The Economic Data Global Express (e-EDGE)

v.6 n.31       Released Aug. 5, 2002
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

U.S. ECONOMY SLOWED IN SECOND QUARTER

     The U.S. Bureau of Economic Analysis (BEA) estimated that national economic growth slowed to 1.1% in the second quarter from a revised 5.0% in the first quarter and a dismal, downwardly revised 0.3% in 2001.  (Rates quoted are seasonally adjusted annual rates.)  There were three main contributors to last quarter's performance.  (1) Consumer spending increased by 1.9%, below the 3.1% pace of the first quarter.  (2) Private business inventories actually increased a smidge after five quarters of decline.  (3) Exports soared by 11.7% after growing by 3.5% in the first quarter and dropping by 5.4% in 2001.
     However, imports--which enter the BEA's calculations with a minus sign--showed a huge jump, rising by 23.5% versus an increase of 8.5% in the first quarter and a decline of 2.9% in 2001.  Part of this increase was no doubt due to the threat of a port strike on the West Coast, as large importers brought goods into the country earlier than usual in order not to be shut out of U.S. markets if a strike does occur.  [Import levels should drop below normal soon when this situation is resolved.]  Most of the remaining imports were part of the great business re-stocking effort currently under way, especially among retailers.
     The BEA's second quarter estimate is just that, an estimate.  Data on June construction, inventories, exports and imports are not yet available.  BEA will revise its estimate for the second quarter in a month.  (Nancy D. Sidhu)
PR: http://www.bea.doc.gov/bea/newsrel/gdpnewsrelease.htm
 

U.S. ECONOMIC HISTORY REVISED

     This is the time of year the Bureau of Economic Analysis releases its "annual benchmark revisions" of Gross Domestic Product and National Income to incorporate newly available information.  This time around, what we thought we knew about 1999, 2000, and 2001 has changed.  Revisions for the first two years were small.  However, the revisions to 2001 were significant and largely on the downside.
     The most important change (to the headline writers at least) is that the U.S. economy experienced not one but three quarters of negative growth--i.e., declines--last year.  The first quarter fell by 0.6% (SAAR), the second quarter by 1.6%, and the third quarter, which stands out most clearly in everyone's memory, edged down by only 0.3%.   On the spending side of the nation's economic accounts, downward revisions to consumer spending for services and business spending for equipment and software together accounted for almost 2/3s of the total revision.  On the income side, net interest income was revised up significantly while corporate profits and wages & salaries both were revised down.
     NOTE:  Some of the outsized revisions to last year need not have happened.  The Administration has asked for higher funding so BEA can start up important new and more frequents surveys, particularly on services and software.  However, this funding increase has been caught up in the Beltway budget wars and may be eliminated.  If you care about this issue, write to your Senator and Congressman.  BEA needs you!   (Nancy D. Sidhu)
PR: http://www.bea.doc.gov/bea/newsrel/gdpnewsrelease.htm
 
 

JULY LABOR MARKETS BLAH

     According to the Bureau of Labor Statistics, not much changed on the U.S. labor scene in July.  Nonfarm employment payrolls rose by only 6,000 jobs following gains of 66,000 in June and 22,000 in May.  The nation's unemployment rate was 5.9% last month, the same as June and midway between May (5.8%) and April (6.0%).
     However, there were some less obvious changes last month, all of them positive.  Employment has now increased for three consecutive months, the first such occurrence since the first quarter of 2001.  Also (and even more subtle), the revision to June's initial employment figure was upward, after a seemingly endless string of downward adjustments.  Finally, the median duration of unemployment actually declined last month to 16.4 weeks from 17.3 weeks in June.  This is a hopeful sign that the longer-term unemployed are finally beginning to find jobs.  We'll just have to take the good news where we find it.   (Nancy D. Sidhu)
PR: http://www.bls.gov/news.release/empsit.nr0.htm
 

MANUFACTURING SLIPPED, BUT STILL GROWING

     The July manufacturing Purchasing Managers' Index (PMI) compiled by the Institute for Supply Management was 50.5%, down significantly from the 56.2% mark in June but still in the "expansion" territory (PMI>50.0%).  The index for new orders dropped more than 10 percentage points, from 60.8% in June to 50.4% in July.  Indexes for production (61.4%->55.7%), backlog of orders (53.5%->45.5%), new export orders (54.5%->52.2%), imports (55.1%->54.2%), supplier deliveries (55.2%->54.9%), and employment (49.7%->45.0%) all suggest a weaker manufacturing sector.  The index for input prices was up from 65.5% to 68.3%, and this type of cost inflation can be problematic for manufacturers who haven't seen higher prices for their products.  Steel tariffs accounted for a significant portion of the input price increases.  One shining spot: inventories are still being liquidated and the inventory levels (at both factories and their clients) are quite low, and thus the demand for products will quickly translate into actual new production.  Growth in employment?  That'll have to wait till production is up significantly.  (George Huang)
PR: http://www.ism.ws/ISMReport/ROB082002.cfm
 

CONGRESS GIVES BUSH POWER TO NEGOTIATE TRADE PACTS

     Last Thursday, hours before its summer recess, the U.S. Senate voted in favor of giving "fast-track authority" to President Bush, empowering the Administration to negotiate trade agreements that cannot be amended by Congress.  The current economic climate, a weak economy and devastated stock market, contributed to the Congressional action at this time, reversing eight years of negativism on this issue.  Numerous compromises had to be made to balance the interests of international traders, worker rights, and environmentalists.  Some political observers have noted that Mr. Bush's party may even lose seats in Congress in the November elections as a result of opposition by labor unions and environmental groups over trade policy.
     A stronger leadership role in international trade negotiations for the United States is timely, given the World Trade Organization's ongoing trade deliberations.  At least trade officials from around the world will know that their U.S. counterparts have the authority to make deals that Congress would either approve or reject, but not quibble about or tinker with specifics. The U.S. has softened its stance on controversial agricultural subsidies and steel tariffs in recent months.  Also, the escalating tension between the European Union and the U.S. on trade issues seems to be dissipating.
     It is just possible that we could see a turnaround in America's external trade position with the rest of the world.  Our trade deficit on goods and services will escalate to an estimated $390 billion this year, compared with $102 billion in 1996 and $262 billion in 1999.  In the Los Angeles Customs District in 2001, exports amounted to $70 billion and were far outstripped by imports of $150 billion.  Do we need to export more and stop being "under-achievers" in the fiercely competitive business of global trade?  Yes!  Hopefully, the U.S. will now make significant inroads in breaking down trade barriers and opening markets abroad.  (Ken Ackbarali)
 

HOMEBUILDING IN JUNE CONTINUED TO MEANDER

     According to the Construction Industry Research Board, new homebuilding activity in California continued to drift in June.  The number of permits issued was down from May and down over the year.  The state's 6-month total is not quite even with last year, down by just 0.1%.  The weakness is in the multi-family sector where the 6-month total is 10.0% below last year.  Single family permits are up by 3.3%.
     Trends around Southern California, however, were extremely VARIABLE.  At the 6 month mark, Los Angeles County's housing permit total is down by 25.3%, with weakness in both singles (-10.8%) and multiples (-36.7%).  New home building in Orange County continued to run ahead of last year (+20.1%), but the growth advantage is narrowing.  The punch here is found in the multi-family sector which was ahead by 110.6%.  The Riverside-San Bernardino area continued as the largest homebuilding market in the state, with the 6-month unit total up by 15.5%.  Both the single and multi-family sectors are running ahead of last year.  New homebuilding in San Diego was down by 11.8% at the 6-month mark, with weakness in both sectors.  Ventura County's performance also continued drab, down over the year by 33.4%.
     In the Bay Area, the Oakland area's new housing unit count for 6 months was up by 2.0% over the year.  However, both San Francisco and San Jose continued to lag, down by 32.8% and 21.9% respectively.  In San Jose, the weakness was in apartments with single family permits up by 12.7%.  (Jack Kyser)
 

NONRESIDENTIAL ACTIVITY UNUSUAL IN JUNE

     The June nonresidential building permit valuations reported by the Construction Industry Research Board were interesting.  In Los Angeles County, the 6-month total for industrial buildings fell back behind last year, easing by 7.1%.  Office construction also continued to lag, down by 78.3% over the year.  However, new retail construction was ahead by 20.5% (enough already).
     In Orange County, 6-month industrial and retail permit valuations continued to lag last year, by 69.5% and 37.1%, respectively.  However, office permit values moved into the plus column, up over last year by 13.2%.  (This is not good when the office vacancy rate is 16.8% and climbing.)  In the Riverside-San Bernardino area, new industrial and office activity continued to run behind last year, down by 25.3% and 35.4% respectively.  Retail was ahead by 11.9%, as developers rushed to capture new markets.
     Industrial, office and retail activity in San Diego County at the 6-month mark was down across the board, by 23.9%, 16.9% and 12.8% respectively.  In Ventura County, industrial activity was down by 54.8% and office was off by 91.3%, but retail was ahead by 30.4%.
     In the nine-county Bay Area, nonresidential permit valuations at 6 months were down.  Industrial activity was off by 50.5%, office was down by 65.7%, and retail lagged by 6.8%.  (Jack Kyser)
 

7TH ANNUAL EDDY AWARDS DINNER -- A night to share in the lives of some of the great visionaries of our time.

     The Eddy Awards are in recognition of excellence in economic development.  The Eddy Award recipients this year have all played an essential role in the evolution of the new downtown LA --they have changed its landscape and made it rich with culture, architecture, opportunity, entertainment and spirit.  More than anything, they've given Los Angeles the vitality necessary to become the thriving metropolitan center that anchors the economy surrounding it.  Please join us on October 10th at the new Cathedral of our Lady of the Angels when the LAEDC awards seven outstanding honorees: Eli Broad, Timothy J. Leiweke, James A. Thomas, Cardinal Roger Mahony, Andrea L. Van de Kamp, Stephan D. Smith and Tonian Hohberg.  Please visit http://www.laedc.org/events/7th_eddy.shtml for more information.
 

ATTN: BIOMED ENTREPRENEURS & INVESTORS

     The Southern California Biomedical Council (SCBC, http://www.socalbio.org) presents The 29th Biomedical Industry Networking Forum with a special presentation and panel discussion on recent venture capital investment trends.  It will be held from 5pm to 9pm, Tuesday, Aug. 27, at the Wilshire Grand Hotel in downtown L.A.  Please visit http://www.socalbio.org/Calendar/august2002.htm for more information.
 

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:

* BEA: US Gross Domestic Product for 2Q02: +1.1% (1Q02: +5.0%)
* BEA: US personal consumption expenditure for 2Q02: +1.9% (1Q02: +3.1%)
* BEA: US nonresidential fixed investment for 2Q02: +0.3% (1Q02: -0.5%)
* BEA: US implicit GDP deflator for 2Q02: +1.2% (1Q02: +1.3%)
* BEA: US personal income for 6/02: +0.6% (5/02: +0.4%)
* BEA: US disposable personal income for 6/02: +0.7% (5/02: +0.5%)
* BEA: US personal consumption expenditure for 6/02: +0.5% (5/02: +0.0%)
* BEA: US personal savings rate for 6/02: 2.3% (5/02: 2.6%)
* BLS: US unemployment rate for 7/02: 5.9% (6/02: 5.9%)
* BLS: US nonfarm employment for 7/02: +6,000 (6/02: +66,000)
* Census: US construction spending for 6/02: -2.2% (5/02: -2.0%)
* Census: US vehicle sales for 6/02: +9.7% to 18.1 million annual units (5/02: +5.1% to 16.5mil.a.u.)
* Census: US new factory orders for 6/02: +% (5/02: +%)
* Census: US factory shipments for 6/02: +% (5/02: +%)
* Census: US factory inventories for 6/02: +% (5/02: +%)
* Census: US unfilled factory orders for 6/02: +% (5/02: +%)
* Conference Board: US Consumer Confidence Index for 7/02: 106.3 (6/02: 97.1)
* Inst for Supply Mgmt: US manufacturing Purchasing Managers' Index for 7/02: 50.5% (6/02: 56.2%)
* USDA: US agricultural prices for 7/02: +2.0% (6/02: +1.0%)

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