e-EDGE broadcast - actual current release

The Economic Data Global Express (e-EDGE)

v.5 n.27 Released July 2, 2001

Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

DURABLE GOODS ORDERS -- A LITTLE BETTER?

     Manufacturers' new orders for durable goods continued their seesaw pattern, ticking up by 2.9% in May after a decline of 5.5% in April and an increase of 1.9% in March [these figures are seasonally adjusted]. A significant portion of these month-to-month changes was due to volatility in orders for transportation equipment, particularly motor vehicles and aircraft. New orders for high technology equipment (computers and related products, communications equipment, and semiconductors) also rose in May following declines in the two previous months. Indeed, higher orders were widespread last month, with only communications equipment and computers & peripherals registering declines. May's results were almost the exact opposite of April, when all industries but two (industrial machinery and "all other" durable goods) turned in negative numbers.
     All of this raises the question: is the worst finally over for manufacturing? It's difficult to discern an improving or downward trend using the month-to-month results. Furthermore, the seasonal adjustment process, designed to eliminate "normal" monthly fluctuations in orders, may be obscuring as much as it reveals. The actual, unadjusted figures reported by the Census Bureau contain more useful information. Total durable goods orders dropped by 11% in April-May 2001 compared with the same months last year. This decline was a little worse than the 9% drop registered during first quarter 2001 and much worse than second quarter 2000, when orders registered a 14% increase. No visible improvement here.
     Beneath the totals, the industry-level details revealed some problems and also some glimmerings of hope. Most of the recent deterioration in total durables orders has occurred in the high tech equipment industries, whose orders plunged by almost 30% in April and May after falling by "only" 10% in the first quarter and soaring upward by 25% in second quarter 2000. On the other hand, orders for transportation equipment fell less rapidly in April-May, by only 4%, than in the previous quarter, when orders were down by 11%. And orders for defense capital goods actually accelerated to an increase of 22% in April and May from only 2% during the first quarter. Thus, some sectors of manufacturing are improving, or at least beginning to see the light at the end of the tunnel. However through May at least, most high technology equipment makers (even those not located in California) were still slogging along in the dark. (Nancy D. Sidhu)
PR: http://www.census.gov/indicator/www/m3/index.htm

MANUFACTURING: STILL BAD, BUT NOT AS BAD AS BEFORE

The U.S. manufacturing Purchasing Managers' Index (PMI) compiled by the National Association of Purchasing Management (NAPM) rose to 44.7% in June, up from 42.1% in May. Although it still showed a decline in the manufacturing sector (PMI<50%, which has been the case for 11 consecutive months now), the PMI was at its highest level in seven months and was significantly higher than analysts' expectations. Firms are continuing to liquidate their excess inventories, but the rates of contraction in production, new orders, backlogs of orders, and employment were all smaller. Prices were still coming down and deliveries were faster, which together signaled a lack of bottlenecks in the production chain and hence less inflationary potential. When new orders do turn up (it may be a while before this happens, however), manufacturers will be in a position to raise output and finally break out of the protracted downturn in manufacturing. (George Huang)
PR: http://www.napm.org/NAPMReport/ROB072001.cfm

MAY RESALE HOUSING ACTIVITY -- PRICES UP, UNITS DOWN

     The May report from the California Association of Realtors (CAR) was generally more of the same -- prices up over the year, but unit sales down. For the state, unit sales dropped 12.9%, while the median price advanced 6.9% to $257,060. The CAR also reported that their unsold inventory index (the number of months needed to deplete the current supply of homes) was 3.8 months, compared with 3.3 months last year.
     Around Southern California, however, several breaks in the general trend were visible. For example, unit sales in Los Angeles County were up 6.2% over the year while the median price advanced 11.5% to $232,710. The Riverside-San Bernardino area also posted gains in unit sales (+6.9%) and the median price (+14.7% to $157,410).   San Diego County posted a modest 1.1% increase in unit sales, while the median price moved up by 6.0% to $293,310. Ventura County saw a stout 17.9% gain in unit sales over the year, but had an anemic 1.6% gain in the median price to $293,400. However, Orange County experienced a 6.3% decline over the year in unit sales, while the median price moved up 9.2% to $351,790.
     The San Francisco Bay area recorded a 24.6% slide in unit sales, while the median price increased by 3.4% to $476,820. And the San Jose area saw unit sales drop 38.9%, while the median price inched up 0.9% to $532,500. The priciest area in the state in May was "Santa Barbara South Coast," which came in at $603,120, a 17.9% increase over the year. However, unit sales there dropped 7.6%. (Jack Kyser)

WEEKLY ENERGY NOTES

Financial issues:

     - The state of California finally got some new money last week, closing a $4.3 billion bridge loan to cover power purchase costs until it receives funds from THE BIG ONE, the state's record $13.4 billion bond sale, now expected in September or October.
     - Edison International, parent company of beleaguered electric utility Southern California Edison, also tapped credit markets last week. The company sold $800 million of high-yield (14%!) bonds and obtained a bank loan of another $385 million. These funds are needed to repay other bank loans and to refinance bonds coming due this year. NOTE: none of this money goes directly to Edison the utility.
     Rates:
     - The Bonneville Power Authority, which operates several big hydroelectric dams and nuclear power plants in the northwestern U.S., is raising its wholesale rates by only 46%. An increase of up to 250% had been feared. Retail rates charged by BPA's utility customers are expected to increase by approximately 23%.

Supply:

     - A brand new power plant, Sunrise near Bakersfield, officially started up last week. Operated and partially owned by Edison Mission Energy, sister company to Southern California Edison, the plant has a long-term contract to sell 325 MW (one MW is enough electricity to supply about 1,000 homes) to the state for the next 18 months and even more after that. (Edison PR: http://www.edison.com/media/indiv_pr.asp?id=2658 ; a list (and maps) of all power plant projects underway: http://www.energy.ca.gov/sitingcases/status_all_projects.html )
     - The San Jose City Council finally relented and approved construction of a new power plant proposed for the Coyote Valley. At the urging of Cisco Systems, the Council had initially rejected the plant, to be called the Metcalf Energy Center. However, it appeared increasingly likely the California Energy Commission, which has final say on such matters, would overrule the city. So the Mayor negotiated an agreement with the plant's owners covering topics like air quality and community programs, which the Council just approved.
     - Documents from Cal ISO shows that Duke Energy's plant in San Diego was following Cal ISO's orders when it adjusted its output up and down in January. Cal ISO asked Duke to power up and down in order to balance the grid. Still, many questions remained on the prices of the power sold last winter. Hot tempers and quick accusations have endangered the relationship between the State and power producers, making a overcharge settlement even more difficult to reach.

Regulation/policy:

     - Last week was the first of three weeks of negotiations sponsored by the Federal Energy Regulatory Commission (FERC) between the western states, their utilities, smaller in-state generators, larger outside generators and a host of lawyers. This large cast of characters has been assembled to discuss, and perhaps resolve, several nagging issues pertaining to rates/payments/etc., or who owes what to whom. Based on the few comments made by participants, little has been accomplished so far. However, FERC has threatened to impose its own solutions if the parties cannot come to some agreement. Maybe next week?
     - CPUC delayed a vote to this week on suspending or restricting the "direct access" program in which businesses or residents buy electricity directly from power generators (rather than the utilities that distribute the power) and pay their contracted rates rather than the regulated retail rates. State officials are concerned that businesses will opt for direct access in order to avoid the utilities' hefty rate increases, and therefore avoid the burden of paying down the cost of
the State's power purchases and debt service. Customer choice is a major cornerstone of deregulation and its suspension would signal an end to effective electric power deregulation in California.
     - CPUC voted to exclude oil refineries and supporting facilities from blackouts. This will help prevent disruptions in the gasoline supply which cause spikes in gasoline costs.

Conservation/Demand:

- Electricity usage in June was 12.3% lower than in June 2000, according to an analysis of raw data from Cal ISO. The reduction of nearly 4,000 megawatts is equivalent to the output of several large power plants. This performance follows the 11% reduction achieved in May and 7% in April as compared with year-ago levels. June usage during the peak periods was 14.1% below the year-ago level. The higher electricity prices (which lead to conservation), the State's conservation drive, and cooler weather are the contributors to this reduction.
--- Compiled by Nancy D. Sidhu and George Huang

KYOTO PACT: JAPAN NOW SUPPORTS U.S. POSITION

Japanese Prime Minister Koizumi said he now supports President Bush's stance on rejecting the Kyoto Pact after the two met for the first time last Saturday. More surprisingly, he said that Japan would not proceed without the support of U.S. Without the support of the two largest economies on Earth, the Kyoto Pact in its present form is highly unlikely to succeed in being ratified by enough countries to meet the "55% of CO2 sources" requirement (U.S. alone is 36%). Japan will seek revisions to the 1997 Kyoto Pact in an effort to lure the U.S. back into some sort of agreement even as the U.S. formulates its own plan. (George Huang)

QUICK STATS:

* BEA: US real Gross Domestic Product for 1Q01 (final): +1.2% (4Q00: +1.0%)
* BEA: US implicit GDP deflator for 1Q01 (final): +3.2% (4Q00: +2.0%)
* BEA: US personal income for 5/01: +0.2% (4/01: +0.2%)
* BEA: US personal consumption expenditures for 5/01: +0.5% (4/01: +0.5%)
* BEA: US personal savings rate for 5/01: -1.3% (4/01: -1.0%)
* Cal Assn of Realtors: California home sales for 5/01: +2.1% to 505,590 annual units (4/01: -4.4% to 495,190 a.u.)
* Cal Assn of Realtors: California median home sale price for 5/01: +0.4% to $257,060 (4/01: -4.4%)
* Cal Assn of Realtors: LA County home sales for 5/01: +17.2% (4/01: -0.7%)
* Cal Assn of Realtors: LA County median home sale price for 5/01: +2.7% to $232,710 (4/01: -0.7%)
* Census: US new home sales for 5/01: +0.8% to 928,000 annual units (4/01: -4.5% to 921,000)
* Census: US construction spending for 5/01: +0.3% (4/01: +0.4%)
* Census: US new durable goods orders for 5/01: +2.9% (4/01: -5.5%)
* Census: US durable goods shipmentsfor 5/01: +3.1% (4/01: -3.8%)
* Census: US unfilled durable goods orders for 5/01: -0.7% (4/01: -0.6%)
* Conference Board: US consumer confidence index for 6/01: 117.9 (5/01: 116.1)
* Conference Board: US help-wanted advertising index for 5/01: 60 (4/01: 65)
* Natl Assn of Purchasing Mgmt: US manufacturing Purchasing Managers' Index for 6/01: 44.7% (5/01: 42.1%)
* US Dept. of Agriculture: US agricultural price index for 6/01: -0.9% (5/01: +1.9%)

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