The international trade report will be one of the top economic stories of the coming week, along with data on consumer credit, consumer sentiment and unemployment benefits. The Federal Reserve will also release its Beige Book report, an anecdotal account of the economy designed to dig beneath the hard numbers to find deeper truths.
It'll be a relatively quiet week for data, and markets may pay as much attention to politics as to the economic data, with Congress returning to Washington and President Barack Obama giving a major speech on health care to the assembled lawmakersMarketWatch consensus
| date | report | forecast | previous |
|---|---|---|---|
| Sept. 8 | Consumer credit | -$4.3 billion | -$10.3 billion |
| Sept. 10 | Trade balance | -$27.5 billion | -$27.0 billion |
| Sept. 10 | Jobless claims | 558,000 | 570,000 |
| Sept. 11 | Import price index | 1.0% | -0.7% |
| Sept. 11 | Consumer sentiment | 68.0 | 65.7 |
Trade gap
One of the few bright sides of the global recession has been a steady improvement in the U.S. trade deficit. After expanding to as much as $68 billion a month in 2006, the trade gap shrank to just $27 billion in June.
Imports have fallen in 10 of the past 11 months, a reflection of weak U.S. demand for foreign-made goods. Meanwhile, U.S. exports also fell, but not as rapidly as imports did.
In May and June, exports began to recover. In real terms (adjusted for price changes), exports rose at a 16% annual rate in the May and June, after dropping at a 60% annual rate around the first of the year.
Economists expect further improvements in exports going forward.
"The outlook for U.S. exports is becoming increasingly positive," wrote Michael Feroli, an economist for JP Morgan Chase Bank, who's expecting the trade gap to narrow to $26.5 billion in July from $27 billion in June. "Foreign economic growth has returned" with U.S. trading partners growing at a 4% annual rate in the second quarter, on a trade-weighted basis.
The median forecast of economists surveyed by MarketWatch looks for a small widening in the gap to $27.5 billion. The July report will be released by the Commerce Department on Thursday at 8:30 a.m. Eastern.
The improvement in exports is a key driver in the recovery in the manufacturing sector. The export orders index of the Institute for Supply Management survey rose to 55.5% in August, the highest in 14 months, and up from a low of 33.5% in December.
Feroli predicts real exports will rise at 6% annualized rate in the third quarter and 11% in the fourth quarter.
However, imports are likely to rise even faster, economists said. Feroli expects foreign trade to be a small drag on U.S. growth over the next three quarters.
For July (and likely August), the government's cash-for-clunkers program appears to have been a big winner for foreign automakers, said Meny Grauman, an economist for CIBC World Markets.
Consumers
While U.S. manufacturers are benefiting from the improvement in global trade, U.S. consumers are still nervous about the future.
Consumer credit (excluding mortgages) has declined in absolute terms for five months in a row and for nine of the past 11 months. The Fed will report on July debt levels on Tuesday. Economists surveyed by MarketWatch are looking for another decline of $4.3 billion after a $10.3 billion decline in June.
Consumer debt is down 2.8% in the past year. It's only the third time in 50 years that debt has been paid down. Credit card debt is down 5.1%, the first decline in 40 years.
Consumers aren't happy. In August, consumers offered their bleakest view of their own finances in the history of the University of Michigan's consumer sentiment survey. Just one in six consumers said their own finances had improved in the past month and only one in four expected their incomes to grow in the coming year.
The UMich survey will be updated with early September responses on Friday. Economists look for a slight improvement in the index to 68 from 65.7 in July, mostly because of the recent rally in the stock market and tentative signs that layoffs are stabilizing.
"Since April, the sentiment index has fluctuated in a range of 65 to 71, which is characteristic of weak spending," wrote IHS Global Insight U.S. economists Brian Bethune and Nigel Gault. "We don't expect that consumer sentiment will break out of this range until job growth resumes next spring. Meanwhile, consumer spending is likely to show only sluggish growth and be a relatively weak contributor to the recovery."
Rex Nutting is Washington bureau chief of MarketWatch.
US EXPORT COUNCIL PROVIDES ASSISTANCE TO US COMPANIES SEEKING ACCESS TO HIGH GROWTH MARKETS OVERSEAS. http://usexportcouncil.com/
