e-EDGE is now available as an RSS feed. [Click here to subscribe to it.]The U.S. Census Bureau reported last week that U.S. housing starts dropped by -11.0% in July to just 965,000 units (seasonally adjusted annual rate or SAAR), a new low, though still in the one million (plus-or-minus 1%) range visible since December 2007. Construction was started on just 641,000 single-family homes in July, down by -2.9% from June—and the lowest level for single-family starts since January 1991. In the volatile multi-family sector (apartments and condominiums), some 324,000 units were started last month (-23.6%), partially reversing last month’s huge increase (+41.3%).
Total housing starts peaked back in January, 2006 at 2.27 million units, according to the Census Bureau. Starts reached another new low for this downturn in July and were down by -58% from the peak quarter (Q1 2006). Single-family starts were even worse, down by -63%, while multi-family starts were “only” -14% below the peak. Not a pretty picture!
The underlying fundamentals in the housing industry are still quite negative. The latest monthly survey of homebuilder attitudes taken by the NAHB (National Association of Home Builders) continued at a record low level (data go back to 1985). About five-sixths of the builders reported slow sales, and seven-eighths complained about low buyer traffic. Expectations for future sales fell continue to be dismal, with only 25% expecting any improvement during the next six months.
The downturn in new home construction is now 30 months old and counting. Most builders and industry observers still expect housing construction activity to move down some more from here. They disagree though on how much farther starts will fall and how long it will take until the bottom is reached. The “optimists” expect the trough will be reached sometime this year, while the “pessimists” forecast declining starts through 2008 with the bottom not coming until 2009 or 2010. (Nancy D. Sidhu)
PR: http://www.census.gov/const/newresconst.pdf
The Federal Reserve Board reported last week that industrial production in the U.S. rose by +0.2% in July (seasonally adjusted), after increasing by +0.4% in June. Utility output dropped by -1.9% last month, offsetting June’s +2.3% increase. Mining activity increased by +0.9% in both July and June. Automotive output grew by +3.6% over the month, after rising by +4.8% in June. [These increases were likely temporary, reflecting the end of the American Axle strike.] Also on the upside, production of high technology products (computers & peripherals, communications equipment and semiconductors) rose by +0.3% in July. Excluding automotive and high tech, manufacturing output rose by +0.2% last month after falling by -0.2% in June.
Taking a longer view, total industrial production last month was down by -0.1% compared to July 2007. Output of high tech products has risen by a strong +17.4% over the year. However, production of motor vehicles and parts was down by -10.4%. Excluding these two important sectors, industrial production fell by -0.4% over the year to July. Among the gainers over the twelve-month period were: mining (which includes oil & gas drilling, +4.2%), petroleum refining (up by +4.1%), aerospace (+2.7%), and utilities (+2.5%). Losers included: wood products (-12.3%), textile & product mills (-11.1%), furniture & related products (-9.8%), printing & support (-5.7%), nonmetallic mineral products (-4.7%), and apparel & leather (-4.6%). (Nancy D. Sidhu)
PR: http://federalreserve.gov/releases/g17/Current/g17.pdf
Wholesale prices for finished goods, as measured by the Producer Price Index (PPI), continued to increase rapidly, rising by +1.2% in July (month-over-month, SA), following a sharp +1.8% increase the month before. Compared with July 2007, the PPI has risen by +9.8%, the fastest annual pace since June 1981. The finished consumer food price index rose by +0.3% in July, a moderate increase compared with the May and June 2008 readings. However, wholesale food prices were still +8.7% higher than July 2007. The finished energy index posted strong gains, rising by +3.1% in July, and was +28.0% higher than twelve months ago. Excluding food and energy, the core finished goods index surged by +0.7% over the month in July, and was up by 3.6% from July 2007, the fastest annual pace since May 1991.
Some pieces of favorable news: within the finished food group, wholesale prices of fruits, vegetables and eggs dropped dramatically over the month (SA), down by -12.4%, -9.2%, and -19.3%, respectively. Eggs, in particular, were down by -6.2% over the past 12 months.
Wholesale finished residential energy prices continued to advance in July. Persistent increases were recorded in home heating oil and residential gas prices, rising by +3.7% and +8.8%, respectively (month-over month). Over the past 12 months, wholesale prices for these two items have gone up considerably, soaring by +80.6% and +23.5%, respectively. After rising by more than 9% for two consecutive months, wholesale gasoline prices declined a bit – by -0.2% – in the month of July. Still, they were up by +36.0% from a year ago.
The increase in wholesale prices for intermediate goods was sizable as well, rising by +2.7% in July (month-over-month). For five consecutive months, the overall intermediate goods index has risen at a double-digit rate (year-over-year), and was up by +16.6% in July. Farmers’ costs have been elevated for awhile now, with prices of feeds, diesel, fertilizers, agricultural machinery, and other energy-related goods all up sharply over the year. Diesel wholesale prices increased at a more moderate pace compared with the past couple of months, rising by +2.6% over the month in July, and were +77.6% higher than in July 2007. Commercial and industrial natural gas surged by +9.4% and 9.0%, respectively in July. Over the year, they have risen by more than 30%. Jet fuel rose by +6.5%, and was up by a whopping +86.6% over the year. Excluding food and energy prices, the core index for intermediate goods rose by +2.0% over the month. The core intermediate goods index has risen by +10.2% over the past twelve months.
Wholesale prices for crude goods (goods ready for further processing) rose by +4.2% in July (month-over-month), following a +3.7% increase in June. Compared to a year ago, the overall crude goods index was up by +51.2%. Within the crude group, wholesale prices of soybeans (+7.0%), natural gas (+7.8%), and crude petroleum (+6.7%) led the price increases over the month. Wheat prices have declined four months in a row, and were down by -9.1% in July. Corn and soybeans wholesale prices were significantly elevated year-over-year, rising by +80.4% and +84.6%, respectively. Both are used for production of ethanol/biofuels. Total crude energy prices rose by +6.9% over the month, and were up by +84.9% over the year. Excluding food and energy prices, the core index for crude goods rose by +3.4% in July. The core crude goods index has risen by +36.3% over the past twelve months. (Candice Flor Hynek)
PR: http://www.bls.gov/news.release/pdf/ppi.pdf
The total number of containers handled at the ports of Los Angeles and Long Beach declined by -7.5% over the year to July to 1,261,862 TEUs. The number of import containers declined by -10.5% to 639,841 TEUs, while export containers continued to boom, rising by 23.6% to 327,014 TEUs.
At the port of Oakland in July, total container activity declined by -5.4% over the year, with all the weakness in empties. Import containers rose by 5.6%, while export container activity increased by 1.6%. (Jack Kyser)
Port of Long Beach PR: http://www.polb.com/economics/stats/latest_teus.asp
Port of Los Angeles PR: http://portoflosangeles.org/maritime/stats.asp
Port of Oakland PR: http://www.portofoakland.com/maritime/facts_cargo.asp
According to the Bureau of the Census, the value of two-way trade at the Los Angeles Customs District rose by 6.9% over the year to June. The total trade value was $31.9 billion. The six-month total trade value increased by 6.2% to $176.6 billion compared to the same period a year ago.
At the San Francisco Customs District, the June value of total two-way trade increased by 10.2% to $$10.6 billion. At $58.6 billion, the six-month total was 7.4% higher than last year.
At the San Diego Customs District, the June trade value was up by 5.0% to $4.6 billion. The District’s six-month total rose by 5.3% over the year to $26.9 billion. (Jack Kyser)
According to PKF Consulting, the hotel industry in the Bay Area continued to hold up through June. In San Francisco, the occupancy rate was 85.8% compared with 82.4% last year. Better yet, the average daily room rate (ADR) rose by 15.2% over the year to June to $203.73. By area in the City, Fisherman’s Wharf set the occupancy pace at 91.5%.
San Jose/Peninsula’s June occupancy rate was 77.8%, essentially unchanged from 77.9% last year. The ADR rose by 3.8% to $133.64. (Jack Kyser)
September 5-7: American International Real Estate Expo & Conference
Attend the 3 Day Conference with over 70 World Renowned Speakers from over 30 Countries. WTCA Los Angeles - Long Beach President Vance Baugham to keynote on September 5 from 12 - 1 p.m.. at the Business Luncheon Meeting: "Los Angeles County is the Creative and Business Capital of America".
Friday, September 5: Los Angeles Business Council: 2008 Mayoral Housing Summit
This event will feature Mayor Antonio Villaraigosa as keynote speaker and The Honorable Henry Cisneros, former HUD Secretary and CityView Chairman as Master of Ceremonies.
Wednesday, September 10: High Gas Prices: The Tipping Point - A Regional Response to a Global Crisis
The Southern California Association of Governments, county transportation agencies and Mobility 21 invite you to a discussion on the impact of increasing gas prices on the region and how residents, public agencies and the corporate world are responding.
Thursday, September 11: Asia Society Southern California: Business Leader Roundtable with Tejpreet S. Chopra, President and CEO of GE India
Mr. Chopra is responsible for directing GE’s strategies for growth in India. Prior to assuming his current role, Tejpreet served as President and CEO of GE Commercial Finance in India.
Tuesday, September 16: Los Angeles NABE – What is a Recession, Anyway? with Dr. Edward Leamer, Director of UCLA Anderson Forecast
Well renowned and respected economist Dr. Edward Leamer will share his views on our current economic situation.
Save the Date! Monday, November 17: The LAEDC 13th Annual Eddy Awards®
The Eddy Awards® is a cocktail, dinner, and awards gala to support fulfillment of the LAEDC mission to attract, retain, and grow businesses and jobs for the regions of Los Angeles County. The Awards were introduced by the LAEDC in 1996 to celebrate individuals, organizations, and now cities that demonstrate exceptional contributions to positive economic development in the region. Confirmed honoree: Rick Caruso, developer of The Grove and the Americana.
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