The Economic Data Global Express (e-EDGE)
v.5 n.52 Released Dec. 24, 2001
Produced
by the Los Angeles County
Economic Development Corporation as a public service to the global
community.
ARGENTINA'S CRISIS--WILL IT CONTAMINATE FINANCIAL MARKETS?
Argentina's economic and financial woes have moved
closer to the boiling point this week, as the government's currency and
banking controls have triggered violent reactions and social unrest in
Buenos Aires and other major cities. Efforts by Argentine officials
to obtain a $1.5 billion loan from the IMF have failed so far. This
is needed to make interest payments on $132 billion of foreign debt.
Argentine president Fernando de la Rua resigned on Thursday amid violence
and social unrest throughout the country. The Senate President, Ramon
Puerta, will take over as the interim president until a national election
can be held.
Through most of the 1990s, Argentina successfully
curbed its runaway inflation problem by adopting a one-to-one peg of its
peso to the dollar and following fairly disciplined fiscal policies.
The adoption of a "currency board" regime has had unintended consequences,
i.e. the strong dollar and thus the strong peso have hurt Argentina's exports.
Nearly four years of recession combined with rising government spending
and over-borrowing in international markets have hammered the country's
finances. The third quarter GDP data released Friday showed a 4.9%
decline over a year ago. It has seen six consecutive quarters of
GDP declines.
Unemployment has risen to 18% and poverty
is now widespread. An actual default on its debt and a switch to
a floating exchange rate, still in question at this writing (morning of
12/21/01), would worsen the country's plight as a large number of bankruptcies
would result. What should the IMF and the U.S. do?
Is there as much danger in the Argentine situation
as there was with the 1994 Mexican "tequila" crisis (huge IMF/U.S. bailout
loan) and the 1998 Russian debt default (massive intervention by the Federal
Reserve and other major central banks). Many analysts do not see
the same level of risk in the Argentine crisis as in these two recent cases,
on the basis of its "systemic" properties. It comes down, therefore,
to whether one believes that the crisis is likely to contaminate the region
(Brazil, Uruguay, Paraguay) and spread further to international bond and
currency markets.
With only ten days left in the year, one has
to wonder how many more unpleasant shocks may be tossed at economic policymakers--the
global recession, the 9/11 terrorist attack, and now Argentina. We
will be monitoring this closely over the holidays, in between family gatherings,
holiday parties, worship services, and football. (Ken
Ackbarali)
WHAT ARE CONSUMERS UP TO?
Several pieces of information about activity of
U.S. consumers were released this week with decidedly different implications.
The Bureau of Economic Analysis reported that personal income declined
by 0.1% in November following revised declines of the same amount in October
and September. This is a serious problem. The last time personal
income declined was in January 1994, on account of the Northridge earthquake.
Except for disasters, income hasn't fallen since the bad old days of the
early 1990s. The declines of the past several months were due to
falling incomes earned by the self-employed and lack of growth in wage
and salaries. In turn, the latter reflects significant declines in
employment. In the face of such adversity, consumer spending dropped
by 0.7% in November after a whopping 2.9% jump in October. Both extreme
moves were influenced by zero-percent financing. Excluding automotive,
consumer spending edged up by only 0.1% in November, a weak performance,
after rising 1.4% in October and plunging by 1.6% in September.
In the second piece of consumer news, the
University of Michigan Consumer Sentiment Index increased to 88.8 in December
from 83.9 in November and the September low of 81.8. So consumer
psychology is improving gradually.
Perhaps not fast enough to rescue retailers.
Recent information on retail sales is sketchy at best. The weekly surveys
for the first half of December don't look very good compared to either
last year (an expected result; the economy was still going strong last
year) or last month. Partly this is due to the hefty price discounting
retail merchants are using to draw traffic. As usual, consumers are
waiting until the very, very last minute to finish their shopping (confounding
both retailers and economists!). (Nancy
D. Sidhu)
PR: http://www.bea.doc.gov/bea/newsrel/pi1101.htm
RESALE HOUSING MARKET MIXED IN NOVEMBER
According to the California Association of Realtors
(CAR), unit sales of existing homes in California were down by 12.4% over
the year in November, but the median price rose 11.2% to $278,740.
The latter was a new record for the state. The CAR noted that the
inventory of resale homes remained on the low side, and that the median
number of days it took to sell a single family home in November was 31
days, compared with 33 days a year ago.
Southern California continued to turn in a
better performance than the north. In Los Angeles County, the median
price advanced by 10.7% to $253,280 in November, while unit sales slipped
by 3.3% over the year. In Orange County, the median price moved ahead
by 11.1% to $358,400, while unit sales dropped by 7.1%. November
data for the Riverside-San Bernardino area, and San Diego and Ventura counties
were not available.
In the Bay Area, the November news continued
grim. In the CAR's "San Francisco Bay" region, the median price eased
by 2.3% to $466,610, while unit sales dipped 21.8%. In San Jose,
the median price declined by 9.1% to $498,500, while unit sales dropped
by a hefty 36.5%. (Jack Kyser)
PR: http://www.car.org/newsstand/news/dec01-3.html
NOVEMBER CONTAINER TRAFFIC MIXED
The data from the port of Los Angeles was a pleasant
surprise. The number of loaded import containers advanced by 17.4%
over the year, while the export container count moved ahead by 8.2%.
The total number of containers handled during November at Los Angeles was
up by 10.0%. At the port of Long Beach, the November container counts
were down over the year. Imports slipped by 9.0%, and exports declined
by 16.4%. The total number of containers handled was down by 9.4%.
The total number of containers moved by the
two ports in November inched ahead by 0.3% over the year, to 827,590.
(Jack Kyser)
Data: http://www.portofla.org/detailmonth.asp
SALES TAX INCREASE...
California's sales tax increases by 0.25% starting
1/1/2002. Make your big ticket item purchases by 12/31/2001 to save
a few bucks...
PR: http://www.boe.ca.gov/pdf/taxincreasenotice.pdf
QUICK STATS:
* BEA: US Gross Domestic Product (final estimate) for 3Q01: -1.3% (2Q01:
+0.3%)
* BEA: US implicit GDP deflator for 3Q01: +2.2% (2Q01: +2.1%)
* BEA: US personal consumption expenditures for 3Q01: +1.0% (2Q01:
+2.5%)
* BEA: US personal income for 11/01: -0.1% (10/01: -0.1%)
* BEA: US disposable personal income for 11/01: +0.0% (10/01: -1.8%)
* BEA: US personal consumption expenditures for 11/01: -0.7% (10/01:
+2.9%)
* BEA: US personal savings rate for 11/01: 0.9% (10/01: 0.2%)
* Cal Assn of Realtors: California (single-family) home sales for 11/01:
-0.2% to 493,870 annual units (10/01: +4.1% to 494,920 a.u.)
* Cal Assn of Realtors: California median (single-family) home sale
price for 11/01: +2.4% to $278,740 (10/01: -1.0% to $272,570)
* Cal Assn of Realtors: LA County home sales for 11/01: +1.7% (10/01:
-12.3%)
* Cal Assn of Realtors: LA County median home sale price for 11/01:
+1.7% to $253,280 (10/01: -0.6% to $249,070)
* Census: US housing starts for 11/01: +8.2% (10/01: -4.0%)
* Census: US exports for 10/01: +0.7% to US$77.3 billion (9/01: -8.4%
to $76.8bil.)
* Census: US imports for 10/01: +11.4% to US$106.8 (9/01: -14.4% to
$95.8bil.)
* Census: US trade deficit for 10/01: US$29.4 billion (9/01: $19.0bil.)
* Conference Board: US Index of Leading Economic Indicators for 11/01:
+0.5% (10/01: +0.1%)--now at 109.7, which is above the 109.2 mark for Sept.
* U. Michigan: US consumer sentiment survey for 12/01: 88.8% (11/01:
83.9%)
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