The Economic Data Global Express (e-EDGE)

v.5 n.43       Released Oct. 22, 2001
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

OUTLOOK FOR THE GLOBAL ECONOMY DOWNGRADED

     The Organization for Economic Cooperation and Development (OECD) has downgraded its forecast of economic growth for 2001 and 2002, for its 30 member countries that are among the richest in the world. GDP growth for the group as a whole has been revised from 2.0% (May 2001 forecast) to 1.0% for this year, and an increase of only 1.2% is forecast for 2002.  This "drastic" revision in the OECD's outlook was undoubtedly triggered by the September 11th terrorist attack which has pushed the U.S. into a wartime economy.  Arguments about whether the U.S. is in a recession have been muted by the new developments.
     The biggest revisions have been made to the outlook for Japan and Germany.  Japanese GDP growth has been scaled back to -0.7% from 1.0% for 2001 and -0.8% is projected for 2002.  Germany's GDP has been marked down from 2.2% to 0.7% for 2001, and only a modest recovery is foreseen for 2002, a 1.0 rise in GDP.  The OECD staff also sliced 0.6% from their May forecast of 2001 growth for the U.K. and France and the bad news is that 2002 will be even weaker than this year.
     Many analysts consider economic growth (GDP) of less than 1.5% as a better definition of "recession" than the traditional two quarters in a row of negative growth.  If world economic growth follows the new OECD's projections for its 30-country group, then both 2001 and 2002 would qualify as recession years. We have not seen conditions like this since 1982.  It would be a good idea to avoid entertaining prospects of a quick snapback to recovery before the middle of next year.  (Ken Ackbarali)
 

ONE UP & ONE DOWN IN SEPTEMBER:  HOUSING & INDUSTRIAL PRODUCTION

     Housing starts rose 1.7% in September, contrary to expectations.  At 1.57 million annual units (SAAR), starts remain near the bottom of the narrow range of (1.55 million to 1.67 million) that we've seen all year.  Single-family starts have been holding up nicely, while multi-family construction has been fading gradually.  Don't be surprised, however, if both sectors weaken more in the near-term.  Buyer confidence has been shaken severely, which may well cause a temporary slowdown in activity.
     Manufacturing continued to struggle in September.  Industrial production plunged by 1.0% last month and has dropped by 5.8% over the past year.  September was the 12th consecutive month of decline, the longest such string since 1945.  Most industries reported falling production in September, with the notable exception of defense & space equipment, which was also up over the year.  Oil & gas drilling also was still up year-to-year but is fading fast now that natural gas prices have plunged.  The motor vehicles and technology sectors both declined in September but otherwise are on decidedly different paths.  Automotive output has increased by 13.6% since January.  However, high tech production has fallen by 6.6% since January and the rate of descent has been increasing.  Not a pretty picture.  (Nancy D. Sidhu)
Industrial production PR: http://www.federalreserve.gov/releases/G17/Current/
Housing starts PR: http://www.census.gov/indicator/www/newresconst.pdf
 

EARLY OCTOBER RETAIL SALES STILL SLOW

     Two weekly surveys suggest that September's plunge in retail sales may--repeat, may--have bottomed out in early October.  The latest results from the BTM-UBS survey show that sales stabilized during the weeks ended October 6 and October 13, though at a level below September's poor showing.  In the same vein, the Instinet Research Redbook survey reported that sales during the week ended October 13 were actually up a little (+0.5%) year over year, only the second such increase in the post 9/11 period.  In addition, the Redbook survey also reported that broadline retailers continued to struggle with sales down sharply over the year, while discount stores posted smallish increases.
     While these survey results differ in detail, both imply the steep plunge in retail sales seen in September may be over.  However, the speed and timing of any recovery are still open to question.  Rapidly rising layoffs (see below) and media reports of various new and dire threats both serve to heighten consumers' uncertainty and dampen their buying spirits.  We're not out of the woods yet.  (Nancy D. Sidhu)
 

UNEMPLOYMENT CLAIMS SURGING

     Initial claims for unemployment benefits soared during the first two weeks of October, pushing their 4-week average from the "low 400,000s" in early September to 491,000 in the week ended October 13.  Note that new claims were in the "low 300,000s" this time last year.  Continuing claims [the number of persons continuing to receive unemployment benefits] rose to 3.65 million in the week ended October 6, their highest level since May 1983!  Continuing claims have increased by 423,000 since the week before the Attacks.  Little noticed but as important, the insured jobless rate now stands at 2.8%, up from 2.6% in mid September.  This suggests the national unemployment rate for October will increase to at least 5.0% from 4.9% in September, its highest level since June 1997.  (Nancy D. Sidhu)
PR: http://www.ows.doleta.gov/news/txtdocs/18Oct01.html
BLS documents regarding the Sept. 11 attack: http://www.bls.gov/web/cesspec.htm
 

US CONSUMER PRICES IN FLUX AFTER SEPT. 11

     The US Consumer Price Index (CPI) rose by 0.4% in September, following a 0.1% increase in August.  Because CPI data is collected throughout the month, approximately 2/3s of the data came after the Sept. 11 attack.  The attack and the threat of military action against potential Mideast targets caused a temporary surge in gasoline and other petroleum-based energy prices, but that phenomenon receded quickly.  Energy prices rose by 2.6% last month, following three months of declines.  Food and the core prices were relatively stable with a 0.2% increase, the same rates of increase as in August.  The CPI was 2.6% above the year-ago level and well within the tolerance range of the Federal Reserve officials, who are now more concerned about the contraction of economic activity than inflation.  There are reports of a surge in the purchases of guns, latex gloves, drinking water, and US flags.  Most of these items will not affect the CPI, however.
     Locally, the LA Area CPI rose by 0.2% last month, after a 0.1% increase in August.  Local CPIs are not seasonally adjusted.  Utility natural gas prices dropped by 8.5% and were 33.4% below the year-ago level.  Gasoline prices rose by 2.0% and were 6.4% below the year-ago level.  Gasoline prices dropped shortly after the Sept. 11 attack and will be reflected in the mid-November CPI report.
     Looking forward to the October numbers to be released in mid-November, we can anticipate significantly lower prices for gasoline, entertainment, and travel & lodging.  The decline in economic activity will likely induce further price cuts in retail and other sectors as well.  (George Huang)
US PR: http://www.bls.gov/news.release/cpi.nr0.htm
LA Area PR: http://www.bls.gov/ro9/ro9cpila.htm
 

SEPTEMBER CONTAINER COUNT UP

     At last the peak shipping season!  In September, the port of Los Angeles saw the number of loaded import containers (in TEUs) climb by 21.3%, while Long Beach returned to the positive column with a 5.4% increase over the year.  Los Angeles also posted an increase in the number of loaded export containers in September, up by 4.2%.  However, Long Beach continued to experience declines, down by 5.1%.  The total number of containers moved at the two ports during September was up over the year by 7.8% to 873,033.
     Elsewhere along the Pacific Coast, the news wasn't as good.  Container volumes at the port of Oakland were down in September by about 5%, while Seattle saw a 15% decline.  Industry experts attribute the gains in Southern California to the deployment of larger ships on Pacific services, as well as new services from China to the region.  Other advantages for Southern California are the size of the market, and good rail access to the mid-west, south-east and Mexico. (Jack Kyser)
 

AUGUST HOTEL OCCUPANCY DATA...

     for what it's worth.  According to PKF Consulting, hotel occupancy rates in Los Angeles County averaged 78.9% during August, down from 81.3% a year-ago.  The average daily room rate (ADR) also eased, down by 7.1% to $119.35.  Around the County, Valencia continued to set the pace with a 93.5% occupancy rate, while Hollywood checked in at 89.6%.  Valencia managed a 3.2% increase in its ADR, but Hollywood posted a decline of 6.0%.
     Orange County saw its August hotel occupancy rate slip by 5.1% to 80.5%.  And the ADR eased by 0.5% to $112.66.  Anaheim was high with an 84.4% occupancy rate, down by 1.4%.    Its ADR inched up by 1.5%.
     Of course 9/11 had a big impact on hotel occupancy and initial reports were grim.  By early October, some hotels had recovered (some quite strongly), but many others were continuing to struggle.  (Jack Kyser)
 

ANOTHER MAKE-OR-BREAK HOLIDAY SEASON?

     One of my favorite e-commerce retailers is going out of business.  This particularly e-tailer, a pure-play online drugstore, has no reason to hope for a bailout from the upcoming holiday season.  Many other e-tailers, however, look nervously at the consumer confidence and retail sales numbers.  For many, the trouble began more than a year ago when their equity bubble began to deflate.  Now with the general economic downturn, they are wondering whether this holiday shopping season will be strong enough for them to secure more working capital from disillusioned investors.  Expect more "going-out-of-business" sales this coming winter, if not earlier...  (George Huang)
 

QUICK STATS:

* BLS: US Consumer Price Index for 9/01: +0.4% (8/01: +0.1%)
* BLS: LA Area Consumer Price Index for 9/01: +0.1% (8/01: +0.1%)
* Census: US housing starts for 9/01: +1.7% to 1.574mil. annual units (8/01: -6.7% to 1.548mil.a.u.)
* Census: US exports for 8/01: +0.1% (7/01: -2.7%)
* Census: US imports for 8/01: -1.1% (7/01: -1.9%)
* Census: US trade deficit for 8/01: US$27.1bil. (7/01: $29.2bil.)
* Federal Reserve: US industrial production for 9/01: -1.0% (8/01: -0.7%)
* Federal Reserve: US industrial capacity utilization rate for 9/01: 75.5% (8/01: 76.4%)
* Conference Board: US Index of Leading Economic Indicators for 9/01: -0.5%


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