The Economic Data Global Express (e-EDGE)

v.5 n.4       Released Jan. 22, 2001
Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

HIGHER INFLATION IN YEAR 2000

     The U.S. Consumer Price Index (CPI) rose 0.2% in December.  The decline in apparel prices (-0.4%) and transportation costs (-0.1%) helped offset the increase in food prices (+0.5%) and education & communication costs (+0.6%).  There was also a sharp decline in tobacco prices (-3.5%).  For the year, the CPI rose 3.4%, compared to 2.7% for 1999, 1.6% for 1998, and 1.7% for 1997.  Energy prices rose 14.2% in 2000 and 13.4% in 1999, after two years of declines in 1998 (-8.8%) and 1997 (-3.4%).  The core CPI, which excludes volatile food and energy prices, rose 2.8% in 2000 and 1.9% in 1999, which are somewhat higher than the rates in 1998 (+2.3%) and 1997 (+1.5%).  The low inflation era that came with the Asian economic crisis is now over.
     Locally, the LA Area CPI was unchanged in December, following a 0.2% decline in November.  Local CPIs are not seasonally adjusted.  Gasoline prices dropped 5.4% last month but were 16.2% higher than a year ago.  Utility electricity prices was unchanged from a year ago due to the SCE rate freeze.  Utility natural gas service costs, however, jumped 9.4% last month and were 58.4% above the December 1999 level.  Excluding food and energy prices, LA Area core CPI rose 2.7% in 2000.
     Up north, the Bay Area CPI rose 0.4% since October.  Gasoline prices declined 4.2% last month but were 22.7% above the year-ago level.  Utility natural gas prices rose 13.6% last month and was 60.3% higher than a year ago.  Excluding food and energy prices, the Bay Area core CPI rose 4.8% in 2000.
     OPEC announced its plan to cut 1.5 million barrels of production per day, effective Feb. 1.  It does not want the slowdown of oil demand and the U.S. economy to drive down the price of crude oil (as the Asian economic crisis had done).  Yet high energy prices are one of the reasons why the economy is slowing down.  We have a chicken-and-the-egg problem here.  Distillate inventories are still low, and a prolonged or cold winter can cause another episode of heating oil shortages in the Northeast.  Natural gas prices are under pressure on multiple fronts, including the cold weather and the demand by electricity generating plants.  Don't expect much relief in that gas bill anytime soon.  And of course, all consumers in California are watching the electricity crisis carefully.  Rate increases are inevitable but may not ease the pain for PG&E and SCE.
     If your labor or rental contracts contain cost-of-living adjustment (COLA) clauses, you may wish to download the appropriate data tables whose links are provided below.  (George Huang)
US PR: http://www.bls.gov/news.release/cpi.nr0.htm
LA PR: http://www.bls.gov/special.requests/sanfrancisco/ro9cpila.htm
Bay Area PR: http://www.bls.gov/special.requests/sanfrancisco/cpisanf.htm
LA CPI for All Urban Consumers (CPI-U) table: http://www.laedc.org/la-cpi-u.txt
LA CPI for Urban Wage Earners and Clerical Workers (CPI-W) table: http://www.laedc.org/la-cpi-w.txt
 

U.S. TRADE DEFICIT FALLS AS ECONOMIC PACE COOLS OFF

     The U.S. trade deficit on goods and services declined last November to $33.0 billion, $1.6 billion less than in October and $1.7 billion less than the September peak level. The decline of $1.3 billion in imports in November is the first visible impact on the global economy of U.S. economic slowing.  The size of the December 2000 and early 2001 monthly deficits will tell us a lot about how much spillover effects our trading partners will feel from America's less voracious appetite for imports.
     The new Bush Administration is starting its term with an estimated $375 billion trade deficit for 2000.  This is set to get worse if our moderate growth scenario for 2001 is correct and results in imports increasing more than exports in dollar terms.  Under a recession scenario, however, a more significant softening of import growth is likely to dominate the picture and the trade deficit could actually move down.
     The new U.S. Trade Representative-designate, Robert Zoellick, who is coming into the Bush Administration with full Cabinet rank, takes over at a very interesting time.  He is expected to pursue more "aggressive" market-opening and trade liberalization policies and make a strong case for Bush to regain fast-track negotiating authority from Congress.  If successful, these policies will help to boost U.S. exports.  Are we entering a new era in trade relations?  It's too early to tell, but let's hope so.  (Ken Ackbarali)
PR: http://www.census.gov/indicator/www/ustrade.html
 

HOUSING STARTS UP AGAIN IN DECEMBER

     Housing starts edged up to 1.58 million dwelling units in December from a revised 1.57 million units in November.  Single-family starts more than accounted for last month's increase, rising to 1.31 million units, their highest level since March.  Meanwhile, multifamily starts declined from 331,000 units to 262,000 units.  Over the course of 2000, total housing starts peaked in the first quarter at 1.73 million units, then dropped to 1.53 million units in the 3rd quarter before picking up some during the past 3 months.  Both single-family and multifamily sectors participated in the earlier dropoff.  However, only single-family housing improved during the 4th quarter.  Apartment construction continued to decline, falling by 4%.  [All figures in this paragraph are seasonally adjusted annual rates.]
     For all of 2000, total housing starts came to 1.59 million units, off by 4.4% compared to 1999.  [Figures in this paragraph are actual counts, not seasonally adjusted.]  Single-family starts dropped by 5.4%, accounting for all of last year's decline in activity. Multiple-family construction was almost even for the year, down by only 0.4%.  Fixed mortgage rates have been falling since February and now are in the 7% range.  Thus, the falloff in housing activity many are expecting in 2001 should be limited unless consumers get spooked.  (Nancy D. Sidhu)
PR: http://www.census.gov/indicator/www/housing.html
 

INDUSTRIAL PRODUCTION DOWN AGAIN IN DECEMBER

     U.S. industrial production dropped by 0.6% in December following 2 consecutive months with 0.3 percentage point declines.  Manufacturing was the problem area, plunging by 1.1% last month.  Mining activity edged up by 0.3%, while utility output surged by 6.5% (due to cold weather in the eastern half of the country).  The 4th quarter was the first "down" quarter for total industrial production since early 1991, during the last recession.  Declining production of autos, trucks and automotive parts was the reason for last quarter's decline.  The Big Three automakers and their suppliers are cutting back production in order to reduce bloated inventories.  Excluding automotive, industrial production was flat with the 3rd quarter.
     Taking a longer view, total industrial output in December rose by 3.1% compared to December 1999.  However, this figure hides much more than it reveals.  Output of high tech products (computers, communications equipment, semiconductors, etc.) soared by 75.5% over the past 12 months, while production by the rest of U.S. industry declined by 0.9%.   The automotive products sector led the way down, with December 8.6% below last year, followed by industrial materials, down by 4.4%, and defense & space equipment, down by 2.1%.  What was up last year?  U.S. production of home electronics rose by 9.2%, business equipment excluding computers by 6.4%, and oil & gas drilling--lured by higher energy prices--by 14.9%.  (Nancy D. Sidhu)
PR: http://www.federalreserve.gov/releases/G17/Current/
 

CONTAINER TRAFFIC FOR DECEMBER AND 2000

     The December container numbers told a tale of two ports.  Los Angeles posted a 12.9% increase over the year in loaded import containers, while the export container count was up by 11.7%.  Both increases were relatively restrained compared with activity earlier in the year.  The port of Long Beach recorded declines in both measures for December with loaded import containers down 2.7% and the number of loaded export containers off by 8.5%.  After good gains during the first half of 2000, Long Beach has posted declines in export activity in 3 of the last 4 months.
     For the year, Los Angeles handled a total of 4.88 million TEUs, an increase of 27.6%.  The port of Long Beach moved 4.60 million TEUs, up 4.4%.  Los Angeles' gain was due to an increase in the number of steamship lines serving that port.   The 2000 total for the San Pedro Bay ports was 9.48 million TEUs, up 15% over the 1999 total.  (Jack Kyser)
 

CATCHING UP ON THE LOCAL HOTEL BIZ

     Data for October and November have just been released by PKF Consulting.  In Los Angeles County, October occupancies ran at 79.9%, compared with 76.5% the previous year.  In November, the occupancy rate ran at 74.4%, versus 70.0% a year earlier.  The average daily room rate continued to climb, up by 6.5% over the year in October and by 4.9% in November.  Year-to-date, Los Angeles County's hotel occupancy rate averaged 77.7%, while the room rate averaged $122.51, up 6.7% over the comparable 1999 period.   Four areas in the County ran above the 80% mark, including Marina del Rey (84.7%), Santa Monica (84.0%), the South Bay (also 84.0%), and Valencia (80.3%).  And San Fernando was a valley on the edge at a 79.5% occupancy rate.
     Orange County's hotel occupancy rate came in at 75.9% in October versus 68.1% a year earlier, while the November reading was 67.1% compared with 64.0%.  The average daily room rate has also been moving ahead.  For 11 months of 2000, the County's occupancy rate has averaged 75.1%, while the room rate was up 5.5% to $110.50.
     San Diego County's hotel industry also did well in October and November, with occupancy rates of 76.2% and 70.0%, respectively.  Year-to-date, the occupancy rate averaged 77.9%, while the average daily room rate was up 5.4% to $135.73.  Three areas in San Diego County averaged over 80% occupancy; Old Town (87.9%), North City/UTC (81.2%) and Downtown (80.7%).  PKF is also reporting on Ventura County's hotel industry.  The October occupancy rate was 69.9% and November came in at 60.8%.  For 11 months of 2000, the occupancy rate in the County averaged 69.7%, while the room rate was $79.07, an 8.6% gain over the like 1999 period.  (Jack Kyser)
 

QUICK STATS:

* BLS: US Consumer Price Index for 12/00: +0.2% (11/00: +0.2%)
* BLS: LA Area Consumer Price Index for 12/00: +0.0% (11/00: -0.2%)
* Census: US housing starts for 12/00: +0.3% to 1.575 million annual units (11/00: +2.7% to 1.570mil. a.u.)
* Census/BEA: US exports for 11/00: -0.9% (10/00: -1.7%)
* Census/BEA: US imports for 11/00: -1.1% (10/00: -1.4%)
* Census/BEA: US trade deficit for 11/00: $32.99bil. (10/00: $33.55bil.)
* Conference Board: US index of leading economic indicators for 12/00: -0.6% (11/00: -0.4%)
* Federal Reserve: US industrial production for 12/00: -0.6% (11/00: -0.3%)
* Federal Reserve: US industrial capacity utilization rate for 12/00: 80.6% (11/00: 81.4%)

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 [email protected] 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 [email protected]