e-EDGE is now available as an RSS feed. [Click here to subscribe to it.]The U.S. Bureau of Economic Analysis (BEA) reported last week that U.S. personal income declined by -0.7% in July, following increases of +0.1% in June and +1.8% in May. Plunging government transfer payments (-7.0% over the month) accounted for last month’s decline in total income, reflecting a huge decline in tax rebate payments.
After income taxes, disposable personal income dropped by -1.1% in July, following a decline of -1.9% in June and a surge of +5.7% in May. All three months were impacted by big changes in tax rebate payments: excluding rebates, DPI would have increased by +0.4% in May, +0.3% in June and +0.5% in July. In August and September, DPI growth should return to normal.
As to consumer inflation, the BEA’s price index for personal consumption expenditures (called the PCE deflator) increased by +0.6% last month, following increases of +0.7% in June and +0.4% in May. Rising food and energy prices were the primary culprits. Compared with July 2007, the overall PCE price index has increased by 4.5%, while the core PCE price index (which excludes food and energy prices) was up by 2.4%.
With more income going to pay for energy and groceries, consumer spending has lost all momentum. Real personal consumption expenditures (after adjusted for inflation) declined by -0.4% last month after edging down by -0.1% in June (May saw an increase of +0.3%). July’s lackluster results reflected lower real spending for consumer durable and nondurable goods, which fell by -1.6% and by -0.9% over the month respectively. Real spending for services showed no change in July.
The weakness in consumer spending during the June-July period provides very little support for the U.S. economy. Overall economic growth will continue to be sluggish in the 3rd quarter if consumers don’t open up their wallets more in August and September. (Nancy D. Sidhu)
PR : http://bea.gov/newsreleases/national/pi/pinewsrelease.htm
The Bureau of Economic Analysis also released preliminary estimates of corporate profits in second quarter 2008. Seasonally adjusted pre-tax profits from “current production” (which exclude inventory profits and include other adjustments) fell by -2.4% during 2nd quarter 2008 compared with a -1.1% decline in the 1st quarter and -3.4% in 4q2007 (which was dampened by extensive year-end write-offs). This was the fourth consecutive quarter-to-quarter decline in profits. Second-quarter 2008 profits were down by -7.0% compared with 2q2007.
Within the U.S. domestic sector, financial industries’ profits rose by +6.1% over the 1st quarter but were still down by -8.6% over 2q2007. Meanwhile, U.S. nonfinancial industries’ profitability dropped by -6.0% over 1q2008 and was down by -17.4% over the year. Net profits from the “rest of the world” surged by +26.4% over the year. [FYI, rest of the world profits is defined as the difference between U.S. receipts of profits earned by companies located in the rest of the world (which rose by +16.5%) and U.S. profit-based payments to companies and residents in the rest of the world (+0.9%).] (Nancy D. Sidhu)
PR: http://bea.gov/newsreleases/national/gdp/2008/gdp208p.htm
According to the Construction Industry Research Board, the number of new housing units permitted in the state through July continued to slow. At the 7-month mark, 41,823 units had been permitted, down by -43.5% over the comparable 2007 period. Single family permits accounted for much of the weakness, with the 7-month total down by -54.0%.
Around Southern California, the number of permits issued in Los Angeles County through July was down by -36.8% from the comparable 2007 period. Single-family permits were off by -53.6%. The 7-month permit total for Orange County lagged by -39.6%, with the single family sector off by -42.6%.
The housing permit total for the Riverside-San Bernardino area through 7-months was behind by -55.4%, to just 6,466 units. The single-family sector was down by -66.0%, however permits for multifamily units were up by 1.5%. New homebuilding was also slow in San Diego County with the 7-month total down by -32.5% from the like 2007 period. Ventura County’s 7-month total was off by -50.9%.
In the Bay Area through 7-months, the San Francisco metro area’s permit count was up by 10.6% over last year (the only increase in the state). The Oakland metro area, however, lagged by -46.2%, while San Jose was down by -38.8%.
Don’t expect much change in the trend over the balance of the year. (Jack Kyser)
Nonresidential construction activity in Southern California continued to slide in July. The Construction Industry Research Board reported that through July, Los Angeles County total permit values for total nonresidential buildings were up by almost $3.0 billion, a +20.8% increase from the comparable period in 2007. Industrial buildings were up by +28.5%, while retail was ahead by +9.8%. Also, permits valued at $250.2 million were issued for hotels in the County, compared with $35.4 million last year. However, office permit values in the County were down by -10.2% over the year.
In Orange County through July, total nonresidential building construction permits fell by -27.1% from the same period in 2007. All of the major sectors were down considerably: industrial (-66.5%); office (-54.7%); retail (-61.4%); and hotels (-76.5%). Riverside County’s results were also downbeat with total nonresidential building permit values down by -20.3% over the year and by type: industrial (-60.6%); office (-13.5%); and retail (-25.0%). San Bernardino County’s numbers were depressing as well, with total nonresidential building permit values off by -32.5%: industrial (-55.5%); office (-67.2%); and hotel (-48.8%). However, retail permit values through seven months were up by +7.7% over last year.
The results for San Diego County through July were mixed. Total nonresidential building permit values declined by -10.9% from the comparable period in 2007. Permit values for industrial were down by -18.1% while office was off by -34.4%. However, retail was up by +11.4% over the same period in 2007, and hotels were up by +148.9%. Ventura County’s numbers were also mixed. Total nonresidential building permit values were off by -1.5%. By type, both industrial and office permits declined considerably, falling by -59.1% and by -40.8% respectively. However, retail was doing well, with permit values up by +111.6% over the 2007 period. No hotel construction so far this year in Ventura County.
In the 9-county Bay Area through July, activity was mixed. Total nonresidential building permit values rose by +4.7% from the same period in 2007. By type, industrial buildings were ahead by +57.3% (strength in Contra Costa and Solano counties), but all the other categories were down: office (-1.8%); retail (-10.8%); and hotel (-67.1%). (Candice Flor Hynek)
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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