In January, the trade deficit showed a sharper narrowing than expected. The trade deficit dropped from $39.9B to $36.0B, while an outcome of $38.0B was forecasted. The breakdown shows a 6.7% M/M drop in imports, while exports fell by 5.7% M/M. Excluding petroleum, the trade balance stayed broadly unchanged (-$21.3B from - $21.1B). It is however important to note that only the nominal trade deficit contracted, while the real trade deficit widened, which indicates that trade might remain a drag on growth in the first quarter of 2009.
University of Michigan consumer confidence showed a marginal improvement in March. The headline index rose from 56.3 to 56.6, while the consensus was looking for a slight worsening. The economic conditions sub-index deteriorated from 65.5 to 62.3, while the economic outlook improved from 50.5 to 53.0, after falling sharply in the month before. Although slightly better than expected, consumer confidence remains at record low levels and a significant recovery is not yet expected as labour market conditions remain extremely fragile, with payrolls above 500 000 in the last four months.
EMU: retail sales show first increase in four months
In January, euro zone retail sales rose by 0.1% M/M, slightly less than the expected 0.2% M/M increase. The previous outcome was downwardly revised from flat to - 0.3% M/M. On a yearly basis, retail sales are down by 2.2% Y/Y. Looking at the details, sales of food, drink and tobacco dropped by 0.3% M/M, while non-food sales rose by 0.4% M/M. Nevertheless, this outcome sets up a somewhat more positive tone for household consumption in the first quarter of 2009 after falling by 0.9% Q/Q in the last quarter of 2008.
