The trade deficit unexpectedly narrowed in August to $30.7 B from $31.9 B previously. However, it was only a partial reversal from the widening of previous months. The 3-month average widened still slightly to $30B from $28.5 B. Exports rose by a meagre 0.2%, but imports dropped 0.6% M/M. The decline in imports was due to crude and aircraft, while cars rose still strongly (effect cash for clunkers). We wouldn’t draw many conclusions from this report.
EMU: Italian and French production surge
French industrial production rose a much faster-than-expected 1.9% M/M in August, following an upwardly revised 0.3% M/M in July, earlier reported at 0.1% M/M. It was the fourth consecutive monthly rise that suggests that activity in the industrial sector is reviving. Production stands so far 3.4% above Q2 average pointing to a strong Q3 GDP growth, well above the current BdF estimate of 0.3% Q/Q. Italian production showed a similar upbeat picture, as output rose by 7% M/M in August after increasing 2.4% M/M in July. This brings the Q3 average so far 5.9% above Q2, virtually securing that Italy will report growth in Q3, which would be the first quarterly gain since Q1 of 2008.
