The trade deficit was expected to come down from USD 69.9 bln in the previous month to USD 66.0 bln in September. The outcome was even lower though, at 64.3 bln $. As Q3 trade deficit was somewhat less severe than assumed in the Q3 GDP report and thus should lead to an upward revision of the GDP figure. .

Reduced oil prices are one big part of the explanation. Indeed, Oil prices in the reference period sank from 66.12$ to 62.52 $ per barrel. The balance ex-oil came out only marginally better than the prior time, shrinking from 42.1 bln $ to 41.6 bln $. US exports (0.5% M/M) did rise to a new record (to 132.2 bln$), but this may have been pumped up a bit by stronger aircraft orders (rising 34% M.M). So, one trade balance month isn’t enough to draw significant conclusions in these circumstances. Is this just a temporary and fortunate improvement or the start of a reversal? Wait and see.

The decline in oil prices is also helping to drive import prices lower. These fell by 2.0% in October, spurred on by a fall of 8.3% in petroleum prices. Non-petroleum import prices also dropped, by 0.6% M/M. Export prices dropped 0.4% M/M, which was more than the forecast 0.1% drop. The sharper than expected drop in import prices suggest some downside risks for the headline PPI reading, to be released next Tuesday.

Initial claims are still very much on the low side. They fell from 328 K to 308 K in the week of November 4. This was below expectations calling for 318K. The 4-week average more or less stabilized at 311.250. Continuing claims rose to 2.448.000 in the week of October 28 compared to 2.405.000 in the prior week. These initial claims statistics indicate ongoing healthy employment conditions. With the recent unemployment level set at 4.4%, one could even speak of tight employment conditions. Despite, we still suspect that claims are abnormally low for statistical reasons

Wholesale inventories for September rose by 0.8% M/M, exceeding expectations for a 0.5% M/M and following an already strong 1.2% M/M increase in August. Inventories are up 9.9% Y/Y. The inventory-to-sales ratio jumped to 1.18 from 1.16. The inventories rose by more than assumed in the Q3 estimate and so pushes the latter up. However, this doesn’t bode well for Q4, as we suspect that it is an involuntary inventory build-up that might convince firms to trim back production.

Michigan consumer confidence unexpectedly deteriorated slightly in November. Indeed, the headline index dropped to 92.3 from 93.6 in September, when the index jumped sharply higher. The market was looking for a stabilization. Both the expectations and the current situation sub-indices eased somewhat. Michigan analysts didn’t draw many conclusions from the decline and we agree. The survey was based on a smallerthan- usual number of respondents. The 1-year (and long-term) inflation forecast edged both down to 3% from 3.1%. Of course, more declines in the headline index would raise concerns about consumer spending and the “absence” of a strong impact of lower energy prices on consumer buying attitudes.

Other news: Trade balance

UK’s trade balance showed a slight narrowing in September. The deficit came in from 6.856 (upwardly revised from 6.73 blb £) to 6.56 bln £. That was almost in line with expectations, which stood at 6.50 bln £. The narrowing was on account of slightly growing export and a slight decline in imports. The ONS itself warned though to thereat the numbers with caution due to lower trade related to VAT MTIC fraud with commodities.