The Economic Data Global Express (e-EDGE)
v.5 n.35 Released August 27, 2001
Produced
by the Los Angeles County
Economic Development Corporation as a public service to the global
community.
A POSITIVE MESSAGE FROM THE LEADING INDICATORS
The Index of Leading Economic Indicators (LEI)
rose by 0.3% in July, its fourth consecutive "up" month. Even better,
five of the ten indicators in the index improved during July, compared
to April when only three had plus signs attached. The leading indicators
are supposed to lead the "real" economy. In the past, the LEI usually
began to rise between six and nine months before the economy turned up.
If the same relation holds this time around, the economy should begin to
recover from its current malaise some time in the 4th quarter. Cross
your fingers! (Nancy D. Sidhu)
PR: http://www.conference-board.org/search/dpress.cfm?pressid=LEI0801
MANUFACTURING SLUMP CONTINUED IN JULY
New orders for durable manufactured goods fell
by 0.6% in July after dropping by a revised 2.6% in June. Orders
have been on a downward trend for the past 12 months and were 11.2% below
their July 2000 level. In contrast to June, four sectors actually
registered positive month-to-month growth in July. Motor vehicles
and parts came in first with a 3.8% increase (less impressive than it looks
because retail vehicle sales dropped last month). Orders for electrical
equipment & appliances rose by 1.4%, for fabricated metal products
by 0.9%, and for "other durable goods" by 0.7%. However, continuing
problems in high tech manufacturing swamped the increases in these sectors.
Producers of computers and other electronic products reported that their
orders plunged by 4.4% in July after diving 3.4% in June. Even worse,
July's orders for aircraft and parts declined by 6.9%, though these are
often volatile from one month to the next.
Manufacturers of technology related goods
are working themselves into a very deep hole, and most have little hope
for meaningful improvement soon. Compared to July 2000, last month's
orders were down by 27.8% for computers & peripherals, by 45.8% for
communications equipment, and by a truly depressing 55.8% for semiconductors.
However, some "old economy" manufacturers are beginning to see tentative
signs of improvement amidst the current gloom. All things considered,
that's progress. (Nancy D.
Sidhu)
PR: http://www.census.gov/indicator/www/m3/index.htm
GERMAN ECONOMY FLAT--WILL ECB COME TO THE RESCUE?
The European Central Bank (ECB) is scheduled to
meet on August 30th and financial markets are divided as to the outcome.
The ECB has held its key interest rate unchanged at 4.5% since May, in
the face of mounting evidence of economic weakness in the Euro-zone economies,
especially Germany and France. Prodding by the IMF, the OECD, the
U.S. government, and others has not affected the ECB's stance. Now
that the news from Germany (the EU's biggest economy) has become more dismal,
one has to wonder how much longer the central bank can wait before cutting
interest rates.
Germany's economy was flat in the second quarter,
with its GDP showing no change from the first quarter of this year. This
was worse than the small increase of 0.4% recorded in the first quarter
of 2001 over the fourth quarter of 2000. On a year-over-year basis,
second quarter GDP growth was 0.6% versus 1.4% in the first quarter.
Business investment in new plant and equipment and export growth have slowed.
Consumers, however, are still exhibiting surprising confidence--not unlike
the current American situation.
Tomorrow, Tuesday 8/28, the ECB will release
data on the growth of one of its key monetary indicators, the M3 measure
of money supply. If M3 growth for July is well below its June growth
rate of 6.1%, the chances of a rate cut on Thursday 8/30 will improve.
In addition, if estimates of headline inflation for August, 2.6%, prove
accurate, then the core inflation rate should be close enough to the ECB's
2.0% target to justify a rate cut. The ECB also will be watching
foreign exchange markets, as it deliberates its policy, aware that the
euro has moved up to a five-month high of US$0.913 (last Friday's market
closing in London).
So, financial markets around the world will
intensify their focus on the ECB this week, whether they like it or not.
An immediate interest rate cut is still not a certainty, but at least an
announcement may be made that it will come in September. (Ken Ackbarali)
COMMERCIAL REAL ESTATE NEWS
The 2nd quarter report from the Real Estate Research
Council of Southern California is in. With a slowing economy, one
goes right to the vacancy rate data. In the office sector, vacancy
rates edged up from the first to second quarters of the year. In
Los Angeles County, the rate moved from 12.9% in the first quarter to 13.7%
in the second. By area, the biggest increases came in "West LA,"
which saw its rate jump from 8.8% to 11.2% in the last quarter (dot.com
blues). The South Bay's office vacancy rate also moved up from 12.6%
to 14.6% (son of dot.com blues). However, the rates in Central LA
and the San Fernando Valley both moved lower in the second quarter, to
18.5% and 11.6% respectively.
Elsewhere around the region, Orange County's
office vacancy rate edged up from 7.8% to 8.8% in the second quarter, while
the Inland Empire's rate essentially held steady at 12.7%. Ventura
County's office vacancy rate moved from 8.1% to 10.8% while San Diego County's
rate went from 4.0% to 5.3%.
Second quarter trends were different in the
industrial market. Los Angeles County's rate went from 4.2% in the
first quarter to 3.9% in the second. However, the only area
that saw a decline was the San Gabriel Valley, moving from 4.0% to 3.8%,
which was the low around the County. The biggest increases in industrial
vacancy rates came in "Mid-cities" (5.7% to 7.6%) and the San Fernando
Valley (4.1% to 5.2%). Orange County's industrial vacancy rate went
from 5.9% to 4.8%, while the Inland Empire moved from 8.2% to 7.3%.
San Diego County's industrial vacancy rate also eased from 7.0% to 6.7%
in the second quarter. However, Ventura County saw a modest bump
up from 7.5% to 7.9%. (Jack
Kyser)
QUICK STATS:
* Census: US new durable goods orders for 7/01: -0.6% (6/01: -2.6%)
* Census: US durable goods shipments for 7/01: +0.2% (6/01: -2.5%)
* Census: US unfilled durable goods orders for 7/01: -1.0% (6/01: -0.8%)
* Census: US durable goods orders inventories for 7/01: -0.6% (6/01:
-1.1%)
* Census: US US new home sales for 7/01: +4.9% to 950,000 annual units
(6/01: +2.8% to 907K a.u.)
* Census: US fixed mortgage rate for 7/01: 7.13% (6/01: 7.16%)
* Natl Assn of Realtors: US existing home sales for 7/01: -3.0% to
5.17mil. annual units (6/01: -0.6% to 5.33mil.a.u.)
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