The Economic Data Global Express (e-EDGE)
v.5 n.8 Released Feb. 20, 2001
Produced
by the Los Angeles County
Economic Development Corporation as a public service to the global
community.
A NEW ERA IN U.S.-MEXICO RELATIONS COULD BE IN THE MAKING
The visit by President Bush to Mexico last week
may prove to be a historic milestone in political and economic relations
between the United States and Mexico. Over the longer term, working
out the issues raised by President Fox and President Bush could foreshadow
whether or not NAFTA leads to a more integrated North American economic
bloc. Among the topics discussed were: (1) cooperation to control
drug trafficking, with the Mexican government demanding the end of U.S.
annual certification of Mexico's status in dealing with the drug trade;
(2) immigration issues, including amnesty for the estimated 5 million Mexican-born
persons living and working in the U.S. without legal status as well as
setting up a "guest-worker" program (of great interest to California's
agricultural industry); and (3) trade issues, including the expansion of
NAFTA to additional Latin American countries and U.S. purchases of electricity
from Mexican generating plants.
These are complex, thorny and emotional issues,
so negotiations will take time. Consequently, it was wise that Bush
and Fox agreed to meet at six-month intervals to monitor the progress of
the bi-national task forces that will examine each issue. The meeting
was also useful preparation for the "Summit of the Americas" scheduled
to be held in Quebec City in April.
Latest available figures for 11 months of
2000 indicate the phenomenal growth of U.S.-Mexico bilateral trade, which
has soared by 28% over the same period in 1999, and amounted to $228.6
billion. Of this, U.S. exports to Mexico were valued at $102.8 billion,
while U.S. imports from Mexico amounted to $125.8 billion. For border
states like California, Arizona, New Mexico, and Texas, future expansion
of trade with Mexico will be a critical element in the continued progress
of their own economies. So, apart from caring about our relationship
with our neighbor to the South, the stability of our labor markets, and
the concerns of the growing Hispanic community in our midst, we also need
to recognize the economic benefits of international trade, and the benefits
of a more open dialog with Mexico. (Ken
Ackbarali)
INFLATION DEAD? NOT QUITE...
The Producer Price Index (PPI) for finished goods
shot up by 1.1% in January, its largest monthly increase since Sept. 1990,
right after Iraq invaded Kuwait. Energy prices, which rose 3.8% last
month, were the main culprit but certainly not the only one. Food
prices rose by 0.8%. Even the core PPI, which excludes food and energy
prices, increased by 0.7%--far above analysts' estimates. A few items
had huge increases that skewed the whole index (e.g., tobacco and residential
natural gas). Tobacco companies are raising their prices to help
pay for the huge settlements of recent lawsuits.
Moving up the production ladder, inflationary
pressures remain quite evident. The PPI for intermediate goods rose
by 0.7%. The intermediate energy index rose by 3.1% and food prices
rose by 1.7%. The core index, however, was very tame at 0.2%.
The PPI for crude goods (i.e. raw materials) shot up by 13.9% in a single
month. The 25% (yes, twenty-five percent) increase in energy prices
came mainly from a 46% increase in natural gas prices.
Rising natural gas prices will soon pop up
on consumers' radar screens just as electricity prices have done.
At the intermediate level, which is mainly delivery to commercial and industrial
users for production purposes, natural gas prices make Hannibal-like reading.
Natural gas prices for commercial users went up by 21.1% last month (+76.0%
over the year) and for industrial users, 10.3% (+116.4% over the year).
But prices for electric utilities shot up by 64.4% in just one month (+192.9%
over the year!). Why the drastic increase? The demand for natural
gas is rising because it is now the preferred fuel for many industries
(including the electricity-generating industry), and there's less in storage
than normal, plus there's just not enough transmission capacity to move
the supplies around. Gas drilling was not expanded because of the
low prices during the 1990s. In the case of California, the construction
of gas transmission infrastructure did not keep up with the rush to use
natural gas. High natural gas prices have already claimed some victims.
LA Dye, one of the largest textile firms in Southern California, will shut
down by the end of April because of high natural gas costs. Perhaps
higher prices will encourage more infrastructure investment and more "clean
coal" research in the long run. They won't do any good, however,
to those who will lose their jobs in the coming months... (George
Huang)
PR: http://www.bls.gov/news.release/ppi.nr0.htm
SOME GOOD NEWS: RETAIL SALES PERKED UP IN JANUARY
U.S. retail sales rose by 0.7% in January following
three lackluster months (October's sales slipped by 0.1%, November's by
0.6%, and December's edged up, but only by 0.1%) that set retailers on
edge. We knew last week that vehicle sales were higher last month.
The real news was the strength that was visible in all major categories
except food stores, whose sales dipped by 0.2%. Gasoline stations'
sales rose by 2.5% after falling by 2.8% in December, both months reflecting
the impact of changing fuel prices and weather. In addition, sales
of drug stores rose by 1.7%, those of furniture and home furnishing stores
increased by 1.5%, and building materials and garden supply store sales
climbed by 1.1%. Restaurants and bars also reported healthy
sales growth, an increase of 1.0%. Sales of general merchandise and
apparel stores also went up last month, by 0.7% and 0.9% respectively,
though many firms offered steeply discounted prices in order to move their
leftover holiday merchandise. Not necessarily good news for the bottom
line.
Even allowing for the favorable influence
of weather (a normal January followed a cold, wet December), the latest
month's report was surprisingly good and welcome news to retailers, who
had feared their weak performance during the final calendar quarter of
2000 was a harbinger of poor sales in 2001. Economists in and out
of the Federal Reserve also were relieved. A continued downdraft
in retail sales would have greatly increased fears--and predictions--of
recession. While conditions in U.S. manufacturing are still extremely
weak, consumer spending, the economy's main engine, is still in forward
gear. (Nancy D. Sidhu)
PR: http://www.census.gov/svsd/www/retail.html
E-COMMERCE RETAIL SALES PASSED A MILESTONE
Fourth quarter 2000 Internet-based retail sales
surged by 36% from 3Q00 to $8.69 billion. Also, e-commerce retail
sales crossed a major milestone last quarter by surpassing the 1% mark
of total retail sales. At 1.01% (0.79% in 3Q00), they're still a
tiny fraction of the total retail sales in the U.S. but growing at an astonishing
rate. This past holiday season was a make-or-break time for many
e-tailers, and it was a brutal period. Many shoppers waited till
the last few weeks to do their shopping, adding to delivery pressures.
And many e-tailers had to provide deep discounts to entice buyers and generate
cash flow to impress their investors. But it may be too late for
some, including celebrity firms that once shone brightly in this arena.
eToys will likely complete its shutdown in the next few weeks, joining
many other smaller firms that traveled the same difficult journey over
the past year. Taking their places are the online siblings of existing,
brick-and-mortar firms. (George
Huang)
PR: http://www.census.gov/mrts/www/current.html
JANUARY HOUSING STARTS TOO
Housing starts also were higher than expected
in January, 1.65 million units compared to 1.57 million units started in
December. [Housing starts are quoted as seasonally adjust annual
rates.] Single-family starts increased by 3.1% to 1.34 million units,
while multiple-family construction surged by 17.8% to 311,000 units.
January's performance continues a trend of improvement that began late
in 2000, at least partly due to lower mortgage rates.
This too is very good news. However,
estimates of housing starts are often volatile, influenced by big month-to-month
increases or declines in apartment construction such as the one we saw
in January. Furthermore, construction related data for the winter
months, especially December through February, often reflect (temporary)
weather conditions rather than fundamental trends. January's weather
across the nation was approximately normal, but December was decidedly
worse than normal; so the Commerce Department's seasonal adjustment process
boosted its published estimate. Better hold off tooting all those
celebratory horns until spring. (Nancy
D. Sidhu)
PR: http://www.census.gov/indicator/www/housing.html
BUENAS NOTICIAS AT THE PORT OF LOS ANGELES
We have been anxiously awaiting local economic
indicators for January. The Dataquick housing report of last week
was positive (prices and unit sales of both new and existing homes rose).
And now the Port of Los Angeles has released their January cargo statistics.
The number of loaded import containers increased by 8.4% over the year,
which in comparison with past months is slower growth. Loaded export
containers were ahead 11.5%, about in line with recent trends. The
total number of containers handled at the port in January was up by 10.8%
to nearly 397,000 TEUs.
In the meantime, the pace of shipping technology
continues to change at warp speed. Hyundai is putting into service
a 6,500 TEU ship that will cruise at 26.4 knots (that's roughly 30 mph
ground speed). And China Shipping Company has two 9,800 TEU
ships on order. All of these will call at the local ports which are
among the few with the capacity to handle these monsters. (Jack
Kyser)
QUICK STATS:
* BLS: US Producer Price Index for finished goods for 1/01: +1.1% (12/00:
+0.2%)
* BLS: US Producer Price Index for intermediate goods for 1/01: +0.7%
(12/00: +0.4%)
* BLS: US Producer Price Index for crude goods for 1/01: +13.9% (12/00:
+8.5%)
* BLS: US export prices for 1/01: -0.4% (12/00: -0.8%)
* BLS: US import prices for 1/01: +0.2% (12/00: -0.1%)
* Census: US retail sales for 1/01: +0.7% (12/00: +0.1%)
* Census: US business sales for 12/00: +0.1% (11/00: -0.4%)
* Census: US business inventories for 12/00: +0.1% (11/00: +0.3%)
* Census: US housing starts for 1/01: +5.3% (12/00: +0.3%)
* Federal Reserve: US industrial production for 1/01: -0.3% (12/00:
-0.5%)
* Federal Reserve: US industrial capacity utilization rate for 1/01:
80.2% (12/00: 80.7%)
* Census: US e-commerce retail sales for 4Q00: +36.0% (3Q00: +15.6%)
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