The Economic Data Global Express (e-EDGE)

v.6 n.3       Released Jan. 22, 2002
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

DECEMBER'S ECONOMY:  MOSTLY DOWN BUT . . .

     We learned a lot about the performance of the U.S. economy in December last week.  The Census Bureau released reports on housing starts and retail sales, while the Federal Reserve published its December estimates of industrial production.  Let's take them in alphabetical order.
     U.S. builders started 1.57 million homes in total last month, down by 3 percent from November's 1.62 million but up by 2 percent from December 2000.  All of last month's decline came in the volatile multi-family sector, which plunged by 27 percent after soaring by 29 percent during November.  Single-family housing starts increased by about 4 percent following an uptick of 2 percent during the previous month.  Total housing starts finished the year at 1.60 million, up by 2 percent from the 2000 performance.  Again, all of the action was on the single-family side, where annual starts totaled 1.29 million, up by almost 4 percent from 2000.  Some 328,400 multi-family units were started over the past 12 months, down by about 3 percent from 2000.
     Industrial production declined by only 0.1 percent in December, its best performance since July (and before that September 2000).  Last month was the fourth consecutive month of decline but also the third month of improvement.  Production plunged by 1.1 percent during September, then fell by 0.7 percent in October and 0.4 percent in November.  Communications equipment production and oil and gas well drilling continued to register big month-to-month declines, down by 3.0 percent and 3.9 percent respectively.  However, production of semiconductors & other electronic components has risen for four months in a row and computers & office equipment and motor vehicles & parts for the past two months, both hopeful trends.
     Retail and food services sales also declined by only 0.1 percent in December, much less than expected, after dropping by 3.0 percent in November and soaring by 6.4 percent in October.  This month-to-month volatility was caused by sales of motor vehicles and parts, which rocketed up by almost 24 percent in October (due to zero-percent financing), and then plunged by over 10 percent in November before steadying at minus 0.1 percent last month.  Excluding automotive, retail sales edged down by 0.1 percent in December after falling by 0.2% in November and rising by 0.8 percent in October.  Big monthly declines were reported in sales of gasoline service stations (due to falling prices), down by 3.3 percent, sporting goods, books, & music stores, down by 3.3 percent, and building materials & garden equipment stores, which fell by 1.9 percent.  Clothing stores reported healthy increases over the month, up by 2.6 percent, as did electronics & appliance stores, up by 2.0 percent, and restaurants & bars, which rose by 1.8 percent.
     What to make of all this information?  All three reports showed December's activity was lower than previous months.  Still, housing starts continued to be well within the narrow bands of the previous 12 months.  Further, last month's declines in both industrial production and retail sales were small, suggesting the downturns in manufacturing and retailing may be close to an end.  Keep your fingers crossed!  (Nancy D. Sidhu)
Housing starts PR: http://www.census.gov/indicator/www/newresconst.pdf
Industrial Production PR: http://www.federalreserve.gov/releases/G17/Current/
Retail PR: http://www.census.gov/svsd/www/retail.html
 

CONSUMERS GOT MORE FOR THEIR MONEY IN DECEMBER

     The U.S. seasonally-adjusted Consumer Price Index (CPI) declined by 0.2% in December, following a flat November and a 0.3% decline in October.  Over the past 12 months, the CPI rose by just 1.6%, the lowest December-to-December increase since 1998.  The annual average CPI for 2001 rose by 2.8%, thanks to larger price increases in the middle of the year.  In December, a 3.2% drop in energy prices and a 0.1% slide in food prices offset the tiny 0.1% increase in the core CPI, which excludes the more volatile food and energy prices.  Gasoline prices fell by 6.0% and were 24.9% below the December 2000 level.  Since peaking in May, gas prices has fallen 34.7%.  Over the past year, medical care services scored the biggest cost increases (+4.8%) while personal computers posted the largest decline in prices (-30.7%).
     Locally, L.A. area consumers had a great month with a 0.6% decline in the CPI.  That was the largest month-to-month decline since November, 1987.  Between December 2000 and December 2001, the CPI rose by 2.1%.  The annual average of CPI rose by 3.4%.  Energy prices fell by 6.1% last month and were 10.2% below the year-ago level.   Gasoline prices fell by 13.4% and were 29.5% cheaper than a year ago.  Utility natural gas service costs fell by 40.0%; however, electricity prices jumped by 49.6% over the past year.  Food prices declined by 0.3% last month but were 3.0% above the year-ago level.  Medical care costs jumped 6.9% over the past year, and shelter costs went up by 5.0%.  Apparel costs, however, fell by 3.9% last month and were 8.9% below the year-ago level.  There was very heavy discounting by retailers in an effort to generate more sales and get rid of some inventory (though at the expense of their profits).
     Up north, the Bay Area CPI saw a 0.6% increase versus October (Bay Area CPIs are calculated every two months except for certain items).  The year-over-year increase was 3.5%, significantly higher than the national average and the L.A. area increase.  Shelter costs (rent or owner's equivalent rent) rose by 9.4%, and medical care costs up by 4.8%.  Gasoline prices were 24.4% lower than a year ago, and utility natural gas service cost 31.0% less.  In the past few months shelter costs have ceased to rise, mainly due to falling apartment rents.  The severe recession has driven many jobless people out of high-cost San Francisco and San Jose.
     We have prepared a special CPI data page for the Los Angeles area.  It includes the monthly data, month-over-month percent changes, and year-over-year percent changes.  Please use the appropriate number for your cost-of-living adjustment.  Due to the limited resources at LAEDC, we are unable to answer individual questions regarding the use of CPIs.  Please consult the brief tutorial at the bottom of the data page.  We also recommend reviewing the past adjustment to figure out the procedures involved in calculating the adjustment factor.  (George Huang)
US PR: http://www.bls.gov/news.release/cpi.nr0.htm
LA Area PR: http://www.bls.gov/ro9/ro9cpila.htm
Bay Area PR: http://www.bls.gov/ro9/cpisanf.htm
>> LA Area CPI data page (monthly, 1989-2001): http://www.laedc.org/CPI-LA.htm
 

DECEMBER CONTAINER COUNT AT LOS ANGELES DELIGHTS

     The port of Los Angeles finished 2001 with a flourish.  The number of loaded import containers moved in December was up by 12.6% over the year, while export containers moved ahead by 5.1%.   For all of 2001, Los Angeles moved 2.68 million import containers, an increase of 7.7% over 2000, and 1.03 million export containers, a gain of 5.4%.  The total number of containers handled at Los Angeles in 2001 was 5.18 million, up by 6.2%.  Los Angeles' performance in 2001 was better than trends at other West Coast ports, where traffic was down.
     Plugging in a December estimate for Long Beach yields a total container count for the twin ports of 9.6 million TEUs in 2001, which keeps the San Pedro Bay ports solidly in third place among the major ports of the world.  (Jack Kyser)
 

MAJOR BUSINESS EXPANSIONS IN SOUTHERN CALIFORNIA

     Despite the slowing economy and disruptions caused by the 9/11 terrorist attack, there was a modest increase in the number of major business expansions in the Los Angeles five-county area during 2001.  The total number for the year was 390, compared with 370 major expansions in 2000.  The level of activity over the course of 2001 was fairly constant, although there was an easing in October and November.
     There was a significant difference in performance by metro area in the region during 2001.   Orange County saw its number of major projects jump by 34 to a total of 129.  The Riverside-San Bernardino area posted an increase of 26 to a total of 58.  However, expansion activity in Los Angeles County moderated in 2001, easing to a total of 193 from 222 in 2000.  Ventura County also saw an easing, with 10 major expansions compared with the 2000 total of 21.
     The value of major expansions in the Los Angeles five-county area in 2001 totaled nearly $2.82 billion, an increase of 50.3% over the 2000 total.  By this measure, the biggest increase in 2001 came in the Riverside-San Bernardino area, up by 167.4%.  Los Angeles County had the largest dollar volume of major expansions in 2001, a total of $1.72 billion, which was up by 55.6% over the prior year.  The single largest expansion in 2001 was the announced move of the headquarters of MGM, which had a value of $500 million.
     One interesting feature of the 2001 expansion survey for the Los Angeles area was the diversity of the projects.  Industry sectors posting increases from 2000 to 2001 included aerospace, apparel, autos, biomedical, health services, international (foreign ownership), and logistics.  Far and away the largest number of expansions were found in technology, a total of 73, although this was down from 121 in 2000.  The next largest number of expansions in 2001 were in logistics with 24, followed by autos at 20.  (Jack Kyser)
PR: http://www.laedc.org/index.html/pressreleases/PR52.html  (The press release includes definitions that are needed for a proper interpretation of our findings.)
Summary table: http://www.laedc.org/out/BER-2001.pdf
 

U.S. RANKS NEAR THE TOP IN "INVESTMENT IN KNOWLEDGE"

     According to a study by the Organization For Economic Cooperation and Development (OECD), entitled "OECD Science, Technology and Industry Scoreboard: Towards a Knowledge-Based Economy", the U.S. ranks second after Sweden in investment in knowledge.  The OECD made a rigorous comparison of data for 17 countries, which included 15 "advanced-industrialized" countries, one "newly-industrialized" country (South Korea), and one "emerging-market" country (Mexico).  Investment as a percent of GDP in 1998 in three categories determined the rankings:  (1) investment in Research & Development (R&D), (2) Software, and (3) Higher Education.
     Ranked by total investment as a percent of GDP, the leaders are Sweden (6.5%), United States (6.0%), Finland (5.2%), South Korea (5.2%), Switzerland (4.8%), Japan (4.7%), and Canada (4.7%).  On the low end of the scale are Mexico (1.5%), Italy (2.1%), and Spain (2.2%).
     Measured only by investment in R&D as a percent of GDP, Sweden is also the leader.  However, the U.S. drops to sixth place behind Japan, Finland, Switzerland, and South Korea. Mexico, Spain, Italy, Australia, and Canada are at the bottom of the scale.
     Sweden also leads in investment in software, 1.9% of its GDP, and Canada was next with a 1.6% ratio.  The U.S., Switzerland, and Denmark were tied for third place, each investing 1.5% of GDP in software.  Mexico, South Korea, Italy, and Spain trailed the pack,  investing only 0.4%-0.5% of GDP in software.
     One of the most revealing findings is that the United States outranks all countries (in the study) in investment in higher education--investing 1.9% of its GDP.  This is more than twice the ratios for the United Kingdom, France, and Japan, and well above Canada.  Our educational system at the K-12 level may be in a sad state of disrepair, but we are doing better than most by directing financial resources to the college and university system.
     If the knowledge economy is indeed the wave of the future, this study provides valuable insight into where the new growth industries and occupations will be located in the world economy.  With its large number of world-class universities and research facilities, the Los Angeles area is well-positioned to be at the forefront of the knowledge-based economy. (Ken Ackbarali)
 

QUICK STATS:

* BLS: US Consumer Price Index for 12/01: -0.2% (11/01: +0.0%)
* BLS: LA Area Consumer Price Index for 12/01: -0.6% (11/01: -0.1%)
* Census: US retail sales for 12/01: -0.1% (11/01: -3.0%)
* Census: US business sales for 11/01: +% (10/01: +%)
* Census: US business inventories for 11/01: +% (10/01: +%)
* Census: US housing starts for 12/01: -3.4% to 1.57 mil. annual units (11/01: +7.0% to 1.63 mil.a.u.)
* Census/BEA: US exports for 11/01: +0.7% (10/01: +1.1%)
* Census/BEA: US imports for 11/01: -0.8% (10/01: +11.7%)
* Census/BEA: US trade deficit for 11/01: US$27.9 billion (10/01: $29.3bil.)
* Conference Board: US Index of Leading Economic Indicators for 12/01: +1.2% (11/01: +0.8%)
* Federal Reserve: US industrial production for 12/01: -0.1% (11/01: -0.4%)
* Federal Reserve: US industrial capacity utilization rate for 12/01: 74.4% (11/01: 74.5%)
* Univ. of Michigan: US Consumer Sentiments Survey for 1/02: 94.2 (1/02: 88.8)

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