The Economic Data Global Express (e-EDGE)

v.5 n.10       Released Mar. 5, 2001
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

RESALE HOUSING MARKET STURDY IN JANUARY

     Data for January from the California Associations of Realtors (CAR) indicates that that the resale housing market continues to be healthy.  Unit sales in the state were up by 6.6% over the year ago period, while the median price advanced 8.6% to $246,380.   The unsold inventory index (or the number of months needed to deplete the supply of homes for sale at current sales rates) was 4.8 months, versus 5.0 months last January.
     In Los Angeles County, the median price moved up over the year by 9.4% to $217,710, while unit sales were ahead by 2.9%.  In Orange County, the median price jumped by 14.5% to $332,970, while unit sales increased by 11.0%.  Resale activity in the Riverside-San Bernardino area, however, was more subdued in January.  The median price inched up 1.9%, while unit sales were down by 0.9% over the year.  San Diego County posted a 12.3% increase in the median price to $282,180, while unit sales moved ahead 4.1%.  In Ventura County, the median price increased by 5.6% to $289,290.
     In the Bay Area, unit sales dropped 6.0% over the year, but median prices continued to zoom upward.  In the San Francisco area, the January median was up 21.3% to $472,280, while the San Jose area saw prices climb 31.3% to $577,500.  (Jack Kyser)
PR: http://www.car.org/newsstand/news/feb01-5.html
 

PERSONAL INCOME AND SPENDING ROSE IN JANUARY

     Personal income increased by 0.6% in January, more than expected and the biggest monthly growth since September.  Strong gains in wages and salaries were the largest contributor to January's performance.  [All figures in this report are adjusted for normal seasonal variation.]  A number of special factors also affected the final result.  On the plus side, recipients of Social Security pensions and other inflation-indexed federal benefits received larger checks in January, due to annual adjustments.  Federal employees also received a pay raise.  On the down side, U.S. farmers received $5.5 billion in special subsidy payments in December but only $0.8 billion in January.
     Growth in personal consumption spending also picked up in January, rising by 0.7% over the month, the biggest increase since September.  January's increase was led by spending for durable goods, especially purchases of light vehicles, which had fallen during the previous three months.  Spending for nondurable goods also increased in January after a weak fourth quarter.  However, consumer purchases of services rose by only 0.5%, slower than the 0.8% pace of the previous two months.  The growth in spending for heating oil and natural gas likely was less than seasonal in January, reflecting a return to normal weather that month following record cold temperatures in November and December.
     What does this report tell us about the U.S. economy in the first quarter?  Personal Consumption Expenditure (PCE) is about two-thirds of total U.S. GDP (Gross Domestic Product); so consumers' behavior makes a big difference to overall economic performance.  January's improvement in spending, if it continues, puts a floor under domestic demand in the current quarter, a positive sign.  On the other hand, higher spending levels also will deplete inventories more than many economists currently expect, which would reduce measured economic growth in the first quarter but boost it in later quarters.  The "poster child" for developments of this sort is the light vehicle industry, where retail sales through February have been better than expected and excess inventories have fallen more than expected, leading some to predict higher production in the 2nd quarter.  At this point, we can only watch to see whether January's trend will continue into February, March, and April.  (Nancy D. Sidhu)
PR: http://www.bea.doc.gov/bea/newsrel/pi0101.htm
 

MANUFACTURING SECTOR CONTINUES TO WEAKEN

     The Purchasing Managers' Index (PMI) compiled by the National Association of Purchasing Management (NAPM) shows that the U.S. manufacturing sector continued to weaken in February, albeit at a slightly slower pace.  This was the seventh consecutive month in which the PMI was below 50%, the threshold for expansion/contraction.  At 41.9%, the index suggests that the overall economy is also shrinking, and it has been in this unwelcomed status for two consecutive months.  The employment index, at 37.2, reached its lowest level since 1991.  Even as firms saw a decline in orders, in general they had to pay higher prices for their inputs.  They are adjusting to the worsening economic environment by liquidating their existing inventories, cutting back on capital investments, and in some cases, laying off workers.  (George Huang)
PR: http://www.napm.org/NAPMReport/ROB032001.cfm
 

INLAND EMPIRE PURCHASING MANAGER'S REPORT

     The Institute of Applied Research and Policy Management at Cal State San Bernardino compiles a monthly purchasing manager's report.  The Riverside-San Bernardino area has a growing manufacturing base, so the survey offers some interesting insights.
     The February PMI declined to 45.4 from January's 47.2, which suggests that the local manufacturing sector is still growing, but at a much reduced rate.   The commodity price index (prices paid) decreased from January to February, but still remains at a high level.
     Purchasing managers remained pessimistic in their three-month forecast for the local economy, with 41% expecting a weaker economy in the coming months, while 50% expected the economy to remain the same.  Not many optimists in this fast growing area.  (Jack Kyser)
 

NEW COUNTRY RISK DATA CAN HELP INVESTORS

     A January 2001 survey by PricewaterhouseCoopers (PWC), a leading international consulting firm, provides useful information for investors considering foreign market opportunities.  This is especially timely, given the disappointing performance of American equity markets in the last twelve months and worries about an economic slowdown, an environment that tends to make overseas investments appear more attractive.  The survey focuses on transparency in 35 countries and compiles an "opacity index" to quantify its findings (the higher the index, the less transparent or more opaque its investment market).
     The criteria used to compile the index are: (1) the clarity of legal systems and regulation;  (2) monetary, fiscal, and tax policies;  (3) accounting standards;  and (4) corruption in capital markets.  Based on these measures, the PCW survey rates Singapore, the United States, Chile, the United Kingdom, and Hong Kong the five most transparent countries.  At the other end of the scale are the five least transparent countriesChina, Russia, Indonesia, Turkey, and South Korea.
     While some of the results are fairly obvious, there are a few important surprises. California and Los Angeles exporters and investors should take note of the following countries that are important to the region's international business.  Japan and Taiwan are ranked less transparent than we might have placed intuitively them.  One would not have thought that South Korea, a member of OECD, would be in the same (less transparent) category as Turkey and Indonesia.  Despite all the negative media coverage, Mexico (also a member of OECD) received a better ranking than Italy and close to that of Hong Kong.  The difference in these country ratings affect the level of interest rates on their government bondsin effect, a risk premium.  They also shed light on the level of difficulty which foreigners experience in doing business overseas as well as the safety of their investments.  Knowing and understanding the level of risk one is actually taking  before making a commitment can prevent a lot of grief later on. (Ken Ackbarali)
PR: http://www.opacityindex.com/
 

FUTURE WATCH: POPULATION

     The number of people living in California -- currently about 33 million -- is expected to rise to somewhere in the vicinity of 45 million by 2020.  Immigration will contribute to the growth, yet natural increase (births minus deaths) will be a larger factor.
     California absorbs more immigrants annually than any other state in the nation, both in absolute terms and as a percentage of the existing population.  Indeed, more than one third of all immigrants to America choose to live in California.  An even more important trend is California's high rate of natural increase, which is fourth highest in the nation despite our enormous population base.
     For Southern California, these trends mean the five-county region will see five to six million people added to the more than 16 million already here.  That means we're going to add the population equivalent of another City of Los Angeles plus another City of San Diego over the next twenty years.  The majority of the growth (almost 90%) will occur in Los Angeles County and the Inland Empire, with Orange County forecast to absorb 7% and Ventura County just 4%.  While accommodating the growth will create considerable infrastructure challenges -- particularly in transportation and housing -- it will also create business opportunities for those willing to meet them.  (Gregory Freeman)
Sources: California Department of Finance, U.S. Census Bureau, Public Policy Institute of California
(Editor's note: Future Watch is a new feature of e-EDGE that will periodically bring you interesting facts, figures, and forecasts on trends affecting the Southern California region.)
 

WESTEC HELPS YOU BUILD IT BETTER

     Manufacturers in search of the latest machine tools and metalworking technologies can find the resources they need at the Society of Manufacturing Engineers' (SME) WESTEC 2001 Advanced Productivity Exposition (APEX), March 26-29, 2001, at the Los Angeles Convention Center.  WESTEC is North America's largest annual metalworking and manufacturing exposition, so don't miss your opportunity to see technology in action, compare suppliers and gain state-of-the-art technical knowledge.  Visit http://www.sme.org/westec for more information.
 

QUICK STATS:

* BEA: US Gross Domestic Product for 4Q00 (preliminary): +1.1% (3Q00: +2.2%)
* BEA: US personal income for 1/01: +0.6% (12/00: +0.4%)
* BEA: US personal consumption expenditures for 1/01: +0.7% (12/00: +0.4%)
* BEA: US personal savings rate for 1/01: -1.0% (12/00: -0.8%)
* BEA: US vehicle sales for 2/01: +1.7% to 17.5 mil. seasonally adjusted annual rate (1/01: +11.0% to 17.2 mil. s.a.a.r.)
* Cal. Assn. of Realtors: California home sales for 1/01: +6.6% (12/00: -15.0%)
* Cal. Assn. of Realtors: California median (single-family) home price for 1/01: +8.6% (12/00: -0.6%)
* Cal. Assn. of Realtors: LA County home sales for 1/01: -16.8% (12/00: -1.5%)
* Cal. Assn. of Realtors: LA County median home price for 1/01: -1.3% (12/00: -3.6%)
* Census: US durable goods orders for 1/01: -6.0% (12/00: +1.2%)
* Census: US durable goods shipments for 1/01: -1.7% (12/00: -0.6%)
* Census: US unfilled durable goods orders for 1/01: -0.2% (12/00: +1.5%)
* Census: US construction spending for 1/01: +1.5% (12/00: +1.0%)
* Census: US new home sales for 1/01: -10.9% (12/00: +14.9%)
* Conference Board: US Consumer Confidence Index for 2/01: 106.8 (1/01: 115.7)
* Dept. of Agriculture: US agricultural prices for 2/01: +2.1% (1/01: -1.0%)
* Natl Assn of Purchasing Mgmt: US Manufacturing Purchasing Manager's Index for 2/01: 41.9% (1/01: 41.2%)

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