Mexico Business Center - Southern California Economic Development Reports
Fourth Quarter 2010 Economic Report Card
According to “advance” estimates of the Bureau of Economic Analysis released last week, the U.S. economy grew by +3.2% last quarter (seasonally adjusted annual rate or SAAR). This marked the sixth consecutive quarterly increase since the recession ended in mid-2009. Furthermore, the level of economic activity has finally overtaken that recorded in the last quarter of 2007 (the recession officially began in December 2007).
Progress was evident in many sectors of the economy during the fourth quarter:
- Consumer spending for goods and services provided the biggest upward thrust to the economy, adding +3.0 percentage points to last quarter’s growth rate.
- Unusually, imports declined in the fourth quarter. Because imports enter the GDP calculation with a minus sign, the increase had the effect of boosting the quarterly GDP growth rate by +2.4 percentage points.
- Exports continued to grow rapidly, which contributed +1.0 percentage point to the quarterly growth rate.
- Business spending for new equipment and software also increased and contributed +0.4 percentage points to fourth quarter GDP growth.
- Residential investment spending edged up slightly, boosting overall economic growth by +0.1 percentage point.
- Business investment in nonresidential structures edged up for the first time since 2q2008. While positive, the impact on quarterly GDP was small, just +0.02 percentage points.
Three sectors made negative contributions to GDP growth last quarter.
- Industrial production grew smartly in recent quarters. By last fall, stocks seemed high enough to many businesses; so in the 4th quarter, the net rate at which firms were building inventories plunged. This change counted as the single biggest negative to the economy last quarter, drawing a whopping -3.7 percentage points out of the growth rate.
- State and local government spending decreased, paring -0.1 percentage point from last quarter’s growth rate.
- Federal government spending declined slightly in the fourth quarter, and so deducted -0.01 percentage point from economic growth.
To summarize, U.S. economic growth surged during the fourth quarter. The real "push" came from the decisions of many households to purchase more goods and services. In addition, imports declined; investment spending by U.S. businesses rose; and exports increased. Even so, a few weak spots were visible. Businesses largely ended their drive to boost inventories, a key source of growth in previous quarters. And state and local governments faced severe budget constraints. Still, these weren't enough to derail the economic recovery.
Note: The BEA called its release an “advance” report because all of the figures are still preliminary. When preparing its estimates, the BEA did not know for sure what happened to foreign trade, inventories, or construction in December and had to make some assumptions, which may or may not prove correct. Also, the information on consumer spending during December was still incomplete. We’ll get a clearer picture of the fourth quarter economy a month from now, but don’t expect the main story line to change significantly. (Nancy D. Sidhu)
Source: www.bea.gov
California’s Resale Housing Market in December
The California Association of Realtors (CAR) recently released their December 2010 report for existing home sales and prices in California. Statewide, sales of existing single-family homes dropped by -6.8% compared with December 2009 to 520,680 units (seasonally adjusted, annualized rate). The median price also fell, declining by -1.6% to $301,850. For 2010 as a whole, 494,900 homes were sold, which was down by -9.5% compared with 2009. The median price rose by +10.2% to $302,900 versus $275,000 in 2009.
In Los Angeles County, unit sales fell by -8.6% over the year in December, and the median price declined by -3.8% to $340,200. In Orange County, the pace of sales dropped by -5.6%, while the median price slipped by -7.5% to $458,700. Last month, unit sales in the Riverside-San Bernardino area slumped by -11.5%, but the median price inched up by +1.3% to $183,540. Unit sales in San Diego were down by -9.5% last month, and the median price fell by -1.7% to $375,790. In Ventura County, unit sales declined by -6.6%, but the median price rose by +3.2% to $441,570. Ventura County was one of only six regions in California covered by the CAR report to post a year-over price increase last month.
In the San Francisco Bay area, unit sales were off by -2.8% over the year, while the median price edged up by +0.3% to $537,520.
The inventory of unsold homes was 5.0 months in December, up from 3.8 months in December 2009.
The California resale housing market began 2010 on a strong footing. Spurred by home buyer tax incentives, sales volumes and median prices posted healthy gains over the first half of the year. The second half of the year was a different story entirely. With the expiration of the tax credits, market fundamentals prevailed, forcing the housing market to wean itself off government aid. The result was a decline in sales and smaller increases in median price. What happens in 2011 depends on how fast lenders work through their foreclosure files. Also needed: improvement in the labor market and greater confidence on the part of potential buyers that the housing market has stabilized. (Kimberly Ritter)
Source: http://www.car.org/newsstand/newsreleases/decsalesprice/
LAX and Orange County Airport Report 2010 Figures
Los Angeles International Airport (LAX) last week announced that total passenger volume increased by +4.5% in 2010, with 59,069,409 passengers when compared to 56,520,843 total passengers in 2009. The total of domestic passengers grew by +4.1% while the number of international passengers expanded by +5.5%. In addition, total air cargo tonnage jumped by +15.8% in 2010 compared with the year earlier.
Orange County Airport (John Wayne Airport) also reported 2010 year-end figures. Total passengers at Orange County Airport dropped by -0.5% in 2010 falling from 8,705,199 to 8,663,452. Air cargo tonnage fell as well in 2010, by -1.5%. (Ferdinando Guerra)
Source: http://www.lawa.org/welcome_lax.aspx?id=798; http://www.ocair.com/NewsRoom/News/AirportStats.aspx
Global Economic Monitor
IMF: The International Monetary Fund (IMF) released its January update last week to its October World Economic Outlook (WEO). The IMF revised most of its projections upward including the World Output from +4.2% to +4.4% for 2011. The most significant revision was related to the U.S. outlook for 2011, as the Fund now forecasts the U.S. economy expanding by +3.0% instead of +2.3% this year.
U.K.: The Office of National Statistics last week announced that the U.K. economy contracted by -0.5% in the fourth quarter of 2010 on a year-to-year basis. Experts placed much of the blame on severe weather. However, many observers have said that the economy would not have expanded even if the weather had been normal. Inflation and austerity measures are big concerns going forward for the British economy. (Ferdinando Guerra)
Residential Construction: Weak Performance in May Trims YTD Gains
The total number of housing permits issued in California during May increased by +6.0% to 35,400 units from 33,400 units a year earlier (seasonally adjusted annual rate or SAAR). Single-family home permits plunged by -19.1% to 20,700 units. This was the lowest single-family rate since February 2009's rate of 18,300 units. In stark contrast, the rate for multi-family homes climbed by +88.5% to 14,700 units, up from May 2009's extremely low rate of 7,800 units. Over the month, permits for single-family homes dropped by -11.9% while the number of multi-family permits increased by +28.9%. In comparing the first five months of 2010 to the same period last year, we find total new housing permits were up by +15.7%. Single-family home permits increased by +12.5% and multi-family permits rose by +21.2%.
In Los Angeles County, 315 permits were issued in May compared with 559 permits posted a year ago. Permits for single-family homes declined by -34.0% to 136 units, while the number of multi-family units permitted was 179 units compared with 353 (-49.3%) in May 2009. Year-to-date, the total number of housing permits issued was up by +6.6%. During the first five months of 2010, single-family permits rose by +13.9% and multi-family permits increased by +3.2%. (Note: Data at the county level are not seasonally adjusted).
The May numbers for Orange County were somewhat better. The total number of housing permits issued was up by +11.1% (to 200 units) compared with the same period last year; 163 permits (+15.6%) were issued for single-family homes, while the number of multi-family units permitted slipped by -5.1% to 37 units. On a YTD basis total housing permits increased by +18.1%. During the first five months of this year, 638 single-family homes were permitted (+31.5%), while permits for the County's troubled multi-family sector edged down by -0.9% to 342 units.
In the Riverside/San Bernardino area, housing permits fell by -32.3% to 329 units in May (2,559 YTD). Once again last month, permits for single-family homes accounted for 100% of the total number of housing permits issued in the Inland Empire. For the first five months of this year, single-family permits jumped by +23.4%, while permits for multi-family residences plummeted by -49.6%.
The May permit count in Ventura County was just 22 units (versus 37 in May 2009), but that was enough to push up the total year-to-date count by +17.4% compared with the same period last year. In San Diego County, the total number of units permitted last month was 435 compared with 221 a year ago. Year-to-date, the total number of permits issued was up by +18.7% from the first five months of 2009.
Of California's 28 metro areas, the San Francisco metro area posted the second worst performance last month (just behind El Centro). Only 50 permits were recorded during May, bringing the current YTD total to 203 (down by -64.1% compared with the same period last year). In the Oakland metro area, a total of 252 permits were issued in May or 1,419 year-to-date (+54.4%). In the San Jose area, total permits for the first five months of 2010 increased by a factor of nearly four. So far this far this year, 972 new housing permits have been issued in contrast to 251 for the same period in 2009. (Kimberly Ritter)
Source: http://www.cirbdata.com/
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