United States on a Data Roll

November 16, 2011

Since Friday, a string of better-than-expected U.S. economic indicators have been reported and, along with a solid Japanese 3Q GDP report, has presumably helped to mitigate market reaction to the bad news coming out of Europe. Enjoy the data roll now because it is unlikely to extend for long.

Treasury-reported international capital flows were considerably more dollar-supportive in August-September than in June-July.  Three increasingly inclusive net measures showed net inflows averaging $63.3 billion per month, $52.4 billion per month and $73.4 billion in August-September following an inflow of just $6.6 billion per month on the narrowest long-term measure in June-July and outflows in those months on the second and third aggregates of $40.4 billion per month and $48.6 billion.  Foreigners had sold a net $15.3 billion per month of Treasury securities (both bills and notes) in June-July but then purchased $88.0 billion per month in August-September.  While the dollar had been unchanged on balance between end-May and end-July against the euro, it advanced 7.5% on balance over August and September.

The deficit in goods and services trade averaged $44.0 billion per month in August-September.  Not only was that $4.6 billion per month less than in June-July, but it also was smaller than each of the three capital inflow aggregates in the Treasury so-called TIC data.  It’s easier to finance the U.S. current account shortfall when Europe is in economic and political crisis.

Price data were pleasingly benign, giving the Fed leeway to stimulate further should growth swoon in early 2012.  Consumer prices dipped 0.1% in October and to a 12-month 3.5% rate of rise from 3.9% in September.  Core CPI edged up 0.1% for the second month in a row.  Import prices sank 0.6% in October, and core non-fuel import prices edged down 0.2%.  The PPI index fell 0.3% on month with an unchanged core PPI.  On-year producer price inflation slowed to 5.9% from 6.9% in September and 7.2% three months earlier.

The National Association of Home Builders index improved by three points for the second straight month in November.  With a reading of 20, this gauge of confidence has risen to an 18-month high.  The Empire State Manufacturing Index, compiled by the New York Fed, improved by 9.09 points in October to +0.61, the first positive reading since May.

Industrial production rose 0.7% in October, almost twice as much as forecast.  Output was 3.9% greater than a year earlier, and capacity utilization advance by half a percentage point from 77.3% in September to 77.8% in October.

Retail sales advanced 0.5% in October on top of a 1.1% jump in September.  Sales were 1.6% greater in June-August than in the prior three months.  Consumer spending had a good head of steam that extended from September into the final calendar quarter.  Such appears headed for faster full-quarter growth than last quarter’s 2.4%, which was a marked improvement on the second quarter’s pace of only 0.7%.  Conceivably, real personal consumption might even top the 3.6% rate of gain booked in the final quarter of 2010.  Chain store sales performed better last week.

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



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