North American Data

June 16, 2011

The U.S. $119.3 billion current account deficit last quarter equaled 3.2% of nominal GDP.  That ratio matches the full-2010 ratio and perpetuates a generally flat trend of 3.3% of GDP in each of the first three quarters of 2010 followed by 3.0% in 4Q10.  During the previous decade (2000-2009), the current account averaged 4.7% of GDP, exceeded 5.0% in the four years to 2007, peaked at 6.0% in 2006, and was lowest at 2.7% of GDP in 2009.  Private capital inflows financed 44.1% of the first-quarter current account deficit, and net official capital inflows offset the remaining 55.9%.  The current account shortfall was $7.1 billion larger in 1Q11 than in 4Q10.  Net private capital inflows including the statistical discrepancy dropped by $1.85 billion to $52.6 billion.  That comparatively small drop, however, masked a huge adverse swing in long-term private direct and portfolio capital from a net inflow of $12.0 billion in 4Q10 to an outflow of $123.5 billion last quarter. That deterioration suggests less support for the dollar, and it indeed posted a trade-weighted average value in 1Q11 that was 1.5% weaker than in 4Q10 and 7.8% less than in the second quarter of 2010.  Alas, these figures are dated.  We are two weeks away from the end of the second quarter of 2011, and the dollar has lately been performing a bit better on revived risk aversion around the world.

Foreign buying of Canadian securities in April net of Canadian purchases of foreign securities generated a big CAD 11.5 billion capital inflow into that economy.  That was nearly twice as large as the monthly average inflow during the first quarter.  Foreigners bought CAD 8.2 billion of Canadian securities in April, whereas Canadians sold CAD 3.3 billion of Treasuries and other foreign stocks and bonds.

The Philly Fed’s regional manufacturing index printed at a 23-month low in June of minus 7.7, representing an 11.6-point adverse swing on the month and a deterioration from +43.4 as recently as March just three months ago.  Demand touched a 25-month low of minus 7.6.  This report follows the New York Fed manufacturing index, nicknamed the Empire State index, which was released yesterday and showed a deterioration of 19.7 points on the month to a reading of minus 7.79 and a drop of 15.6 points over two months from a one-year high seen in April.

Investors breathed a hesitant sign of relief that new U.S. jobless insurance claims fell 16K last week to 414K, but the drop could be statistical noise since the four-week average of 424.75K was unchanged from that in the prior week of June 4.  This mean was higher than the eight week averages of 392K on April 16 and 416K on February 19.

Annualized U.S. housing starts of 560K in May were 3.5% greater than April’s upwardly revised level.  Building permits of 612K were at their best level so far of 2011. As they say, everything is relative.  Housing starts were still 3.4% lower than a year earlier.  Even more telling, starts of 560K was but a shadow of their level before the housing bubble burst.  In 2005, for example, annualized housing starts surpassed 2.0 million in ten of a dozen months.

All in all, the figures paint a pretty dismal picture.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.

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