Thoughts on US Data

The US reported three data series today, weekly initial jobless claims, producer prices and the trade balance.  The data offered a mixed reading.  The key take away is that economists forecasts for Q1 GDP may be increased after the smaller than expected real trade deficit, and the labor market seems to be stable.  Producer prices remain tame. 

Weekly jobless claims rose 13k to the highest level since late January.  There was a 98k decline in the continuing claims, and about a third of these seemed to reflect the reduction (voluntary or otehrwise) of those receiving extended benefits.  Nest week's survey covers the period when the national figures for April were also gathered. 

Producer prices were flat in March, but excluding food and energy, prices rose 0.3%, a touch more than expected.  Fuel costs actually slower, but the cost of light trucks rose.   The year-over-year rae of 2.8% on the headline rate is the lowest in nearly a year. 

The trade deficit in the US was considerably smaller than expected at $46 bln down from $52.5 bln in January.  The Bloomberg consensus was for about a $52 bln shortfall.  It is the smallest gap since October.  Imports fell 2.7%, while exports edged higher to a new record. 

Prices of the goods rather than volumes was also an important factor in the reduction.  The real trade deficit shrank to $44.1 bln, the smallest since April 2011.  This is why some economists will revise up their GDP forecasts.  We have been assuming a 2% annualized pace and that still seems to be fair.  The net export function shaved about quarter of a percentage point off Q4 11 GDP. 

The market reaction was minimal, though the greenback has recovered a part of the earlier losses against most of the major currencies, save the yen.   Bonds remain firm, both in the US and Europe, while equity markets are also mostly steady to higher.