This week trade data was released showing record imports and exports for March – and the trade balance worsened. Bad news – Right???
Surely the average reader who views the above US Census graphic comes away thinking the USA has a growing trade balance deficit. The above graphic was seasonally adjusted – but not adjusted for inflation.
Looking at the data set without seasonal adjustment – but adjusting for inflation using the BLS exim (export,import) price indices, a different conclusion is observed.
From 01Jan2007 thru 31Mar2011, GDP (not adjusted for inflation) increased 10.2%, while the trade deficit (unadjusted for inflation) declined 13%. If real dollars are used (inflation adjusted), the trade deficit has declined 35% since the beginning of 2007.
Over the last 4 years, the trade balance has been improving. Over the last 9 months, the trend is clearly towards a less bad trade deficit. This is caused by exporting more “things” and importing less “things”.
The above graphic removes price changes from the exim data. It shows the USA is exporting more “things” than before the Great Recession – while the USA is still not importing “things” at the same rate as before the Great Recession.
The near term future should have an improving commodity price picture hopefully improving the trade balance trends.
Economic News this Week:
Econintersect’s economic forecast for May 2011 indicates a peaking of this current economic sub-cycle. In simple words, the same rate of improvement of the moderate recovery seen in March and April will continue in May.
This week the Weekly Leading Index (WLI) from ECRI declined from a downwardly revised 6.6% to 6.4%. This level implies the business conditions six months from now will be approximately the same or slightly improved compared to today.
Initial unemployment claims 4-week moving average increased moderately in this week’s release. The data for the last two months as been quite noisy, and it remains important to follow the four week moving average for analysis of unemployment to smooth out the reporting idiosyncrasies. The non-seasonally adjusted claims are under the prior year’s numbers this week, but the bad news is the 4 week moving average is strongly above the dreaded 400,000 new claims per week threshold historically indicating poorer jobs growth may be coming.
The data released this week were consistent with a moderately improving economy.
Weekly Economic Release Scorecard:
|April Consumer Price Index
||The 3.2% YoY price increase is almost all caused by energy, food and autos
|April Sea Container Counts
||7% year-over-year growth for both imports and exports
||Guy Lerner argues a trend reversal is occuring
||Warren Mosler postulates how QE2 is based on false economic dynamics
|March Business Sales
||Up 11% with inflation likely half – but half is great also
|April Producer Price Index
||PPI increased 1% to 6.8%
|April Advance Retail Sales
||More than half of the 7.8% retail increase is inflation and holidays
|March Trade Balance
||Record exports could not overcome inflation
||Jobs dynamics have not started recovering except job openings
|April Diesel Use
||On road diesel use less good may be caused by more trailer on railroads
|May Home Prices
||Seasonal spring time home price improvement underway according to Altos Research
|March Home Prices
||Prices down 7.5% nationally according to CoreLogic
|April Small Business Sentiment
||NFIB reports second bad month in a row of business sentiment
|March Wholesale Sales
||Sales are ballistic even considering inflation
|April EXIM Price Index
||Rising Big Time
||Import prices were up 11%
|April Railroad Car Loadings
||Up 3.8% lead by intermodal – traditional railcar loads down
|1Q2011 Consumer Credit
||5th consecutive quarter of less bad delinquencies
||Zaiham Zamil claims capital requirements miss the point that asset valuations matter
||Elliott Morss argues the sun may be setting on the USA
|Freedom of the Press
||Karl Denninger presents the facts on the WSJ’s re-editing of the words of Finish political leader Timo Soini|
||Dirk Ehnts believes we need rebuild the foundations of economics|
|Mortgage & Bank Fraud
||William Black interview on KCRW Los Angeles|
||Albertarocks suggests the great commodity unwind is coming
||Elliott Morss points out where to invest
||Keith Jurow reviews when it is right for investors to jump into the real estate market
||Erik McCurdy charts out the rise and fall of commodities
Bankruptcies this Week: Innkeepers USA Trust, Profile Technologies
Failed Banks this Week: (None)