The Economic Data Global Express (e-EDGE)

v.6 n.33       Released Aug. 19, 2002
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

A PLETHORA OF (MIXED) DATA--IS IT TIME TO WORRY?

     The government's statistical shops were very active last week, releasing a series of reports on different parts of the U.S. economy.  Let's take them in order of appearance.  (1) Tuesday, we learned that U.S. retail sales increased by 1.2% in July following a revised 1.4% rise in June and a drop of 1.0% in May.  Most of this volatility was due to changing fortunes of the nation's motor vehicle dealers, whose sales plunged by 2.9% in May and then rose by 4.2% in both June and July.  The monthly changes for all other retailers were more modest:  a decline of 0.4% in May followed by an increase of 0.5% in June and a smaller uptick of 0.2% in July.   (2) Wednesday, the Commerce Department announced that business inventories increased by 0.2% in June, the same as in May.  This may not sound like much, but these two small increases followed 15 consecutive months of decline.  Retail and wholesale inventories both increased in June, while manufacturing stocks continued to fall, though by only 0.1%--much less than previous months.  Inventories are now at historically low levels.
     (3) The nation's industrial production index for July was released on Thursday.  This index was up by only 0.2%, the seventh consecutive monthly increase.  However, this pace was markedly slower than either June (+0.6%) or May (+0.5%).  Activity in both the mining and manufacturing sectors paused last month.  Production of automotive vehicles and parts soared by 4.2%, while output of high tech equipment was about flat (actually up by 0.1%).  (4) Finally, Friday saw the release of the housing report.  Housing has been pretty strong this year.  However, housing starts declined by 2.7% in July, matching June's performance.  Still, the level of starts in July, at 1.65 million units, was well within this year's range (1.57 million units to 1.74 million).  Residential construction has been dominated by single-family homes thus far in 2002.  Total starts rose by 3.8% in the first seven months of the year, with single-family starts up by 4.8% and multiple family units about flat (actually down by 0.1%).
     What to make of all this information?  The data coming out for July look "mixed," with some sectors stronger and others weaker than in previous months.  Is it time to worry that the nation's economic recovery is at risk?  The answer is probably not, but as usual it's too soon to tell for sure.  The early months of the current recovery--indeed of any economic recovery--have been dominated by business firms' need to replenish their inventories.  This process clearly continued in June.
     The real issue is when will we see the transition from a recovery led by inventory rebuilding to one led by "final demand," the economist's term for spending by both consumers and businesses for consumer and producer goods, services and equipment.  Business firms are cautious and taking their time about increasing their plant and equipment spending; so consumers will have to do the job--again.  On the plus side, housing related activity is already at a high level and so are consumers' light vehicle purchases (helped by makers' renewed 0% financing deals).  Also, household incomes have been growing, a good sign, though labor markets have been slow to turn up.  These considerations provide good reasons to expect only moderate growth during the rest of this quarter and the next.  And to expect more weeks of mixed reports!   (Nancy D. Sidhu)
Retail sales PR: http://www.census.gov/svsd/www/retail.html
Business inventories PR: http://www.census.gov/mtis/www/current.html
Industrial production PR: http://www.federalreserve.gov/releases/G17/Current/
Housing starts PR: http://www.census.gov/pub/indicator/www/newresconst.pdf
 

CONSUMER PRICES STABLE

     The U.S. Consumer Price Index (CPI) rose by 0.1% last month, following a similar increase in June.  The July CPI was 1.5% above the year-ago level.  Food prices rose by 0.2% and have been in the +/-0.2% range since February.  Energy costs rose by 0.4% after being unchanged in June.  Gasoline prices jumped 1.5% last month but were still 3.7% cheaper than a year ago.  Utility gas and electric prices were 0.4% lower in July and 6.7% cheaper than a year ago.  The core CPI, which excludes the more volatile food and energy prices, rose by 0.2% in July and was 2.2% above the year-ago level.  Reflecting the hard times in the airline industry, airfares fell by 1.3% last month and were 5.5% below the year-ago level.  Services that tend to be more independent of business cycles, such as medical care (+0.7%) and education (+0.7%), posted significant increases while other goods and services generally posted small increases or declines.  Products that are extremely price-competitive, such as apparel, actually saw declines in prices from a year ago.
     Locally, the L.A. Area CPI rose by 0.2% in July and was 2.2% above the year-ago level.  Local CPIs are not seasonally adjusted.  L.A. CPI had declined by 0.4% between May and June.  Food prices fell by 0.1% last month and were 1.5% higher than a year ago.  Energy prices increased by 1.2% last month but were 2.4% below the year-ago level.  Gasoline prices increased by 0.1% last month but were 10.2% cheaper than a year ago.  Excluding food and energy costs, the core CPI for L.A. was 0.1% higher last month and 2.7% higher than a year ago.  Medical care costs were 7.2% higher and shelter costs were 5.0% higher than a year ago.
     Looking forward, there may be significant impact on petroleum prices when the Administration lays out its rationale for military action against Iraq to the general public.  Meanwhile, the Strategic Petroleum Reserve is being filled to its 700 million barrel maximum capacity.  The financial turbulence in the airline industry could also play a part in the formation of travel plans in the months to come and thereby impact both energy and travel costs.  (George Huang)
US PR: http://www.bls.gov/news.release/cpi.nr0.htm
LA PR: http://www.bls.gov/ro9/ro9cpila.htm
Formatted LA data: http://www.e-edge.org/cpi-la.htm
 

MEXICO'S ECONOMY GETS BACK ON TRACK

     Last week, Mexico's Finance Ministry announced that 2nd quarter GDP rose 2.1% over the comparable period last year, the first increase in 12 months and a turnaround from the 1st quarter's decline of 2.0%.  Both industrial output and services registered growth.  Quirks in the calendar also helped boost GDP in the 2nd quarter, which benefited from four additional working days compared with the second quarter of 2001, due to Easter holidays falling in March this year instead of April.  If quarterly GDP changes were calculated the way it is done in the United States, using the prior (first) quarter as a base and seasonally adjusting the change at annualized rates, Mexico's GDP would be shown to have increased at a  more modest rate of 1.2%.
     To put these growth numbers in perspective, it is helpful to note that Mexico's economy expanded at an impressive average annual rate (GDP) of 5.5% in the 1996-2000 period.  This was then followed by the recession of 2001 which resulted in nearly zero growth  (+0.1%).  Practically all forecasters have downgraded growth expectations for Mexico in 2002 and the government's official estimate is now 2.0% for the year as a whole.
     Are there any developments that can raise Mexico's growth rate well above the official estimate?  One of these would be bigger government spending which is dependent on oil revenues. If oil prices move much above $30/barrel, this could be a strong stimulus to growth in the second half of 2002 and in 2003.  Another factor is the strength of the U.S. economy in the second half of this year, since the U.S. is Mexico's biggest export market.  Growth in the U.S. closer to 3.0% instead of 2.0% annual rate in GDP in the second half of this year would make a huge difference to Mexico's prospects.  Still another is the avoidance of debt default by Brazil, given the tenuous condition of foreign investment in Latin America and Mexico's continuing need for capital from external sources.
     With the inflation rate down to 6.0% so far this year, short-term interest rates at 6.7%, foreign reserves at $46 billion, and only a modest depreciation of the peso (MPS 9.97/$1), Mexico's economy is well positioned to shrug off its sluggishness in the near term. (Ken Ackbarali)
 

TAXABLE SALES -- RETAIL & OTHERWISE

     The State Board of Equalization (BOE) has just released several reports, none of which were inspirational.  Third quarter 2001 taxable retail sales in the state were down over the year by 0.1%, after lackluster increases of 5.3% in the first quarter and 3.7% in the second.  This easing trend was also in evidence around Southern California, with Los Angeles County managing just a 0.1% increase in retail sales in the 3rd quarter, while Orange County posted a 1.5% gain.
     Riverside County turned in the best local performance, a gain of 7.4% over the year.  San Bernardino County was up by 4.8%, San Diego County was ahead by 3.5%, and Ventura County had a 4.1% increase.  If you want ugly retail, the Bay Area was the place to be.  In the 3rd quarter of last year San Francisco's (city/county) retail sales were down over the year by 13.4%, while the San Jose area declined by 15.5%.
     The other BOE report was an estimate of 1st quarter 2002 taxable sales (both retail and other taxable transactions).  This series turned negative in the 3rd quarter of 2001 with a decline of 2.9%, was off by 5.1% in the 4th quarter, while activity in the 1st quarter of this year was estimated to have declined by 4.5%.  (Jack Kyser)
Data: http://www.boe.ca.gov/news/tsalescont01.htm
 

JULY CONTAINER COUNT EASES

     The July TEU numbers from the port of Los Angeles indicated some easing in activity.  The number of loaded import containers handled was up by 9.1% over the year, after three consecutive months of double digit increases.  The number of loaded export containers moved during the month was down by 3.6%, the first year-to-year decline at POLA since October 2001.  The total number of containers handled at the port in July was 495,690, up by 9.7%.  (Jack Kyser)
Data: http://www.portofla.org/statistics/detailmonth.htm
 

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:

* BLS: US Consumer Price Index for 7/02: +0.1% (6/02: +0.1%)
* BLS: LA Area Consumer Price Index for 7/02: +0.2% (6/02: -0.4%)
* Census: US retail sales for 7/02: +1.2% (6/02: +1.4%)
* Census: US business sales for 6/02: +0.3% (5/02: -0.3%)
* Census: US business inventories for 6/02: +0.2% (5/02: +0.2%)
* Census: US housing starts for 7/02: -2.7% to 1.65mil. annual units (6/02: -2.7% 1.70mil.a.u.)
* Conference Board: US Index of Leading Economic Indicators for 7/02: -0.4% (6/02: -0.2%)
* Federal Reserve: US industrial production for 7/02: +0.2% (6/02: +0.7%)
* Federal Reserve: US industrial capacity utilization rate for 7/02: 76.1% (6/02: 76.1%)
* Univ. of Michigan: US Consumer Sentiment Survey for 8/02: 88.1 (7/02: 87.9)

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