The Economic Data Global Express (e-EDGE)

v.5 n.22       Released May 29, 2001
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

PLUSES AND MINUSES IN THE TAX REFORM BILL

     The tax reform bill adopted by Congress last week and signed into law by President Bush is both a triumph and a disappointment.  Among the triumphs are the reduction in marginal tax rates, doubling of the child tax credit, reduction of the "marriage penalty" tax, and phasing out of the estate (inheritance) tax.  Given the complexity of the tax code and the emotionalism surrounding the debate on tax policy, it is truly remarkable that such a comprehensive tax package was agreed upon by all the warring factions.
     It is regrettable that the opportunity to truly simplify the tax laws was lost, making for a dream outcome for accountants, financial planners, and lawyers.  Also disappointing is the strategy of Congress to back-load many of the tax cuts to take effect in 2002-2006 and as far into the future as 2011 (estate tax).  The "fairness" issue, a fiercely controversial and difficult-to-define concept, will be debated ad nauseam.
     Nevertheless, tax refunds estimated at $100 billion will boost the U.S. economy in the second half of this year.  We also assume that the lower half of all taxpayers will spend the windfall without delay.  For the year 2001 as a whole, GDP should be roughly 0.5% higher than if no tax refunds were received by consumers during the July to September period. So, while the fundamental problems responsible for the current economic slowdown (and threat of a recession) will not be altered by the tax cut, millions of Americans should feel more optimistic, at least for the brief time it takes to spend the refund.  (Ken Ackbarali)
 

U.S. ECONOMY NOT SO SOLID AFTER ALL

     The Bureau of Economic Analysis (BEA) released its second estimate of U.S. economic growth during the first quarter 2001.  The bureau's latest, "preliminary," figures showed the nation's Gross Domestic Product rose by 1.3% (seasonally adjusted annual rate, or SAAR) compared to its initial, or "advance," estimate of 2.0%.  The BEA's advance report lacked several key pieces of information (mostly about March) that were included in its later preliminary estimate.  In particular, last quarter's decline in manufacturers' and distributors' inventories was steeper than originally estimated.  Indeed, de-stocking alone sliced 3 percentage points off the first quarter's growth rate.  The economic outlook for the second quarter and the rest of 2001 depends heavily on the demand for consumer goods and services, business investment spending--especially in high technology equipment--and also how much more businesses decide to cut inventories.  Early April information on some of these is discussed below.  (Nancy D. Sidhu)
PR: http://www.bea.doc.gov/bea/newsrel/gdp101p.htm
 

DURABLE GOODS MANUFACTURING SHRANK AGAIN IN APRIL

     New orders received by manufacturers of durable goods dropped by a startling 5.0% in April, compared to increases of 2.2% in March and 3.9% in February.  Declines were reported across almost all industries.  However, falling orders for high technology and transportation equipment were the most important factors in last month's decline.  Orders for durable goods are often notoriously volatile.  For example, semiconductor bookings plunged by 32% in April after falling by 4% in March and soaring by 91% in February.  Meanwhile, new orders for aircraft and parts slumped by 10% last month following two good months in March (up by 18%) and February (up by 49%).
     Some of the results in this report are included in the government's calculations of GDP, and it looks like the second quarter didn't start out very well.  On the all-important consumer side, shipments (sales) of motor vehicles and parts declined in April after two up months.  Light vehicle sales were a positive story in the first quarter but may not follow through in the second.  Also, shipments of computer and communications equipment declined again in April, auguring another weak quarter for business investment.  One good sign:  inventories held by durables manufacturers appear to have stabilized in April.  (Nancy D. Sidhu)
PR: http://www.census.gov/indicator/www/m3/index.htm
 

MARCH TRADE NUMBERS NOT SO HOT

     The March Department of Commerce report on the value of trade passing through the state's 3 customs districts was not so hot.    At the Los Angeles District, export values declined by 1.8% over the year, while import values moved back into a positive growth mode with a 2.6% gain.  Total two-way trade value for the month was up by a modest 1.1% to $18.7 billion.  For the first 3 months of the year, total trade value is up by 5.3% over the comparable 2000 period.
     At the San Francisco District, exports declined by 1.2% over the year, while import values were essentially flat at -0.1%.  Total trade value for the month declined by 2.5% to $10.2 billion.  For the first 3 months of 2001, two-way trade values were up by 4.8%.  At the San Diego District in March, exports values inched up 0.1%, while import values dropped by 1.4%.  Total trade value for the month was off by 0.9% to $2.9 billion, while the 3 month total was up 1.8% over the like 2000 period.  (Jack Kyser)
 

APRIL RESALE HOUSING TRENDS MIXED

     The April numbers from the California Association of Realtors (CAR) continue to point to a mixed market.  Unit sales during the month were up modestly over the year, while the median price increased by 10.7% to $262,420.  In Los Angeles County, unit sales were down 4.3% from last year, but the median price recorded a 6.9% gain to $226,640.  In Orange County, unit sales also declined over the year, while the median price increased 11.7% to $352,930.  In the Riverside-San Bernardino area, unit sales were up over the year by 1.5%, while the median price advanced 14.6% to $153,900.
     San Diego County saw unit sales drop 4.9% over the year, but the median price of a resale unit moved over the $300,000 mark for the first time, up by 15.5% to $300,940 to be precise.  Ventura County saw unit sales drop by 12.3%, while the median price moved ahead by 4.7% to $300,640.
     In the Bay Area, trends are interesting, to say the least.  In San Jose, sales dropped by a hefty 39.5% over the year, while the median price declined 5.4% to $530,000.  It seems like some readjustment is afoot in that market.  In what the CAR calls the San Francisco Bay area (the San Francisco and Oakland metro areas), unit sales slipped by 26.3% over the year, though the median price managed a 3.1% gain.  (Jack Kyser)
PR: http://www.car.org/newsstand/news/may01-5.html
 

2000 CENSUS DATA

     More detailed 2000 Census data for California was released last week.  You may view or download the various reports from the Census Bureau.
PR: http://www.census.gov/Press-Release/www/2001/tables/redist_ca.html
 

REVISED ELECTRICITY RATE CALCULATION

     With input from SCE, we have updated the new rate calculation spreadsheet.  The major corrections are: 1) EPS is now part of the new rate and will not be listed separately, and 2) the legislated 10% reduction is based on the charges under the old, frozen rate (excluding the EPS).  The precise new $/kWh rates are also included.
MS Excel 4 spreadsheet: http://www.laedc.org/ee-v5n21/SCE-rate.xls
 

QUICK STATS:

* BEA: US Gross Domestic Product for 1Q01 (preliminary): +1.3% (4Q00: +1.0%)
* BEA: US implicit GDP deflator for 1Q01 (prel.): +3.3% (4Q00: +2.0%)
* BEA: US corporate profits for 1Q01: -2.3% (4Q00: -5.7%)
* BEA: US personal income for 4/01: +0.3% (3/01: +0.5%)
* BEA: US disposable personal income for 4/01: +0.3% (3/01: +0.5%)
* BEA: US personal consumption expenditures for 4/01: +0.4% (3/01: +0.2%)
* BEA: US personal savings rate for 4/01: -0.7% (3/01: -0.6%)
* Cal Assn of Realtors: California single-family home sale for 4/01: -4.4% to 495,390 annual units (3/01: +6.6% to 518,190 a.u.)
* Cal Assn of Realtors: California single-family median home sale price for 4/01: +0.1% to $262,420 (3/01: +7.1% to $262,160)
* Cal Assn of Realtors: LA County home sale for 4/01: -0.7% (3/01: +47.0%)
* Cal Assn of Realtors: LA County median home sale price for 4/01: -0.7% to $226,640 (3/01: +1.6% to $228,240)
* Conference Board: US Consumer Confidence Index for 5/01: 115.5% (4/01: 109.9%)
* Census: US new home sales for 4/01: -9.5% to 894,000 annual units (3/01: +2.3% to 988K a.u.)
* Census: US new durable goods orders for 4/01: -5.0% (3/01: +2.2%)
* Census: US durable goods shipments for 4/01: -3.6% (3/01: -0.3%)
* Census: US durable goods inventories for 4/01: +0.1% (3/01: -0.9%)
* Census: US unfilled durable goods orders for 4/01: -0.2% (3/01: +0.3%)
* Natl Assn of Realtors: US existing home sales for 4/01: -4.2% to 5.2mil. annual units (3/01: +4.6% to 5.43mil.a.u.)
 

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