53 billion.  In contrast, total retail sales actually declined between 2Q00 and 3Q00, from $815.7 billion to $812.0 billion.  E-commerce's share of retail sales rose 0.78% from 0.68% in 2Q00.  There's much consolidation in the industry, however.  E-tailer mergers, acquisitions, and failures are now frequently in the news.  Although a few players such as Amazon have achieved formidable market position and name recognition in the "one-stop" categories, there's plenty of room for smaller operations to prosper.  Thanks to powerful search engines, small shops targeting niche markets can show up on shoppers' radar screen without heavy advertisement costs.  They rely on outside service providers to put their catalogs on the web and to take credit card orders.  They avoid the heavy initial investment by paying a small fraction of their sales revenue to these providers.  Some of them sell as few as 10 different items but at heavy discounts, and thus they incur far lower inventory costs.  Thomas Jefferson's vision of America as a country of small farmers didn't hold, but a web full of tiny retailers is certainly viable.  Doing Christmas shopping online this year?  Start early.  Give yourself enough time and make sure you can return products easily.  Online merchants offering returns to local stores can save you much headache in early January.  (George Huang)
PR: http://www.census.gov/mrts/www/current.html
 

QUICK STATS:

* Census: US exports for 9/00: -0.7% (8/00: +3.5%)
* Census: US imports for 9/00: +3.1% (8/00: +1.1%)
* Census: US trade deficit for 9/00: $34.3bil. (8/00: $29.8bil.)
* Census: US e-commerce retail sales for 3Q00: +15.3% (2Q00: +5.5%)
* Natl Assn of Realtors: US existing home sales for 10/00: -3.9% to 4.96mil. s.a.a.r. (9/00: -2.3% to 5.16mil. s.a.a.r.)
* Treasure Dept.: US Treasury budget for 10/00: -$11.3bil. (9/00: +$65.6bil.)

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