The Economic Data Global Express (e-EDGE)

• February 15: LAEDC Economic Forecast and Industry Outlook
• February 17: Business Without Borders Presents: 2012 Global Economic Outlook

LAEDC Annual Forecast: Emerging Opportunities and New Challenges in 2012 and Beyond

The LAEDC Economic Forecast & Industry Outlook is the premier source for in-depth economic information and analysis on L.A. County and the surrounding areas. Join us on Wednesday, February 15, 2012 at the Marriott Los Angeles Downtown for the release of the 2012-2013 Economic Forecast Report.

Featured speakers include:

• Dr. Robert Kleinhenz, Chief Economist LAEDC
• Dr. Christine Cooper, Vice President Economics and Policy Analysis, LAEDC
• Kevin Klowden, Director of the California Center, Milken Institute
• Dr. Edward E. Leamen, Professor of Management, Economics and Statistics, UCLA
• Dr. Sung Won Sohn, Professor of Economics, CSUCI and Vice Chairman, Forever 21

For more information or to register, visit us at the 2012-2013 Forecast Event website.

GDP Growth Striving to Pick Up Steam

The BEA reported that real GDP grew in the fourth quarter of 2011 at 2.8%, an improvement over the third quarter figure of 1.8%, but still below the levels of growth that are needed to trim the unemployment rate significantly. The "second" estimate for the fourth quarter, based on more complete data, will be released on February 29, 2011.

Real GDP received positive contributions from:

Personal consumption expenditures (PCE), up 2.0% (seasonally adjusted annualized rate)

• Durable goods, up 14.8%
• Nondurables goods, up 1.7%
• Services, up 0.2%

Gross private domestic investment, up 20.0%

• Nonresidential fixed investment, up 1.7%
• Real residential fixed investment, up 10.9%

Exports, up 4.7%

• Goods, up 5.0%
• Services, up 3.9%

Private inventory investment, up 1.94 %

Positives were partially offset by:

• Federal government spending, down 7.3%
• National defense, down 12.5%
• State and local government spending, down 2.6%
• Imports, which are a subtraction in the calculation of GDP, up 4.4%

The BEA report also indicated the economy grew at an annual rate of 1.7% in 2011 compared with 3.0% in 2010. Several events combined to hold back growth back in 2011: the disasters in Japan, the Arab Spring and the European debt crisis. The likely outlook for 2012 is for continued but modest growth. (Rafael De Anda)

Source: http://bea.gov/newsreleases/national/gdp/2012/pdf/gdp4q11_adv.pdf

International Economy - IMF & China

IMF: The International Monetary Fund (IMF) released its January update to its September World Economic Outlook (WEO) last week, and revised all of its projections downward (with the exception of the U.S. outlook) including the global outlook from 4.0% to 3.3% for 2012. The most significant revisions were related to Spain and Italy for 2012, as the IMF now forecasts the Spanish economy contracting by -1.7% instead of expanding 1.1% this year, and the Italian economy declining by -2.2% instead of growing by 0.3%. Also, the IMF cut its forecast for the entire euro zone from growing by 1.1% to a contraction of -0.5%, signaling a mild recession. Overall, the advanced economies are projected to grow by just 1.2% in 2012 due the increased risks in Europe and elsewhere.

China: The National Bureau of Statistics recently announced that the Chinese economy expanded by 8.9% in the fourth quarter of 2011 on a year-to-year basis. On an annual basis, the Chinese economy grew by 9.2% in 2011. Naturally, these growth rates are exceptionally strong by global standards. However, for China these figures are a different story. Firstly, the fourth quarter growth rate was the lowest growth rate in 2.5 years. Secondly, the annual rate was over a full percentage point lower than last year’s and was the lowest growth rate since 2002. All of this translates into a cooling Chinese economy mainly due to weaker exports, tighter credit conditions, and a drop in the real estate market. Please refer to our upcoming February forecast for more details on the Chinese economy and the outlook for 2012. (Ferdinando Guerra)

California Home Sales & Prices in December

The California Association of Realtors (CAR) released their December 2011 report for existing home sales and prices in California. Statewide, December sales of existing single-family homes ticked up by 0.1% compared with a year ago to 520,940 units (seasonally adjusted, annualized rate). The median price declined again, falling by 6.2% on a year-over basis to $285,920. Over the month, however, the median price rose by 1.8% - the second consecutive monthly increase.

Preliminary figures indicate that for 2011 as a whole, home sales statewide increased by 1.1% to 497,860 compared with 492,290 homes sold in 2010, while the statewide median price declined by 6.3% to $285,950.

Improving consumer confidence may have been a factor in pushing December home sales a bit higher than expected. Home prices appear to be stabilizing in the distressed part of the market, but there is still downward pressure on prices for more expensive homes.

Sales and price activity by county over the year to December:

• Los Angeles County: unit sales declined by 4.6% over the year to December, and the median price fell by 6.5% to $306,950.
• Orange County: sales fell by 5.6%, while the median price dropped by 3.0% to $484,630.
• Riverside County: sales of existing homes dropped by 4.3% and the median price dipped by 0.8% to $203,650.
• San Bernardino County: sales increased by 4.0%, while the median price fell by 4.7% to $128,450.
• San Diego County: unit sales increased by 5.6%, but the median price was down by 4.2% to $359,930.
• Ventura County: existing home sales rose by 5.3%, while the median price plunged by 11.4% to $391,060.

Other items of interest:

The inventory of unsold single-family detached homes in California was 4.2 months in December, down from 5.0 months in December 2010. Los Angeles County found itself with a 4.7 month supply of single-family homes in December (compared with 5.3 months a year ago). Inventories are quite lean right now.

The amount of time homes are spending on the market increased. The median number of days it took to sell a single-family home in California last month was 58.7 days compared with 58.0 days in December 2010. (Kimberly Ritter-Martinez)

Source: http://www.car.org/newsstand/newsreleases/2012releases/decembersales/

California New Home Construction in December

The total number of housing permits issued in California in 2011 increased by 5.0% to 47,015. All of last year’s gain for the state was attributable to multi-family construction. The number of permits pulled for new apartment and condo construction increased by 33.1% to 25,595 units, while permits for single-family residences fell by 16.1% to 21,420.

Here is a quick look at home building activity by county for 2011:

• In Los Angeles County, 10,380 housing permits were issued in 2011 compared with 7,468 in 2010 (an increase 39.0%). Permits for single-family homes slipped by 4.5% to 2,329 units, while the number of multi-family units permitted was 8,051 for the year compared with 5,029 in 2010 (an increase of 60.1%).
• The number of residential permits issued in Orange County rose to 4,818 units in 2011, or by 55.9% compared with 2010. In the single-family sector, 1,890 new homes were permitted, representing an increase of 21.7%, while the number of permits issued for multi-family units increased to 2,928 permits last year versus 1,538 issued during 2010.
• 2011 was another tough year for homebuilders in the Inland Empire. New housing permits totaled 5,214 units for the year, which was down by 18.6% compared 2010. Permits for single-family homes tumbled by 28.6% to 3,732 units, while the number of permits issued for multi-family residences rose by 26.1% to 1,482 units.
• In San Diego County, the total number of units permitted in 2011 was 5,223, which was up by 56.1% compared with 2010. Single-family homes ticked up by 4.4% (to 2,353 units), while new multi-family construction jumped by 172.0% to 2,970 units.
• The 2011 permit count in Ventura County was 702 compared with 590 during the previous year.

(Kimberly Ritter-Martinez)

Source: http://www.cirbdata.com/

A Year-end Assessment of Nonresidential Construction in California

The Construction Industry Research Board released figures for December nonresidential construction, including preliminary year-end results for 2011. The value of total nonresidential construction in California was up 16.3% to $13.0B in 2011. Below is the statewide breakdown of how the year shaped up:

• Industrial construction permits rose by 33.6% to $478.9M in value.
• Office construction permits were up by 22.6% to $626.6M in value.
• Hotel construction permits increased by 68.7% to $163.9M in value.
• New retail construction permits rose by 6.5% to $954.1M in value.

In Los Angeles County, total nonresidential permit values improved by 16.9% to $3.1B in 2011.

• Industrial: up 143.8% to $136.0M
• Office: up 16.6% to $155.5M
• Retail: down 15.1% to $223.1M
• Hotel: down 13.4% to $24.2M

In Orange County, the value of nonresidential permits increased by 12.8% to $1.3B in 2011.

• Industrial: down 55.2% to 10.3M
• Office: down 11.9% to 86.1M
• Retail: up 43.1% to 77.5M
• Hotel: up 7.2% to 9.1M

New construction in the Inland Empire was also up in 2011. The value of new construction permits increased by 16.3% to $921.3M.

• Industrial: up 112.4% to 60.6M
• Office: down 62.1% to 18.2M
• Retail: up 18.0% to 184.7M
• Hotel: down 68.7% to 6.3M

Most of the construction activity in the Inland Empire in 2011 consisted of alterations and additions to existing structures.

San Diego County continued as one of the state’s best performing metro areas. Total nonresidential construction rose by 62.8% to $1.1B in 2011.

• Industrial: down 53.8% to $3.6M
• Office: up 317.4% to $90.3M
• Retail: up 26.9% to $40.6M
• Hotel: up 263.0% to $53.0M

The only county in Southern California with a loss in the value of construction in 2011 was Ventura County. Total nonresidential permit values dropped by 8.3% to $147.2M. In the 9-County Bay Area, the total value of nonresidential permits moved up by 16.6% in 2011 to $4.0B. (Rafael De Anda)

Source: http://www.cirbdata.com/

Leading Economic Indicator Report for January

The Conference Board’s leading economic index (LEI) grew 0.4% in the month of December to 94.3 (2004=100). The LEI grew a revised 0.2% in November, and 0.4% in October after incorporating annual benchmark revisions. The LEI is designed to offer advance warning of upcoming business cycle peaks and troughs. For the first time since 1996, the Conference Board made comprehensive benchmark revisions to the LEI. The LEI now incorporates a leading credit index, rather than the real money supply (M2).

Of the ten indicators that make up the LEI, seven made positive contributions in December in descending order:

• Interest rate spread, 10-year Treasury bonds less federal funds
• Average weekly initial claims for unemployment insurance
• Average weekly hours, manufacturing
• Stock prices, 500 common stocks
• Manufacturers’ new orders, nondefense capital goods excluding aircraft orders
• ISM Index of New Orders
• Manufacturers’ new orders, consumer goods and materials

Three made negative contributions, starting with the largest:

• Average consumer expectations for businesses and economic conditions
• Leading credit index
• Building permits, new private housing units

To put these results in perspective, the LEI index was consistently above the 100 mark between 2004 and early 2008.. After a peak in early 2006, the LEI sunk through March 2009, nearly reaching a value of 80. The LEI has since rebounded. As seen in the chart below, the last seven months have been stable, suggesting moderate economic growth for the start of 2012. (Rafael De Anda)

Sources:http://www.conference-board.org/pdf_free/press/PressPDF_4390_1327577759.pdf and http://www.conference-board.org/pdf_free/press/TechnicalPDF_4390_1327575981.pdf

Events of Interest

Save the Date!

Wednesday, February 15: LAEDC Economic Forecast and Industry Outlook
7:00 a.m. – 10:30 a.m., Los Angeles Marriott Downtown

Register now for the 2012-2013 Economic Forecast and Industry Outlook.

Friday, February 17: Business Without Borders Presents: 2012 Global Economic Outlook
7:30 a.m. – 9:30 a.m., Four Seasons Los Angeles at Beverly Hills