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Weekly Economic Commentary


International Trade and Jobless Claims Data Paint a Bullish Picture

August 9, 2012

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The trade deficit of the U.S economy narrowed to $42.9 billion in June from $48.04 billion in the prior month. The trade balance of goods, in real terms, narrowed to $44.2 billion in June, which results in a smaller trade deficit in the second quarter compared with the assumption embedded in advance estimate of second quarter GDP. The upshot is that, holding other things constant, second quarter real GDP is most likely to show growth that exceeds the current estimate of 1.5%. The change in inventories is the missing item that could alter this prediction. Factory and wholesale inventories for June are available at the present time; the tally of inventories will be complete when retail inventories numbers are published on August 14.

DEC 8/9/2012 Chart 1

From the details of the report, imports of goods and services fell 1.5% in June, following a 0.8% drop in May. In real terms, imports of goods dropped 0.3% in June, reflecting a 0.7% decline in imports of non-petroleum goods and a 1.8% gain in imports of petroleum goods. Exports of goods and services have risen in May (+0.3%) and June (+0.9%). Real exports of goods and services rose 2.9%, which is higher than expected. Among the major categories of exports, autos (+5.7%), consumer goods (+6.0%), and other goods (+6.8%) posted large increases in June. The strength in exports is a bit of a surprise as the world economy is slowing. The trade deficit narrowed vis-à-vis Canada, Euro area, Japan, and Mexico but widened vis-à-vis China during June.

DEC 8/9/2012 Table 1

In other economic news, initial jobless claims fell 6,000 to 361,000 during the week ended August 4. The four-week moving average stands at 368,250. Distortions from seasonal adjustments related to the auto sector’s summer plant shutdowns had rendered interpretation of jobless claims difficult in recent weeks. The latest read of initial jobless claims is free from distortions and is encouraging given the levels seen in the second quarter (375,000 – 385,000). Continuing jobless claims, which lag initial jobless claims by one week, moved up 53,000 to 3.33 million.

DEC 8/9/2012 Chart 2

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.