• Home ::
• Fundamental ::
• Economic Calendar ::
• US economic indicators

• Send
• Print
• Add To
• Rss

US economic indicators

The trade deficit is likely to have narrowed in February

Mon, Apr 7 2008, 11:59 GMT
by BHF-Bank Economics Department

BHF-Bank

• Import prices will probably have increased by 2% mom due to a sharp rise in energy prices

• UMI’s consumer sentiment could deteriorate further in April

On 18 March, the FOMC lowered the fed funds rate by 75 basis points to 2.25%. Due to the slowdown in economic growth and the financial crisis, rates have been reduced by a total of 300 basis points within 7 months. But the FOMC minutes might reveal a vigorous discussion amongst members as to whether the rate cuts so far had been too aggressive, given that inflation rates are still elevated. In fact, there were two dissenters in March, who would have preferred a smaller rate cut. Some Fed representatives now fear that the US central bank could lose credibility as a keeper of price stability, if the rate cuts continue at the recent pace. The financial markets have actually reduced their expectations of a further rate cut at the meeting on 30 April to 25 basis points. However, the Fed will do whatever is needed to prevent financial instability, which seems to be the predominant concern at present.

Wholesale inventories rose markedly by 0.8% mom in January, partly due to price increases for nondurable goods. As inflation rates moderated temporarily, we expect wholesale inventories to have increased by 0.3% mom only in February. The low level of the ISM inventories component, which dropped to a mere 45.4 that month, also indicates a slowdown in inventory growth.

Despite a significant rise in petroleum prices, the January trade deficit only widened slightly, by $344m to $58.2bn, because exports rose sharply again. In February import prices went up by a mere 0.2% mom, and in March imports are only likely to have gone up moderately due to the slowdown in domestic demand. Furthermore, the ISM export component is still on an elevated level, indicating that the percent rise in exports could again have been more pronounced than the rise in imports. We thus expect the trade deficit to have narrowed by about $1bn to $57.2bn.

Initial jobless claims jumped by 38k to 407k in the week ending 29 March. This was the first time they exceeded 400k since summer 2002 – apart from a short period after the hurricanes had hit the US in 2005. Seasonal adjustment problems due to the early Easter holidays could have contributed to the sharp rise. However, the increase in continuing claims to over 2.9m is another recession signal. At 395k, we expect initial jobless claims to have remained elevated in the week ending 5 April.

The CBO expects the March budget deficit to be just under $50.0bn. This would be only about half the deficit of March 2007, but the improvement is due to calendar-related factors. In the first half of the current fiscal year, the total deficit would nevertheless be much higher than during the same period of the last fiscal year (–$310bn as opposed to –$258bn).

The rise in import prices is likely to have accelerated sharply in March, as petroleum prices went up by about 17% mom in the first half of the month, which is the statistically relevant period. We forecast that import prices will have increased by 2.5% mom in March, raising the annual rate from 13.6% to a new record level of 14.6%.

The University of Michigan’s (UMI) final March consumer sentiment was revised down from 70.5 to 69.5. This indicates that late respondents were even more pessimistic, which does not bode well for the April report. In addition, expectations have fallen to the lowest level since January 1992, and the latest ABC consumer comfort poll also deteriorated. We expect the preliminary April UMI consumer sentiment to decline to 67.5, particularly due to the deterioration in labour market conditions, the rise in gasoline prices and the house price decline.

• Download Full US Economic Indicators

Published on  Mon, Apr 7 2008, 12:05 GMT

Archive

• PPI and CPI surge on energy in June, core rates remain moderate
  Published On Mon, Jul 14 2008, 12:06 GMT
• UMI consumer sentiment could remain at a long-term low in July
  Published On Tue, Jul 8 2008, 06:16 GMT
• June ISM indices are likely to have deteriorated
  Published On Mon, Jun 30 2008, 11:21 GMT
• June consumer confidence indices are likely to decline further from long-time lows
  Published On Mon, Jun 23 2008, 09:30 GMT
• First regional June PMIs are likely to remain in negative territory
  Published On Fri, Jun 20 2008, 06:22 GMT

[ View All ]

• More Reports from this Author
• More Reports from this Contributor

BHF-BANK Aktiengesellschaft  | Bockenheimer Landstrasse 10 60323 Frankfurt am Main
http://www.bhf-bank.com/w3/index.en.jsp | corp-comm@bhf-bank.com