The Economic Data Global Express (e-EDGE)

v.5 n.14       Released Apr. 2, 2001
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

BRITISH ELECTIONS POSTPONED, MAKING A RATE CUT MORE LIKELY

     Last weekend, U.K. Prime Minister Tony Blair announced his decision to postpone national elections from May 3 to June 7.  This delay would allow parliament to remain in session to deal with the country's growing epidemic of foot-and-mouth disease.  In making this decision, Mr. Blair heeded calls from farmers, business organizations, and religious leaders.  He also overrode many Cabinet officers in his government as well as Labor leaders in parliament.  Did the state of the economy have any bearing on this action?  Perhaps not, but the timing is certainly fortuitous.
     Real GDP growth in the U.K. last year was 2.9%, not a barn-burning rate, but still a quite respectable performance.  Slower growth is likely this year, with GDP increasing around 2.5%, due largely to softer export demand, the drop in stock prices, and the growing dislocation of the agricultural and tourist industries caused by foot-and-mouth disease.
     In this environment, financial markets have been expecting the central bank (Monetary Policy Authority--MPA) to reduce interest rates from their current 5.75%.  At its scheduled meeting later this week, the MPA will find itself in a box familiar to our FOMC before elections.  The economic fundamentals, that is a slowing economy and inflation running below the official target of 2.5%, argue for a rate cut.  However, a rate cut at this time would be perceived as helping the Labor Party and would invite the wrath of the opposition Conservative Party.  The postponement of the election by five weeks gives the MPA more breathing room, and it is likely that British interest rates will be cut.  (Ken Ackbarali)
 

2000 CENSUS RESULTS

     Population counts and ethnicity data from the April 2000 Census have come in for all the counties in California, and the results are interesting.  Los Angeles County had a population of 9,519,338, for an increase of 656,300 since 1990.  Orange County's April 1, 2000 population was 2,846,289, yielding a 435,300- person gain.  The Riverside-San Bernardino area had a Census count of 3,254,821, up by 665,800 residents.  Ventura County's 2000 Census count was 751,197, a gain of 82,200 residents.  Overall, for the 10-year period, the 5 counties added 1,839,600 people.
     The ethnicity numbers are receiving a lot of attention, too.  For 6 Southern California counties (including San Diego), whites accounted for 41.4% of the population, Hispanics 35.1%, African-Americans had a 7.1% share, and Asians took 10.3%.  As a boost to reality, each category had a new "multiple races"  group, which in total accounted for 7.6% of the region's population.
     Being numbers wonks, we also compared the Census data with population estimates made by the California Department of Finance (DoF).  They adjusted the 1990 Census data for the undercount.  How did they do in their estimates for 2000?  The DoF undercounted Orange County's 2000 population by 17,900 people, and the Riverside-San Bernardino area by 42,600.  They overestimated Ventura County's 2000 population by 5,300 people and Los Angeles County by 365,000.  However, this miss probably isn't as big as it appears.  Since there was an admitted undercount in 2000, we will check with DoF to get their insights. (Jack Kyser)
PR: http://www.census.gov/Press-Release/www/2001/tables/redist_ca.html
 

CONSUMER INCOME & SPENDING ROSE IN FEBRUARY

     The Commerce Department reported that Personal Income rose by 0.4% in February, compared increases of 0.5% in January and December and in line with earlier growth trends in 2000 and 1999.  Personal Consumption Expenditures grew by 0.3% in February, the same as December but well below the (upward revised) 1.0% spending surge reported for January.  After three months of decline, spending for durable goods -- vehicles, appliances, etc. -- led the way, bouncing up by 1.6% in February.  Spending for nondurable goods actually declined, by 0.5%, while services increased by 0.4%.
     With two months in hand, it's pretty clear that consumer spending grew at least as fast during the quarter just ended as during the 4th quarter of 2000.  And a good thing, because business spending for new equipment and to accumulate inventories both declined significantly.  However, consumer spending, which accounts for about two-thirds of the U.S. economy, matters a lot more for the economy as a whole.  Based on what we know today, it looks like first quarter GDP increased, contrary to some economists' expectations.  However, it will turn out to have been a weak performance, perhaps even slower than the 4th quarter's anemic 1.0% pace.  (Nancy D. Sidhu)
PR: http://www.bea.doc.gov/bea/newsrel/pi0201.htm
 

MORE CONSUMER NEWS: CONFIDENCE TURNED UP IN MARCH

     Two independent surveys of consumer sentiment checked in last week with their March results, and the news was unexpectedly promising.  The University of Michigan and The Conference Board each reported that their consumer confidence index increased last month, the latter for the second month in a row.  These upticks came after steep, three-month plunges that set off alarm bells on- and off-Wall Street and at the Federal Reserve.  Even better, improved expectations for the future accounted for the rise in the overall index, in spite of the stock market's slide during March.  [The Michigan Expectations Index is one of the leading economic indicators.]  Consumers' attitudes about their current economic situation were more equivocal, reflecting concerns about mounting layoffs and weaker demand for new workers.
     The March upticks in the confidence index might just be one-month wonders, to be followed in upcoming months by a relapse into deepening gloom.  Alternatively, this could be an early sign that consumer demand is unlikely to deteriorate much more, if at all in 2001.  In turn, these two alternatives spell the difference between the U.S. falling into an outright recession -- with GDP declining for several quarters -- and a period of very-slow-but-positive growth, during which business firms adjust their equipment and inventory spending downward but consumer spending keeps the economy on an upward path.  (Nancy D. Sidhu)
PR: http://www.conference-board.org/search/dpress.cfm?pressid=4627
 

U.S. MANUFACTURING SECTOR STILL WEAK...

     The latest Purchasing Managers' Index (PMI) compiled by the National Association of Purchasing Management (NAPM) shows that the U.S. manufacturing sector continued to contract in March, but at a slower pace.  The PMI rose from 41.9% in February to 43.1% in March.  This is the eighth consecutive month of weakening in the manufacturing sector, indicated by a PMI less than 50%.  New orders and the backlog of orders still shrinking, few are predicting a quick or forceful recovery.  Inventories have been in the liquidation mode for 14 months.  There's light at the end of the tunnel, however.  The production index improved for the second straight month, signaling a possible recovery in the making.  One good piece of news is the reported decline in prices paid for materials, the first such decline in almost two years.  Another good piece of news is higher new export orders.  The biggest concern for manufacturers now is the cost of energy, particularly in the West.  The energy situation adds additional uncertainty into manufacturers' decision-making process.(George Huang)
PR: http://www.napm.org/NAPMReport/ROB042001.cfm
 

2001 FORTUNE 500 RANKING

     Fortune magazine has just released their 500 rankings for 2001, and 23 such firms are headquartered in the Los Angeles five-county area.  Five have headquarters in the City of Los Angeles, 11 in the rest of Los Angeles County (including that hot spot El Segundo with 4), while 7 make their home in the other 4 counties.  The largest local Fortune firm is Santa Ana-based Ingram Micro at 49 on the roster, followed by Walt Disney at 67.  Hilton Hotels made it back onto the 500 by dint of mergers.  As usual, the latest 500 ranking is a work in progress, with 2 firms in the process of being acquired.  City of Orange-based Bergen Brunswig is merging with a Pennsylvania firm.  Litton Industries, which is based in Woodland Hills (part of the City of Los Angeles) is being bought by Century City (that's also in the City of Los Angeles) based Northrop Grumman.  (Jack Kyser)
PR: http://www.fortune.com/
 

MINORITY BUSINESS REPORT: AFRICAN-AMERICANS

     The Census Bureau released its report of Black-owned business enterprises (part of the 1997 Economic Census).  There were 823,500 Black-owned businesses in the U.S. in 1997.  Among the states, New York topped the list with 86,500, followed by California at 79,100 and Texas at 60,400.  Black-owned businesses represent 9.6% of all firms in California.  Locally, LA County came in third in the nation with 38,277 Black-owned businesses (New York PMSA was no. 1 at 69,410 and Washington DC was second at 48,709).  L.A.'s 38,277 firms generated $3.3 billion in sales.  Most Black-owned businesses are family-run (with no reported employees) or single-person operations.  Only 3,359 had paid employees, but they employed a total of 32,268 workers.  Firms with employees were roughly 8.8% of the total, but accounted for 74% of the sales.  Roughly 60% of the Black-owned businesses in LA County are in services.  The cities in LA County with the largest numbers of Black-owned businesses were: Los Angeles (17,593), Inglewood (1,717), Long Beach (1,619), and Lynwood (1,609).  (George Huang)
PR: http://www.census.gov/Press-Release/www/2001/cb01-54.html
 

FUTURE WATCH: RAIL CORRIDORS

     Goods movement is shaping up as one of the most important transportation issues in Southern California.  The Ports of Los Angeles and Long Beach -- which together handle 30% of U.S. container traffic -- are growing faster than anticipated.  Failure to move goods efficiently into, through, and out of the region threatens not just our global competitiveness and economic health, but our regional mobility as well.  Commuters, idling at rail crossings or on a freeway jammed with trucks, will share the frustration of businesses waiting for delayed "just-in-time" deliveries.
     There are two main trade corridors serving the San Pedro Bay ports: the Alameda Corridor for rail, and the 710 Freeway for trucks.  Increasing truck trips will slowly grind the 710 to a halt, with little relief in sight.  However, the prospects for rail are much brighter.  Scheduled to open on time (and on budget!) in 2002, the Alameda Corridor is a twenty-mile, high-speed, completely grade-separated corridor connecting the ports with the rail yards just east of downtown Los Angeles.
     However, conflicts between trains and vehicles have not been addressed beyond the Alameda Corridor.  Two rail corridors connect the rail yards with the transcontinental rail network: the Alameda Corridor East (ACE), via the Union Pacific tracks through the San Gabriel Valley into San Bernardino County, and the Orange County Gateway (OCG), which follows the Burlington Northern Santa Fe line through northern Orange County into Riverside County.  Freight and commuter trains share the rails along both corridors.  By 2020, the number of trains using ACE is forecast to more than double from 67 per day to 168 per day, while traffic on the OCG will rise from 59 per day to 150 per day during the same period.
     Longer vehicle delays, higher vehicle emissions, more grade crossing accidents and noise impacts are inevitable unless mitigated by grade-separation. The sheer number of trains forecast -- more than one every 10 minutes along the OCG -- has spurred plans to literally lower the tracks below grade for part of the OCG and separate many of the crossings along ACE.  Both projects need further funding commitments from local, state and federal governments.  Our regional economy, air quality, and traffic flow depend on those dollars. (Gregory Freeman)
 

QUICK STATS:

* BEA: US Gross Domestic Product for 4Q00 (final): +1.0% (3Q00: +2.2%)
* BEA: US GDP deflator for 4Q00 (final): +2.0% (3Q00: +1.6%)
* BEA: US personal income for 2/01: +0.4% (1/01: +0.5%)
* BEA: US personal consumption expenditures for 2/01: +0.3% (1/01: +1.0%)
* BEA: US personal savings rate for 2/01: -1.3% (1/01: -1.3%)
* BEA: US personal income for 2/01: +0.4% (1/01: +%)
* Census: US construction spending for 2/01: +0.6% (1/01: +2.2%)
* Census: US new home sales for 2/01: -2.4% to 911,000 annual units (1/01: -5.4% to 933K a.u.)
* Census: US new durable goods orders for 2/01: +0.2% (1/01: -7.3%)
* Census: US durable goods shipments for 2/01: -0.4% (1/01: -2.5%)
* Census: US unfilled durable goods orders for 2/01: -0.3% (1/01: -0.3%)
* Natl Assn of Purchasing Mgmt: US Purchasing Managers' Index for manufacturing for 3/01: 43.1% (2/01: 41.9%)
* Conference Board: US Consumer Confidence Index for 3/01: 117.0 (2/01: 109.2)
* Conference Board: US Help-wanted Advertising Index for 3/01: 71 (2/01: 76)
* USDA: US agricultural prices for 3/01: +4.0% (2/01: +3.1%)--livestock prices rose by 4.9% as a result of the foot-and-mouth disease in Europe driving up the demand for U.S. meat

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