e-EDGE is now available as an RSS feed. [Click here to subscribe to it.]The Federal Reserve Board released results of its quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) last week. The survey respondents are the senior officials charged with setting loan policy—including lending rates and terms—at 56 of the nation’s largest banks. In general terms, their job is to make sure their bank gets rewarded appropriately for the amount of risk it takes when it lends money to business and household borrowers.
The April 2008 survey results indicate that most banks continued to tighten credit for both business and household lending between January and April. Below are the grim details. [Note: the figures given below are the net percentage of banks tightening standards; e.g., the total percent tightening minus the total percent easing.]
Why does SLOOS matter? The most important question about the economy today is whether the problems in housing and mortgage finance will spread to other industries. Bank lending policies are important to the answer, as lower interest rates can’t help borrowers who can’t get a loan. The SLOOS survey shows that banks are still unwilling to make loans to most types of customers, not the hoped-for response! (Nancy D. Sidhu)
PR: http://federalreserve.gov/boarddocs/SnLoanSurvey/200805/
The Bureau of Labor Statistics reported that U.S. productivity in the nonfarm business sector increased by 2.2% (quarter-over-quarter, SAAR) in the first quarter of 2008, following a revised 1.8% increase during 4Q 2007. U.S. workers produced more and worked less during the first quarter of 2008. Output rose by 0.4% during the first quarter, while hours worked declined by 1.8%. Hourly compensation increased by 4.4%. Bonus income shows in the Q4-Q1 compensation figures. The unit labor costs softened a bit and rose by 2.2% compared with the 3.1% growth in 4Q 2007.
In the manufacturing sector, productivity went up by 4.1% in the first quarter, following a 4.2% growth the previous quarter. Output during the first quarter declined by 0.3% and total hours worked declined as well, down by 4.2%. Hourly compensation for manufacturing rose by 6.7%. Unit labor costs rose by 2.5% compared with the 0.2% growth in 4Q 2007.
On a year-over-year basis, productivity in the nonfarm business sector rose by 3.2%. Output went up by 2.6%, while hours worked declined by 0.6%. Nonfarm unit labor costs rose by 1.5% from 1Q 2007. In the Manufacturing sector, productivity went up by 4.1%. Output grew by 2.1%, while hours worked declined by 2.0%. Manufacturing unit labor costs declined by 1.3% from 1Q 2007. (Candice Flor Hynek)
PR: http://www.bls.gov/news.release/pdf/prod2.pdf
California reclaimed the number one spot for state exports in March in terms of U.S. Principal Parties of Interest (USPPI) with a total of $13.3 billion (an increase of +4.4% from a year earlier. Texas dropped back to the number two position with $12.5 billion (an increase of 15.3%). Texas edged out California in the export of manufactured goods ($10.2 billion to $9.5 billion) in March, while California maintained its perennial position as a dominant exporter of non-manufactured goods ($1.5 billion versus $891.7 million). With the exception of February, California has led the nation in state exports since the inception of the USSPI data series in January 2006.
Using the BEA’s Origin of Movement (OM) series, Texas again led the nation in March with $15.6 billion in total exports, a year-over-year increase of +11.3%. During that same period, California saw its total exports increase by 4.5% to $12.4 billion. California’s export of manufactured goods increased by +4.0% year-over-year to $7.8 billion, while Texas jumped by +15.7% to $12.5 billion. California’s non-manufactured exports increased by +12.4% to $1.5 billion.
State export data by commodity are not available by USSPI. However, commodity data is available for OM state export figures. For both California and Texas, overseas demand for high technology goods led export growth in March. Oil products and semiconductor manufacturing equipment had the largest contribution to year-over-year growth for California OM exports, while air transportation equipment had the largest negative contribution. Oil products and wheat contributed the most to the year-over-year growth in Texas OM exports.
The USPPI measure allocates export trade value according to the location of companies having the greatest economic interest in an international transaction, while OM measures trade values at the point where international shipments begin, often at consolidation points near border crossings or other ports of exit. With its long border with Mexico, Texas is home to numerous international border crossings and warehousing facilities, as well as major rail links between the United States and Mexico. Industry observers believe that many shipments originating in other states (including California) are credited with Texas exports to Mexico under the OM state export series. (April Lisonbee & Eduardo J. Martinez)
The State Controller just released the latest financial results for the General Fund, covering the first ten months of fiscal (FY) 2007-2008, which began on July 1st, 2007. Compared to the first ten months of FY2006-2007, total receipts have increased by 8.7% to $85.9 billion, while total disbursements grew by 2.9% to $95.4 billion. With spending outpacing revenues, the General Fund ran a deficit of -$9.5 billion over the ten-month period. Still, this was better than the deficit of -$13.6 billion registered during the first ten months of the previous fiscal year.
This year’s -$9.5 billion shortfall was covered in three ways. (1) The General Fund’s cash balance ($2.5 billion as of July 1, 2007) has been drawn down to minus $7.0 billion. (2) The State of California sold $3.3 billion in Economic Recovery Bonds in February and borrowed $7.0 billion in November (by selling short-term Revenue Anticipation Notes) to cover the cash drain. (3) “Internal borrowing” transferred funds from accounts in the General Fund and special funds to others.
Other details from the Controller’s report: (1) Revenue from the big three tax sources—corporation, income and sales & use taxes—increased by +2.1% (+$1,522,000) over the previous year, slower than the 3.1% growth pace of the first ten months of FY2006-07. (2) Corporation tax revenues have dropped by -6.4% (-$559,000) compared to last year, while retail sales and use tax revenues were down by -$117,000 (-0.6%), mostly due to the drop in new homebuilding and slower automotive sales. (3) On the spending side, Local K-12 Education has received $33.3 billion so far, a decrease of -$507,000 (-1.5%) over same period of the previous fiscal year. However, contributions to the State Teachers’ Retirement System (CALSTRS) grew by $664,000, and spending for other local educational purposes rose by $1.50 million. (4) Spending for State Operations was up by $1.18 million, or 5.3%. The biggest dollar increase was $552,000 for the Department of Corrections followed by debt service, which has risen by $215,000.
It looks like the State’s General Fund will run another deficit in fiscal year 2007-2008, for the second year in a row. Soon, the Governor will publish a revised FY2008-09 budget proposal with new estimates for this year and next. However, the trends observed to date are not comforting. Revenue growth is slowing and spending is not, at least not enough to stanch the red ink. It’s budget time again in Sacramento and some difficult decisions lie ahead. (Nancy D. Sidhu)
According to PKF Consulting, hotels in the Bay Area continued to perform well in March. In San Francisco, the occupancy rate was 76.9% compared with 75.4% last year. The average daily room rate (ADR) rose by 8.0% over the year to March to $200.96. By area, Fisherman’s Wharf did the best, with a March occupancy of 84.6% while the ADR zipped up by 20.9% to $161.81. On the other hand, the Financial District saw its occupancy rate dip to 70.6% compared with 77.7% in March 2007.
The March hotel occupancy rate in San Jose/Peninsula was 71.2%, down modestly from last year’s 72.2%. However, operators were able to push up the ADR by 8.2% to $152.98. (Jack Kyser)
Register today: Wednesday, May 14
LAEDC International Trade Outlook
Breakfast & Networking: 8:00 a.m. - 8:30 a.m. Program: 8:30 a.m. - 10:00 a.m. At Keesal, Young and Logan – Long Beach.
Foreign Direct Investment is a major contributor to LA County's economy. Join us to preview this special report on FDI along with the International Trade Outlook report highlights. For more information and sponsorship opportunities, please contact Eydie Galper (213) 236-4828 or e-mail: eydie.galper@laedc.org.
Wednesday, May 21
Los Angeles Chapter of the National Association for Business Economics "
The Economic Outlook for the United States and California: Slow Growth or Recession?" with Ross DeVol of Milken Institute. To register and for more information www.lanabe.org
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