The Economic Data Global Express (e-EDGE)

v.8 n.26      Released June 28, 2004

Produced by the Los Angeles County Economic Development Corporation as a public service to the global community.

GREENSPAN'S "GRADUALISM" TO PREVAIL -- BABY-STEPPING RATES UP

     The Federal Reserve Open Market Committee (FOMC) will meet on Tuesday and Wednesday to consider the state of the U.S. economy and its monetary strategy.  One scenario can be quickly ruled out, i.e. keep interest rates where they have been since June 2003.  A hike in the Fed Funds Rate (FFR) this week should be no surprise, as Chairman Greenspan has gone to extraordinary lengths to signal a policy change.  The issue is whether the FOMC will follow a "gradualist" approach and raise the FFR by 25 basis points several times this year or opt for a more aggressive 50 basis-point rise.  The last time the Fed engaged in monetary tightening was four years ago, before the stock market (dot-com) bubble burst and before 9/11.
     Some observers have argued that inflation is once again rearing its ugly head.  Oil prices recently were over $40/bbl, commodity prices across the board are up, and the economy's growth rate is robust.  However, it must be noted that strong gains in productivity have constrained cost increases and moderated the rise in the CPI.  Headline inflation, the overall CPI, has increased by 3.1% from May 2003 to May 2004, while core inflation (ex energy and food prices) has jumped only 1.7% in the same period.  With the focus on rising inflation, the battle lines at the FOMC are drawn between most of the regional Fed presidents, a more "hawkish" bunch and the majority of the Fed governors, a more "dovish"/moderate group.
     At this time, monetary policy is in one of its classic dilemmas, truly a catch-22 and no-win situation.  If inflation gathers traction during the 2nd half of '04, the gradualist strategy will be seen as wrong headed and critics of the Fed will chastise the FOMC for misreading the tea leaves.  On the other hand, adopting a more aggressive policy of monetary restraint runs the risk of shortening the life of the current economic expansion and damaging financial markets.  To top off the difficulties, the presidential election climate has intensified the spotlight on the Federal Reserve.
Outcome:
     25% (1/4%) rise in FFR, a probability of 70%
     50% (1/2%) rise in FFR, a probability of 20%
     No Change, a probability of 10%  (Ken Ackbarali)

MAY DURABLE GOODS PICTURE: MIXED

     New orders for durable manufactured goods fell by 0.7% in May after registering a decline of 0.8% in April.  However, these declines were relatively modest and followed a 4.4% surge in March.  Thus, orders are still on an upward trend.  Only two industry sectors received more orders in May.  Primary metals orders increased by 3.6% after a 4.3% plunge in February, while orders for "All Other Durable Goods" rose by 0.7% over the month.  The largest order declines were registered by communications equipment--down by 12.5% after an April surge of 21.1%--and motor vehicles and parts, which fell by 4.0% over the month.
     This year's upturn in manufacturing shows up best in the year-to-date comparisons.  New orders for all types of durable goods through May have increased by 12.2% compared to the first five months of 2003.  On the upside were--surprise, surprise--nondefense aircraft and parts, up by 26.4%, and primary metals, up by 23.4% due mostly to rising prices.  Orders for computers and electronic parts have increased by a respectable 14.9%.  Defense aircraft and parts was the only sector to register lower new orders year-to-date, falling by 28.6%.  However, defense aircraft shipments were up by 22.3%, reflecting strong orders in previous years.  (Nancy D. Sidhu)
PR: http://www.census.gov/indicator/www/m3/

RESALE HOUSING MARKET VERY WARM FOR MAY

     According to the California Associations of Realtors (CAR), the states resale housing market rumbled upward during May.  Unit sales increased by 10.5% over the year, while the median price advanced by 25.6% to $465,160.  The median number of days it took to sell a single family home was 24 days in May, compared to 27 days a year-ago.  However, there have been reports that homes are starting to stay on the market a little longer than in recent months.
     Around Southern California, the May numbers were mixed.  The median price of a resale home in Los Angeles County advanced by 29.2% to $434,790, but unit sales declined by 10.8% over the year.  In Orange County, the median price shot up by 40.7% to $662,290, but unit sales dropped by 7.5% from May 2003.  In Ventura County, the median price rose by 34.5% to $614,850, while unit sales dropped by 8.2%.  The unit sales numbers in all three counties reflect both a shortage of attractive inventory as well as some resistance to asking prices.
     The Riverside-San Bernardino area saw median prices jump by 40.8% during May to $292,060, while unit sales zipped up by 22.1%.  In San Diego County, the median price increased by 38.3% to $565,030, while unit sales inched up by 1.4%.
     In the San Francisco Bay area, resale prices increased by 17.6% in May to $649,240, and unit sales moved ahead by a healthy 17.6%.  In the San Jose area, the median price increased by 16.5% to $635,000, while unit sales roared ahead by 35.2%.
     In the meantime, the great debate about a housing bubble (is there is or is there aint one) continues.  (Jack Kyser)
PR: http://www.car.org/index.php?id=MzM4MzI=
 

AIRPORT TRAFFIC FOR MAY (WITH A FEW LAST NUMBERS FROM APRIL)

     We have been trying to get all the airport traffic numbers for April, and now the May figures are rolling in.  No matter what month you are looking at, there is no mistaking the fact that air traffic is coming back.
     At Bob Hope Airport, April passenger traffic was up by 6.3% over the year, the third month in a row of increases, after a period of ups and downs during the second half of 2003 into early 2004.  At Long Beach Airport, April traffic was up by 10.9% over the year.
     Now for those May numbers.  At Los Angeles International, total passenger traffic during the month was up by 15.9%, with a 27.0% increase in international activity (this makes three months in a row of double digit gains in the latter).  Ontario International was up by 6.1% during May, with the international passenger count ahead by 50.1%.  An accompanying press release did warn about long lines at security checks during the summer travel season.
     Elsewhere in Southern California, May traffic at John Wayne/Orange County Airport advanced by 8.6%, helped along by some new service, while Palm Springs was up by 13.0%.  However, Long Beach recorded what for it was a wan 0.1% gain.  But remember, this facility is bumping up against its limit on flights, and in the some- things-never-change department, the surrounding communities are still nervous about more activity (a very pleasant facility and Jet Blue are a very powerful combination.
     The news air cargo during May was mixed.  LAX recorded a 5.1% increase in tonnage, but Ontario was down by 0.5%.  International air freight tonnage at LAX was strong during May.  Export tons were up by 27.1% (the third month in a row of double digit gains), while import activity was ahead by 12.0%.  Total international air freight tonnage was up by 18.0% over the month.  (Jack Kyser)
BUR data: http://www.burbankairport.com/pdf/STATS2004April%20for%20PDF.pdf
LAX data: http://www.lawa.org/statistics/tcom-0504.pdf
ONT data: http://www.lawa.org/ont/statistics/tcom-0504.pdf
PSP data: http://www.palmspringsairport.com/documents/May2004_recordpax_62204.prs.pdf
LGB data: http://www.longbeach.gov/airport/airport_statistics.asp
 

APRIL INTERNATIONAL TRADE VALUES

     The April numeros on international trade values contained more good news.  At the Los Angeles Customs District, export values were up by 7.2% over the year, while imports increased by 12.6%.  Total two-way trade value at Los Angeles was up by 11.1% to $21.2 billion.  The 4-month total was up by 14.1% over the comparable 2003 period to $81.2 billion.
     The San Francisco CD continued on the comeback trail in April, with export values up by 21.5%, while import values increased by 16.9%.  The April two-way trade total was up by 18.7% to $7.5 billion, while the 4-month total was up by 15.3% over the comparable 2003 period to $29.2 billion.
     At the San Diego CD, export values during April increased by 9.0%, while export values moved ahead by 12.2%.  The months total two-way trade value was up by 11.1% to $3.1 billion, while the 4-month total of $12.1 billion was 8.9% above the like 2003 period.  (Jack Kyser)


DON'T FORGET TO SUPPORT OUR TROOPS OVERSEAS

     Here are some links to show them our gratitute:
Send them gift certificates: http://www.aafes.com/docs/homefront.htm -- for purchases by soldiers or their families
Send them a USO Care Package: http://www.usocares.org/home.htm
Send grocery certificates for Guards & Reserves families: http://www.commissaries.com/certificheck/index.htm
Send them phone cards (for them to call home): http://www.operationuplink.org
Donate airline miles: http://www.heromiles.org over 540 million miles (=22,600+ tickets) have been donated!) -- for soldiers on emergency leave to get home for free or for family members of wounded soldiers to visit them; a bill is pending in both houses of the Congress to make this a permanent program...
Send them a note: http://anyservicemember.navy.mil
Send virtual thank-you cards: http://www.defendamerica.mil/nmam.html

QUICK STATS:

* BEA: US Gross Domestic Product (final) for 1Q04: +3.9% (4Q03: +4.1%)
* BEA: US personal consumption expenditure (final) for 1Q04: +3.8% (4Q03: +3.2%)
* BEA: US nonresidential fixed investment (final) for 1Q04: +5.3% (4Q03: +10.9%)
* BEA: US implicit GDP deflator (final) for 1Q04: +2.9% (4Q03: +1.5%)
* BEA: US personal income for 5/04: +0.6% (4/04: +0.6%)
* BEA: US disposable personal income for 5/04: +0.6% (4/04: +0.6%)
* BEA: US personal consumption expenditure for 5/04: +1.0% (4/04: +0.2%)
* BEA: US personal savings rate for 5/04: 2.2% (4/04: 2.6%)
* Cal. Assn. of Realtors: California existing single-family detached home sale for 5/04: -1.3% to 632,380 annual units (4/04: +8.6% to 640,710a.u.)
* Cal. Assn. of Realtors: California existing condo sale for 5/04: -5.0% (4/04: +5.9%)
* Cal. Assn. of Realtors: California median single-family detached home sale price for 5/04: +2.9% to $465,160 (4/04: +5.8% to $453,590)
* Cal. Assn. of Realtors: California median condo sale price for 5/04: +4.3% to $366,770 (4/04: +4.9% to $351,650)
* Cal. Assn. of Realtors: LA County existing home sale for 5/04: -4.2% (4/04: -0.6%)
* Cal. Assn. of Realtors: LA County median home sale price for 5/04: +2.7% to $434,790 (4/04: +8.1% to $423,480)
* Census: US new durable goods orders for 5/04: -1.6% (4/04: -2.6%)
* Census: US durable goods shipments for 5/04: -0.7% (4/04: -0.8%)
* Census: US durable goods inventories for 5/04: +0.4% (4/04: +0.6%)
* Census: US unfilled durable goods orders for 5/04: +0.4% (4/04: +0.7%)
* Census: US new home sales for 5/04: +14.8% to 1.369 million annual units (4/04: -7.9% to 1.192mil.a.u.)
* Conference Board: US Help-wanted Advertising Index for 5/04: 39 (4/04: 38)
* Natl. Assn. of Realtors: US existing home sales for 5/04: +2.6% to 6.80 million annual units (4/04: +2.3% to 6.63mil.a.u.)
* Univ. of Michigan: US Consumer Sentiment Survey for 6/04: 95.6 (5/04: 90.2)



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]