The Economic Data Global Express (e-EDGE)
v.5 n.31 Released July 30, 2001
Produced
by the Los Angeles County
Economic Development Corporation as a public service to the global
community.
U.S. ECONOMY GREW--BARELY--IN SECOND QUARTER
On Friday, the Bureau of Economic Analysis (BEA)
released its "advance" report of the economy's performance during the second-quarter.
The headline item was that the economy grew during the second quarter of
2001 but by only 0.7% (seasonally adjusted annual rate or SAAR), making
it the fourth consecutive quarter with growth below the 2% mark.
Inflation also subsided last quarter. The GDP chain price index decelerated
to a 2.3% pace (SAAR) from 3.3% during the first quarter.
The story line was pretty much as we have
been reporting in recent weeks. Business investment spending for
new plant and equipment (P&E) provided the main drag to the economy
last quarter, plunging by 13.6% (SAAR). This was the largest decline
in P&E spending since the second quarter of 1982, during the nation's
deepest postwar recession. Declines were registered for most types
of nonresidential structures and equipment. However, spending for
information processing equipment and software was particularly hard hit,
dropping by a 19% annual rate.
Three sectors provided enough oomph to offset
the effects of business fixed investment on the economy in the second quarter.
(1) Consumer spending for goods and services rose by 2.1% (SAAR), led by
higher spending for durable goods. Consumer spending has been the
mainstay of the U.S. economy for some time, though consumers' interest
in acquiring more stuff may be waning. Last quarter was the third
consecutive quarter of slower growth in spending by households, a worrisome
trend. (2) Spending by state and local governments increased by 7.5%
(SAAR) last quarter, the best performance in several years. However,
state and local governments will have to moderate their spending in the
current fiscal year because revenue growth has slowed sharply. (3)
Finally, investment spending for new and remodeled housing rose at a healthy
7.4% (SAAR) pace.
The BEA calls this report on 2nd quarter economic
growth an "advance" estimate because it doesn't yet have all the information
it needs to make a "preliminary" (more accurate) estimate. In particular,
we don't yet know anything about June for the following: spending
for residential and nonresidential construction, manufacturing and
trade inventories, and U.S. exports and imports. The Bureau had to
make some assumptions about June for all of them. We'll find out
how accurate their guesses were in coming weeks as that information is
released. In the past, advance estimates have been altered by as
much as a full percentage point in either direction. Stay tuned.
(Nancy D. Sidhu)
PR: http://www.bea.doc.gov/bea/newsrel/gdp201a.htm
WTO MEETING IN GENEVA TO SET TRADE AGENDA FOR NOVEMBER
Representatives of 142 member nations of the World
Trade Organization (WTO) are meeting today and tomorrow in Geneva to set
the agenda for trade liberalization talks in November. In the aftermath
of violence and protests earlier this month at the G8 Summit in Genoa and
the collapse of WTO talks in Seattle in December 1999, the selection of
tiny and less accessible Qatar in the Middle East is not likely to discourage
protest demonstrations. These groups have already warned that they will
protest in several areas around the world. The agenda, however, will be
a major determinant in the level of protests towards the November talks.
Likely issues on the WTO agenda are: (1) Rich
countries, especially in the European Union, want fairer treatment of foreign
investment and stronger antitrust laws in emerging market countries;
(2) Poor countries want greater access for their agricultural exports and
lower subsidies of agricultural products in rich countries; and (3) The
U.S. does not want antidumping rules on the agenda, on the belief that
these rules restrict U.S. exports. This is a sore point with poor
countries that feel that their industries are harmed by antidumping rules.
Apart from the contentiousness surrounding
the agenda, the timing of the November WTO meeting is not favorable.
The record shows that countries become more militant and hardened in their
policy positions during periods of global recessions or weak economic growth
and declining international trade. Negotiating thorny trade issues
tend to be extremely difficult in such circumstances. One option
is to reschedule the meeting to a date after the middle of 2002, when we
expect to see stronger global economic conditions. Absent this, we
should lower our expectations of the outcome for WTO talks this year.
(Ken Ackbarali)
LABOR COSTS STILL RISING
The U.S. Employment Cost Index (ECI) rose by 0.9%
between March and June, a small decline from the 1.1% increase recorded
between Dec. 2000 and March 2001. Wage and salaries rose by 1.0%,
same as the 12/'00-3/'01 change. Benefit costs, which include health
insurance costs, rose by 1.0% between March and June, down from the 1.3%
increase of the previous 3-month period. The June ECI was 3.9% above
the June 2000 level. Over that period, wage & salaries rose by
3.7% and benefit costs rose by 4.5%. The rise in labor costs has
been moderating since early last year when the economy began going south.
The lessened pressure from benefit costs is particularly notable.
In March of 2000, the 3-month change of benefit costs was 1.8%, or a 7.4%
annual rate. Businesses are watching closely the current debate on
workers' ability to sue HMOs and even employers under the proposed "patients'
bill of rights." HMOs will likely raise their rates to cover potential
litigation costs. Would the threat of litigation AND higher costs
cause employers to just pay an "allowance" (if those workers are lucky)
and avoid providing health insurance, just as Superfund's provisions led
to an avoidance of brownfields by banks and developers? If that's
the case, the law may end up hurting the very people it seeks to protect
in the first place. (George
Huang)
PR: http://www.bls.gov/news.release/eci.nr0.htm
RESALE HOUSING MARKET MIXED IN JUNE
The June data from the California Association
of Realtors (CAR) contained the usual array of mixed trends. For
the State, unit sales were up from May to June, but 6.4% below the year-ago
count. And the median price continued to march ahead, up by 9.8%
to $266,930. However, the unsold inventory index for June calculated
by CAR was 3.6 months compared with 3.0 months last year (this is the number
of months needed to deplete the supply of homes available at the current
sales rate).
In Los Angeles County, the number of units
sold was up 11.2% over the year, while the median price moved ahead by
9.2% to $242,620. However, in Orange County unit sales continued
to slide for the 5th month in a row, down 4.6% over the year. The
median price increased by 8.8% to $353,480. Unit sales in the Riverside-San
Bernardino area shot up by 20.9% over the year, while the median price
also jumped, by 16.5% to $160,380. In San Diego County, unit sales
were up by a modest 0.7% while the median price moved up 10.8% to $301,180.
CAR did not have June data for Ventura County.
Up north is where the June CAR data get interesting.
In "San Francisco Bay," unit sales dropped 17.8% over the year, while the
median price moved up 5.0% to $489,790. In San Jose, unit sales plunged
27.0%, while the price was up a modest 1.1% to $546,000. The latter
increase was the weakest of any area in the State for the month.
(Jack Kyser)
PR: http://www.car.org/newsstand/news/jul01-4.html
MAY TRADE VALUES APESTOSAS
The May report from the U.S. Department of Commerce
on trade values was rather grim reading. At the Los Angeles Customs
District, the value of exports during the month declined by 11.3% over
the year, while import values dipped 6.9%. The total value of trade
at Los Angeles was off 8.5% in May, and the year-to-date total, at $87.5
billion, was unchanged from 2000.
At the San Francisco district, export values
during May declined by 3.4%, while import values dropped by 26.5%.
The May total was down 16.4%, and the 5-month total was down by 4.2% from
last year. San Diego managed some good news, with export values in
May up 12.4% over the year, but import values declined by 2.0%. For
the month, total trade values at San Diego were up 2.9%, while the 5-month
total is ahead a tiny 0.9%. (Jack
Kyser)
QUICK STATS:
* BEA: US Gross Domestic Product for 2Q01: +0.7% (1Q01: +1.3%)
* BEA: US implicit GDP deflator for 2Q01: +2.3% (1Q01: +3.3%)
* BEA: US personal consumption expenditures for 2Q01: +2.1% (1Q01:
+3.0%)
* BLS: US Employment Cost Index for 2Q01: +0.9% (1Q01: +1.1%)
* Cal Assn of Realtors: California home sales for 6/01: +4.2% to 526,570
annual units (5/01: +2.1% to 505,350 a.u.)
* Cal Assn of Realtors: California median home sale price for 6/01:
+5.1% to $266,930 (5/01: +0.4% to $254,980)
* Cal Assn of Realtors: LA County home sales for 6/01: -8.7% (5/01:
+17.2%)
* Cal Assn of Realtors: LA County median home sale price for 6/01:
+4.3% to $242,620 (5/01: +2.7% to $232,620)
* Census: US new durable goods orders for 6/01: -0.2% (5/01: +2.7%)
* Census: US durable goods shipments for 6/01: -2.3% (5/01: +3.2%)
* Census: US durable goods inventories for 6/01: -0.7% (5/01: -0.7%)
* Census: US unfilled durable goods orders for 6/01: -0.7% (5/01: -0.8%)
* Census: US new home sales for 6/01: +1.7% to 922,000 annual units
(5/01: +0.2% to 907,000 a.u.)
* Census: US rental vacancy rate for 2Q01: 8.3% (1Q01: 8.2%)
* Census: US homeowner vacancy rate for 2Q01: 1.8% (1Q01: 1.5%)
* Census: US homeownership rate for 2Q01: 67.8% (1Q01: 67.6%)
* Conference Board: US Help-Wanted Advertising Index for 6/01: 58 (5/01:
60)
* Natl Assn of Realtors: US existing home sales for 6/01: -0.6% to
5.33mil. annual units (5/01: +2.7% to 5.36mil.a.u.)
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