The Economic Data Global Express (e-EDGE)
v.6 n.4 Released Jan. 28, 2002
Produced
by the Los Angeles County
Economic Development Corporation as a public service to the global
community.
FEDERAL RESERVE WILL NOT CUT INTEREST RATES THIS WEEK
Federal Reserve Chairman Greenspan's testimony
in Congress last week has changed the outlook for monetary policy and interest
rates. The Chairman now believes that the economy's worst performance
is in the past and that economic recovery prospects are brighter. This
view is in sharp contrast to Mr. Greenspan's remarks in San Francisco two
weeks prior, in which he underscored "significant risks" to the economy.
This change is not an exercise in semantics and cannot be characterized
as playing games with the subtleties of the language known as "Fedspeak."
In fact, financial markets have interpreted the Chairman's latest remarks
literally and have concluded that the central bank will not reduce the
Federal Funds Rate from its current 1.75% this week.
What's behind the new analysis of the Fed's
Chairman? First, inventory liquidation has made significant progress.
Second, consumer confidence indices have turned up. Third, the stimulative
effects of interest rate reductions adopted one year ago are now being
felt. Fourth, corporate earnings for the fourth quarter of 2001 were
better than expected and the stock market has rallied though somewhat unsteadily.
Fifth, inflation has remained in check. The weight of all of these
factors is likely to convince Federal Reserve officials that their aggressive
campaign of interest rate reductions does not need to be extended.
Is there a "wild card' in this neat picture
that should make us uncomfortable? Yes, and it is the probability
of another terrorist attack on American soil or facilities abroad.
In making forecast assumptions, monetary policymakers cannot overlook or
completely rule out such an event. Instead, they tend to treat such
an event as a random shock to the economy and their response may be further
easing of interest rates. Absent this, we will now focus attention
on when the Fed will shift to tighter monetary policies and how aggressively
interest rates will be raised. (Ken Ackbarali)
FEDERAL BUDGET BLUES
The U.S. budget turned in a $26.6 billion surplus
during December, a little better than expected but below the December 2001
surplus of $32.7 billion. Federal receipts dropped by 6.3% last month,
dragged down by a 30% plunge in corporate profits taxes. Federal
outlays were down by 3.9%, after a 17.4% increase in November. This
two-month anomaly was caused by a calendar quirk that pushed some normal
December spending into the previous month. Government spending in
November and December combined rose by 6.2% over the same two months in
2001.
The federal budget also was in deficit, to
the tune of $37.1 billion, during the first three months of fiscal year
2002, which runs from October 2001 through September 2002. This compared
poorly to last year's three-month deficit of only $2.3 billion. Total
government expenditures increased by 8.4% last quarter, boosted by sizeable
increases in every major category, especially military outlays (up by 12.6%)
and Medicaid spending (up by 17.9%). Total federal receipts through
December 2001 barely increased over the previous year, rising by only 0.9%.
Even that increase was gained by postponing corporations' regular September
tax payments (amounting to some $23 billion) to October 1st and the new
fiscal year.
The nation's budget outlook has darkened considerably
over the past year. Revisions to previous official estimates are
only now beginning to filter out, and the news is not good. Dan Crippen,
Director of the Congressional Budget Office, testified last week that CBO
now believes the fiscal 2002 budget will end the year with a deficit in
the neighborhood of $21 billion. Last year at this time, CBO was
expecting a surplus of $359 billion! CBO estimated the budget for
the next fiscal year 2003 will also be in the red, showing a deficit of
$14 billion. Both of these estimates were made under the very restrictive
assumption that Congress and the Administration will not enact any changes
to current laws or policies. Fat chance. Whatever happens to
military efforts abroad next year, spending for homeland defense is sure
to increase, and the two might finally agree on a stripped-down economic
stimulus package. Unless the economy surprises on the upside, it
looks like the budget situation is about to go from bad to worse.
(Nancy D. Sidhu)
DECEMBER HOME SALES IN CALIFORNIA MIXED
According to the California Association of Realtors
(CAR), resale housing activity in California during December was
mixed. For the state, unit sales were down by 1.0% over the year,
but the median price rose by 11.5% to $276,940. The CAR also
reported that their unsold inventory index (the number of months needed
to deplete the supply at current sales rates) remained a tight 2.9 months.
Around Southern California, both Los Angeles
and Orange counties broke trend, with unit sales up over the year by 3.6%
and 3.7% respectively. The median price in Los Angeles was $251,510
(up 14.0%), while Orange County posted a median of $364,300 (up 11.7%).
Elsewhere in the region, the trend was mixed.
In San Diego County, unit sales were down 0.8% over the year, while the
median price advanced 11.8% to $311,840. Ventura County saw unit
sales drop by 1.0%, while the median price went up by 10.3% to $329,090.
No December was reported for the Riverside-San Bernardino area.
In the Bay Area, the December news continued
to be distressing. For "San Francisco Bay," unit sales declined by
4.2% over the year, while the median price slipped 0.2% to $469,220.
In Santa Clara County, unit sales dropped by 2.2% in December, while the
median price declined by 7.6% to $499,000. (Jack Kyser)
THE PORT OF LONG BEACH ALSO DELIVERS A DECEMBER DELIGHT
The December data from the port of Long Beach
was good news (last week Los Angeles checked in with good numbers), with
the loaded import container count up by 6.1% over the year, and the number
of loaded export containers moved ahead by 5.4%. The latter was the
first year-over-year gain that Long Beach has recorded since October 2000.
The total container count at Long Beach for
2001 was 4.46 million, which combined with Los Angeles' 5.18 million yields
a San Pedro Bay total of 9.65 million. This was about what we estimated
last week, making Long Beach-Los Angeles a solid number three among the
World's major ports.
Looking ahead, discussions about the July
1 expiration of the ILWU contract seem to be taking an ominous tone.
Shippers are focusing on improving productivity, and the prospect of work
stoppages has been raised. Stay tuned! (Jack
Kyser)
AIRPORT ACTIVITY IN DECEMBER AND THE YEAR 2001
Total passenger traffic at LAX in December was
down over the year by 19.8%, with the domestic count off by 20.2% and international
down by 18.7%. The year-to-year declines since 9/11 are narrowing
slowly. For all of 2001, LAX handled 61.6 million passengers, a decline
of 8.5% from 2000. Air cargo tonnage for the year totaled 1.96 million,
a drop of 13.0%. Ontario International's December traffic was down
by 10.5% over the year, and its 2001 passenger total came to 6.70 million.
This was down by just 0.8% from 2000's total.
At the Burbank-Glendale-Pasadena Airport,
December activity was off by 13.2%, while total traffic in 2001 was 4.49
million, down by 5.5% from 2000. December traffic at John Wayne/Orange
County Airport was off by 5.7% over the year, with the narrowing trend
quite visible. The 2001 total hit 7.32 million, a decline of 5.8%.
The Palm Springs airport reported a decline in passenger traffic of 19.5%
in December, while the year's total was 1.17 million, down by 8.3% over
2000.
And what was the trend in international air
cargo at LAX? Still down, with import tonnage off by 9.3% over the
year in December, and export tonnage down by 10.6%. (Jack
Kyser)
ARE YOU A TECH COMPANY NEEDING CASH?
LAEDC and L.A.
Regional Technology Alliance (LARTA) will be accepting applications
for the 2002 Southern California Technology Venture Forum (SCTVF) through
February 1, 2002. SCTVF, now in its 8th year, is the longest running
and most prominent Forum of its kind in California, having jumpstarted
over $400 million in investment financing for companies. If you are selected
to present, you will be assigned a seasoned mentor team to meet with weekly
in order to refine your presentation and business plan and prepare you
for your presentation at SCTVF 2002 on April 18. Please visit http://www.sctvf.org
for more information.
FILING FOR TAX REFUND?
If you are due a refund and have gotten all your
documentation, might as well go ahead and ask Uncle Sam for your money
back. Here are some resources to get you started:
IRS forms: http://www.irs.gov/forms_pubs/forms.html
Free tax preparation software & service: http://www.taxact.com
E-file for free: http://www.irs.gov/elec_svs/partners.html
H&R Block's page on tax law changes: http://www.hrblock.com/taxes/fast_facts/tax_law_changes.html
SANTA CLARITA ECONOMIC FORUM
Newhall Land and Valencia Bank and Trust present
the 7th Annual Santa Clarita Valley Economic Forum. It will be held
at the Hyatt Valencia on this Wednesday, Jan. 30, starting at 5pm.
The event is free but you must RSVP at 661-255-4259.
QUICK STATS:
* Cal Assn of Realtors: California existing (single-family) home sales
for 12/01: -3.9% (11/01: -0.2%)
* Cal Assn of Realtors: California median price of existing homes sold
for 12/01: +0.8% to $276,940 (11/01: +1.7% to $272,210)
* Cal Assn of Realtors: LA County existing home sales for 12/01: +5.5%
(11/01: -6.9%)
* Cal Assn of Realtors: LA County median price of existing homes sold
for 12/01: -0.7% to $251,510 (11/01: +1.7% to $253,280)
* Census: US new home sales for 12/01: +5.7% to 946,000 annual units
(11/01: +5.2% to 895K a.u.)
* Natl Assn of Realtors: US existing home sales for 12/01: -0.8% to
5.19 million annual units (11/01: +1.0% to 5.23mil.a.u.)
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