The Economic Data Global Express (e-EDGE)

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

WEAKER DOLLAR--WHAT'S BEHIND THIS AND WHAT DOES IT MEAN?

     In the past several weeks, the fall of the U.S. dollar has made worldwide headlines and some have interpreted this as a warning signal of something fundamentally wrong with the U.S. economy.  The $/euro exchange rate is currently at 0.93, a 16-month low.  The Yen/$ exchange rate is currently at 124.1, a 6-month low.
     The main reasons for the dollar's decline are: (1) Foreign investors continue to worry about the strength and sustainability of the U.S. economic recovery--we may have to record another two quarters of solid gains in GDP before skepticism dissipates.  (2) U.S. stock markets are still being hammered by poor corporate earnings performance and the fallout of the Enron/Anderson fiasco--the integrity of financial reporting and accounting practices is under severe scrutiny.  (3) The U.S. budget deficit for fiscal 2002 and 2003 is likely to be bigger than official estimates--spending for expanded military operations  against terrorism, homeland security, and intelligence gathering is expected to loom.  None of these three negative factors affecting the dollar are likely to be reversed in the near term.
     If foreigners withdraw a substantial amount of their investments in American stocks and bonds, the U.S. will be forced to raise interest rates to induce this flow of investments  back to the U.S.  As long as we continue to run a large balance of trade and payments deficit, inbound foreign investment needs to be made attractive.  A weaker dollar will eventually contribute to a higher inflation rate, as imports will cost more.  Conversely, our exports will cost less and will be more competitive in global markets.  Unfortunately, Americans traveling abroad on vacation this summer will encounter less favorable exchange rates than in recent years.
     And finally, the single most devastating risk to the dollar, in these nervous times, would be a second terrorist attack on the United States.  Such a contingency hangs over our heads like the sword of Damocles--let us hope that it does not happen!  (Ken Ackbarali)
 

MANUFACTURING CONTINUES TO EXPAND

     The manufacturing Purchasing Managers' Index compiled by the Institute for Supply Management was 55.7% last month, up from 53.9% in April.  The index has been in the expansion mode for four consecutive months, after 18 months of contraction.  Production, new orders, and the backlog of orders are growing at a faster rate, and inventories continue to contract.  Even prices are rising.  Employment is still contracting, however, but at a slower pace.  Inventory levels are low because both manufacturers and their customers are cautious about holding excess inventories.  (George Huang)
PR: http://www.ism.ws/ISMReport/ROB062002.cfm
 

RETAIL E-COMMERCE SALES CONTINUE TO GROW...

     But not as fast as pundits predicted three years ago.  During the first quarter of 2002, retail e-commerce (e-tailing) sales was estimated to be $9.85 billion, a 19.3% increase over 1Q2001.  It accounted for 1.32% of the total retail sales in 1Q2002, up from 1.14% in 1Q2001.  Compared to the fourth quarter of 2002, e-tailing declined by 11.9%, which is lower than the 13.1% decline of overall retailing.  E-tailing accounted for 1.31% of total retailing in 4Q2001.
     What is the next thing for e-tailing?  E-tailers are getting creative and finding new uses for the power of the Internet.  On-line gift registries that span across multiple vendors greatly simplify gift shopping for well-wishers.  Some firms hold no inventory by being just a broker and facilitate the transactions of individual parties.  Some firms allow easy customizing of their products through the web interface.  Existing retailers who exploit the power of  e-commerce well can expect e-tailing to be an integral and indispensable part of their overall business strategy.  As for pure-play e-tailers, there are plenty of niche markets to grab and hold.  (George Huang)
PR: http://www.census.gov/mrts/www/current.html
 

NEW HOMEBUILDING MIXED IN APRIL

     The April report from the Construction Industry Research Board continued to point to mixed trends in new homebuilding.  The number of permits issued in the state during the month was up over the year, and at the 4-month mark the unit count was down by just 1.1% from the comparable 2000 period.
     Los Angeles County's April unit count was also up over the year, but the 4-month total was still behind last year by 34.9%.  Another laggard was Ventura County, where the April permit total was down over the year, and the 4-month total was behind by 41.9%.  In Orange County, the April permit count was up over the year, and the 4-month total was ahead of last year by 32.1%.  In the Riverside-San Bernardino area, the April count was down from last year.  However, for the first 4 months, the area's total was ahead by 14.1%, but the advantage over last year was shrinking.  San Diego County's April permit count was up over the year, and at the 4-month mark was up by 1.0%.
     New homebuilding activity during April continued weak in the 9-county Bay Area.  For 4 months, San Francisco County was behind last year by 21.7%, while Santa Clara County trailed by 23.9%.  However, there was a little good news in Alameda County, where the 4-month total was ahead by 23.5%.
     At the 4-month mark, the Riverside-San Bernardino area continued to set the homebuilding pace in the state with a permit total of 9,582 units.  In second place was the Sacramento metro area with 6,469 units, up over the year by 15.5%.   San Diego County placed 5th with 5,431 units.  (Jack Kyser)
 

SOME SHIFTS IN NONRESIDENTIAL CONSTRUCTION IN APRIL

     There were some interesting shifts in nonresidential construction activity in April, according to the Construction Industry Research Board.  In Los Angeles County, at the 4-month mark, industrial  and office permit values continued to lag, off by 39.9% and 89.6% respectively.  However, a spurt in the retail sector pushed it into positive territory for 4 months (+27.6%).   In Orange County at the 4-month mark, all 3 sectors continued to lag last year.  Industrial was down by 64.8%, office was off by 18.8%, and retail was behind by 34.2%.
     It was a similar story in the Riverside-San Bernardino area, with industrial valuations down by 31.6%, office off by 36.0%, and retail behind by 35.1%.   In San Diego County, industrial and office building valuations were down by 4.3% and 32.6%, respectively.  However, retail was running ahead by 68.6%.  Ventura County exhibited a similar pattern, with industrial down by 24.4% and office off by 95.9%.  However, retail was ahead by 82.8%.
     In the 9-county Bay Area, caution continued to be the word in April.  For the first 4 months of the year, industrial activity was down over the year by 67.9%, office was behind by 73.5%, and retail was down by 24.1%.  (Jack Kyser)
 

APRIL DATA FROM ONT

     The April traffic data finally arrived for Ontario International Airport.  Total passenger traffic during the month was down by 10.1% over the year, which was a little weaker performance than posted during the previous months.  However, air cargo tonnage was ahead by 13.2%.  (Jack Kyser)
Data: http://www.lawa.org/ont/html/voltraffic.html
 

2000 COUNTY BUSINESS PATTERNS

     The 2000 data from "County Business Patterns" (CBP) published by the U.S. Bureau of the Census has just arrived, and while some people tisk . . . tisked that it was "old" data, we found some things of interest.  Los Angeles County recorded the largest job gain from 1999 to 2000 of any county in the nation, up by 116,100 jobs (this does not include the government sector).  The County also had the largest (net) increase in number of business establishments, up 3,769 to a total of 226,282.  Orange County placed 4th in this measure, with an increase of 2,024 to a total of 78,556 establishments.
     As to 1999-2000 job growth in other areas in Southern California, Orange County added 47,737, the Riverside-San Bernardino area added 51,117 jobs, while Ventura County added 13,185.
     Since the Census Bureau has one of the best data bases of any agency, comparisons are in order.  For example, according to the California Employment Development Department (EDD), Los Angeles County added 55,100 jobs between 1999 and 2000 (March/March, without government).  Orange County added 39,700, while the Riverside-San Bernardino area added 48,000.
     One other interesting trend; there is a growing "gap" between employment in Los Angeles County as reported by "County Business Patterns" and EDD.  In 1990, CBP reported that there were 201,918 more jobs than EDD.  By 2000, this gap had grown to 381,800.  The other areas also have such a gap, but there hasn't been the increase that Los Angeles County has experienced.  (Jack Kyser)
CBP page: http://www.census.gov/epcd/cbp/view/cbpview.html
California book download: http://www.census.gov/prod/2002pubs/00cbp/cbp00-6.pdf
 

WHEN IT RAINS IN SOUTHERN CALIFORNIA, IT... THE REGION'S "OTHER" WATER PROBLEM

     The way the water quality laws work these days, California cities are responsible for improving the water quality of the region's rivers, streams, and the ocean water quality by reducing the amount of polluted storm water that runs off our streets, parking lots, etc. into the storm sewers.  The cities' tasks are described in the form of five-year municipal storm water National Pollutant Discharge Elimination System (NPDES) permits, which are issued by nine regional water quality boards. The latest version of these permits have recently been issued, or are in the process of being issued, for all cities in Southern California as well as the rest of the state.
     The new permits set very strict standards, which will require cities to increase their storm water related activity.  Even more difficult, citizens will need to make some major changes in their own behavior.  If everything goes as planned, we will see reduced amounts of trash and pollutants going into the storm sewers and will experience fewer beach closures after it rains.  However, implementing the new standards will be an expensive proposition for many cities, most of which are only now putting their storm water plans on paper.
     To meet the challenges presented by these permits, LAEDC has joined with a "blue ribbon" team of experts in government, water treatment, environmental issues, and related fields, to develop the BEACON Program(tm) (Balancing Economic And Clean Ocean Needs).  By working together in the Program, member cities can save money on their storm water runoff plans, obtain discounts by pooling their storm water related purchases, enjoy greater influence with regulators, and free up city staff time and money for other pressing needs. Cities, Counties and special purpose jurisdictions can contact Wally Baker at 213.236.4812 for further information on the BEACON Program(tm). (Martin Webley & Nancy D. Sidhu)
 

QUICK STATS:

* BLS: US nonfarm labor productivity for 1Q02 (revised): +8.4% (4Q01: +5.5%)
* BLS: US nonfarm unit labor costs for 1Q02 (r): -5.2% (4Q01: -3.1%)
* Census: US e-commerce sales for 1Q02: -11.9% to $9.849 billion (4Q01: +9.5% to $11.178bil.)
* Census: US construction spending for 4/02: +0.2% (3/02: +%)
* Census: US new factory orders for 4/02: +1.2% (3/02: +1.0%)
* Census: US factory shipments for 4/02: +2.4% (3/02: +1.1%)
* Census: US factory inventories for 4/02: -0.2% (3/02: -0.6%)
* Census: US unfilled factory orders for 4/02: -0.4% (3/02: +0.3%)
* Conference Board: US Help-wanted Advertising Index for 4/02: 47 (3/02: 46)
* Inst. for Supply Mgmt.: US manufacturing Purchasing Managers' Index for 4/02: 55.7% (3/02: %)
* Univ. of Michigan: US Consumer Sentiment Survey for 5/02: 96.9 (4/02: 93.0)
* USDA: US agricultural prices for 5/02: +3.2% (4/02: -9.5%)

The Economic Data Global Express (e-EDGE) is a free service of the Los Angeles County Economic Development Corporation (LAEDC). Permission to quote any proprietary part of this release is granted given proper credit. Distribution is allowed provided that no modifications are made to the original content. Sponsors of this service do not necessarily endorse all opinions stated herein. For more information, please e-mail to research@laedc.org. To contact LAEDC, please call 213-622-4300.

Subscribe to e-EDGE and receive current economic news and major developments.  Your e-mail address will not be disclosed to any outside party (including e-EDGE sponsors) under any circumstances.

To send us comments regarding e-EDGE, please e-mail to research@laedc.org.