The Economic Data Global Express (e-EDGE)

v.6 n.29       Released July 22, 2002
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

HOUSING STARTS STILL HOLDING UP

     Construction started on about 1.67 million U.S. housing units in June, a little below May's pace of 1.74 million units but above the 1.57 million units started in April.  Single-family housing starts, at 1.35 million units, likewise came in between May (1.39 million units) and April (1.26 million units).  Multiple family starts were 0.32 million units in June, down a tad from 0.35 million units in May.  [All figures in this paragraph are seasonally adjusted annual rates.]
     Housing has been one of the strongest sectors of the economy this year.  About 840,100 housing units were actually started (not seasonally adjusted) during the first half of 2002.  this pace was about 31,900 units, or 3.9%, higher than the first six months of 2001.  An increase in the number of single-family starts accounted for all of this growth, as construction of new multi-family units declined slightly.
     What can change this picture?  Favorable mortgage rates (the 30-year fixed-rate mortgage is hovering around 6.5%) have attracted many buyers into the housing market.  These low rates partly reflect a slowdown in business lending.  Many financial institutions want to lend only to creditworthy firms.  As most of them aren't interested, lenders are turning to the mortgage market.  Lately, long rates have been pushed even lower, as investors retreat from equities and into more conservative (fixed-income) securities.  Both factors will fade in importantce and ultimately disappear as the economic recovery takes hold.  (Nancy D. Sidhu)
PR: http://www.census.gov/indicator/www/newresconst.pdf
 

FACTORY SECTOR GAINING MOMENTUM

     Industrial production rose by 0.8% in June, better than the previous 0.4% increase in May and 0.2% in April.  Production also was 0.2% higher than June 2001, the first positive year-to-year uptick since January 2001.  In addition, June registered the highest monthly increase since October 1999.  The nation's capacity utilization rate improved to 76.1% last month, the highest since August 2001, before the recession.  Rising output was widespread last month.  Over 60% of industries reported higher production, a sign the recovery is gradually spreading out.
     Looking at the quarterly record, total industrial production rose by 4.6% during the second quarter (seasonally adjusted annual rate or SAAR) following an increase of 2.6% in the first quarter and a decline of 6.7% during 4Q2001.  Production of consumer goods led the charge during the first quarter, rising by 3.7% (SAAR) after falling by 3.6% in the 4th quarter.  When consumer related output decelerated to 1.7% last quarter, however, other sectors picked up the slack.  Production of materials accelerated from +5.3% in the 1st quarter to +10.0% in April-June, while production of defense equipment sped up from +2.8% to +5.2% over the same period.  Even business equipment, a noticeable laggard in this economic recovery, reported a decline of only 2.1% in the 2nd quarter, better than the 1st quarter's drop of 4.4% and the 4th quarter's plunge of 14.4%.  (Nancy D. Sidhu)
PR: http://www.federalreserve.gov/releases/G17/Current/
 

SMALL INCREASE IN U.S. EXPORTS SWAMPED BY SURGE IN IMPORTS

     In May, U.S. exports of goods and services increased by a modest $600 million while imports increased by a sturdy $2.1 billion.  This resulted in a widening of the trade deficit to $37.6 billion in May from $36.1 billion in April.  The May deficit was the biggest in the 12-month reporting period and is well above the recent low of $27.3 billion recorded in December 2001.  Consensus expectations had been for a decline in the deficit to $35.0 billion, from its April level.
     Motor vehicles and parts led imports with a gain of $900 million, followed by consumer goods ($600 million) and capital goods ($200 million).  Small increases were recorded in exports of vehicles and parts, industrial supplies, foods, feeds, and beverages, but exports of consumer goods fell.
     The dollar was still strong in May and had a dampening effect on U.S. exports, on top of the weakness in demand conditions in the economies of many of America's trading partners-- Japan, Mexico, and the European Union.  The lower value of the dollar in June and July should help to reverse this trend somewhat as some stimulus of U.S. exports could be expected.
     For 2002 as a whole, our estimate of the trade deficit is $390 billion, a rather substantial increase of $43 billion over the 2001 shortfall.  The stronger pace of U.S. economic growth in 2003, which we expect, will raise import growth beyond export growth, resulting in further widening of the trade deficit.  Should you worry about this?  It depends on whether you take a short-term view or a long-term view, but more fundamentally, whether you believe that foreigners will maintain their willingness to hold  additional claims on U.S. assets. (Ken Ackbarali)
PR: http://www.census.gov/indicator/www/ustrade.html
 

CONSUMER PRICES FAIRLY STABLE...

     U.S. Consumer Price Index (CPI) increased by 0.1% in June, after being unchanged in May.  Both the energy and food indexes were unchanged last month, after posting declines in May (energy: -0.7%, food: -0.2%).  The core CPI, which excludes those two volatile categories, rose by 0.1%.  Over the past 12 months, the CPI rose by 1.1% and the core CPI increased by 2.3%.  Energy prices were 11.1% lower than a year ago, as gasoline prices were 15.4% cheaper and utility gas & electricity were 7.6% cheaper.  The largest increases among major categories came from education (+6.3% over a year ago) and medical care (+4.5%), with hospital & related services (+8.5%) holding the top honor (or dishonor?).  Tobacco prices rose by 11.0% over a year ago, thanks to increases in many states' "sin" taxes and the need of tobacco companies to recuperate legal settlement costs.  The item registering the largest price decline was personal computers, down by 24.2% over a year ago.
     Locally, the LA Area CPI declined by 0.4% in June, after rising by 0.2% in May.  Local CPIs are not seasonally adjusted.  Food prices fell by 0.5%.  Housing costs declined by 0.1%, thanks to a 7.2% drop in utility natural gas costs.  Rents rose by 0.4% last month and were around 5.9% higher over a year ago.  Apparel prices posted a 4.9% monthly decline, partly because of the season switch.  Energy costs declined by 0.7%.  Gasoline prices increased by 0.3% last month but were 17.9% cheaper than a year ago.  (So far in July gas prices have declined slightly.)  Overall, the L.A. Area CPI was 1.7% higher than a year ago.
     Up north, the Bay Area CPI increased by 0.1% over the past two months and was 1.2% higher than a year ago.  The economic downturn has halted the rapid increase in rents, which rose by just 3.8% compared to a year ago.  Gasoline prices did increase by 1.7% last month, but they were 17.0% cheaper than a year ago.  (George Huang)
US PR: http://www.bls.gov/news.release/cpi.nr0.htm
LA Area PR: http://www.bls.gov/ro9/ro9cpila.htm
LA historical data (CPI-U): http://www.laedc.org/cpi-la.htm
Bay Area PR: http://www.bls.gov/ro9/cpisanf.htm
 

HOTEL BIZ SOMEWHAT BETTER IN MAY

     The May data from PKF Consulting indicated that the hotel industry is seeing some improvement in business.  The occupancy rate for Los Angeles County was 68.4%, compared with 72.1% a year ago.  The County was helped by 3 large conventions during the month.  The average daily room rate (ADR) was down by 2.8% to $121.41.  By area in the County, Valencia remained the leader in May with an 84.8% occupancy rate.  The next best rate was Santa Monica's 76.8%.  Of note here was the 10.0% increase in ADR.  The downtown Los Angeles market turned in a better performance in May, with an occupancy rate of 55.2%, while the ADR increased by 1.5% to $135.97.
     May wasn't so merry for Orange County's hotel industry, as the occupancy rate eased from 71.1% in April to 65.9%.  The rate in May 2001 was 72.3%.  And the ADR dropped by 9.2% to $111.56.  The best performance was turned in by South Orange County with an occupancy rate of 70.9%, compared with 68.8% a year ago.
     The hotel business remained troubled in the Bay Area in May.  The occupancy rate in San Francisco was 65.6%, compared with 76.9% last year.  The ADR slipped 18.9% to $155.45.  In San Jose, the May occupancy rate was 59.3%, compared with 65.1% last year.  The ADR dropped by 20.1% to $135.76.  (Jack Kyser)
 

JUNE CONTAINER BIZ BOOMS

     The June container numbers from the port of Los Angeles were impressive.  The number of loaded import containers was ahead of last year by 25.7%, while the export container count was up by 8.1%.  The total number of containers handled at POLA in June increased by 23.2% to 536,461, a new record level.  This activity reflects both strike fears (they are still negotiating) and a recovering economy.  We are anxious to see the Long Beach numbers.  (Jack Kyser)
Data: http://www.portofla.org/statistics/detailmonth.htm
 

ERRATA FOR LAST WEEK'S e-EDGE

     In our business expansion article last week, two typos were discovered after e-EDGE was sent out.  The number of expansions for the first six months of this year is 159, not 59 as reported.  The space reporting criterion is 20,000s.f., not 200,000s.f. as reported.  We apologize for these typos, especially to Candice Flor, the original author of the article.
 

* * * e-EDGE SUBSCRIPTION DATABASE CLEANUP * * *

     We will go through e-mail transmission error messages and delete invalid e-mail addresses from our system on the week of July 29th.  If you don't receive e-EDGE v.6 n.31 (Aug. 5th issue) by Wednesday, your e-mail may have been deleted because your mail server reported a permanent error for the e-EDGE sent on July 29th.  If that's the case, just re-subscribe again by e-mailing to subscribe@e-edge.org or reply to this issue of e-EDGE.  Thank you for your understanding.
 

RECENT PUBLICATIONS

     LAEDC released several publications in the past few weeks, including:
* International Trade Trends & Impacts -- $40
* LA Stats -- $30 (Census 2000 data not included; see below)
* Census 2000 Statistical Compilation -- free at http://www.laedc.org/census2000
* Manufacturing in Los Angeles -- $35
     These reports all cover the five-county area.  You may order by calling 213-236-4822 or visiting http://www.laedc.org/economic_research/publications.shtml (for secure on-line purchasing).  Your support help sustain our research department (and this free e-mail service).
 
 

TRADE SHOWS LISTINGS (Repeat announcement)

     LAEDC is now compiling a comprehensive listing of trade shows in Southern California.  Please send us such information.  Thank you so much.
     Our current listing includes fashion/apparel, textiles, shoes, home furnishings & giftware, and manufacturing.  It's available at http://www.laedc.org/trade_shows.html
 

QUICK STATS:

* BLS: US Consumer Price Index for 6/02: +0.1% (5/02: +0.0%)
* BLS: LA Area Consumer Price Index for 6/02: -0.4% (5/02: +0.2%)
* Census: US housing starts for 6/02: -3.6% (5/02: +10.8%)
* Census: US exports for 5/02: +0.7% to US$80.6 billion (4/02: +2.1% to $80.0bil.)
* Census: US imports for 5/02: +1.8% to $118.3bil. (4/02: +4.8% to $116.2bil.)
* Census: US trade deficit for 5/02: US$37.6 billion (4/02: $36.1bil.)
* Conference Board: US Index of Leading Economic Indicators for 6/02: +0.0% (5/02:+0.6%)
* Federal Reserve: US industrial production for 6/02: +0.8% (5/02: +0.4%)
* Federal Reserve: US industrial capacity utilization rate for 6/02: 76.1% (5/02: 75.6%)

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