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2008-05-09 Trade Balance

Trade Balance

Survey -$61.0B
Actual -$58.2B
Prior -$62.3B
Revised -$61.7B

Better than expected.  Without foreign CBs and monetary authorities accumulating USD reserves, I expect the trade balance to fall to near zero, and the USD will probably fall until we get there.

Note that saying the dollar will fall until the trade balance goes to zero is not the same as saying the falling USD directly causes the trade gap to go to zero.  Yes, they are linked, but loosly and over longer periods of time, so this can be a choppy and ugly process as US real terms of trade continuously decline.

Exports up 15.5% year over year, though down a bit in March.

Street talking Q1 revisions will kick gdp up to the 1-1.5% range and more for Q2 with fiscal now kicking in.

Most of the data is coming out better than expected and showing some modest improvement.

Credit spreads seem to have peaked with the Bear Stearns raid.

Financial sector still being hit/disrupted with its continuing credit and liquidity issues as the Fed creeps towards removing some of the self imposed landmines in its own monetary operations procedures.

Housing may have bottomed but still muddling through at very low levels.

The rest of the economy doing reasonably well and leaving the financial sector in its wake.

Modestly rising GDP means the output gap is at least stable.

The question for the Fed is the level of GDP that corresponds to non inflationary growth – what they call the ‘speed limit’ for optimal long term GDP.

Seems hard to make the case that higher GDP growth won’t add to upward price pressures from levels already too high.

Meanwhile, consumers hit with higher food/crude prices still working but buying less as their remaining output gets exported.

Welcome to the new US export economy – looks good, feels bad, and the Fed and Tsy think the trade balance moving towards zero (less consumption more exports) is a ‘good thing’ .

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2008-05-09 Trade Balance TABLE

Trade Balance TABLE


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