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Key U.S. Data Releases This Week2 Jul 09This week will be light on major releases. The key report will be the trade balance, for which we are projecting an improvement. The eye of the storm has passed, but the economy still faced stiff headwinds as the second quarter ended. This can be seen in the latest employment report, which showed the economy losing another 467,000 jobs in June, raising the recession's job toll to 6.5 million. About the only piece of good news in the report was that the unemployment rate only rose by one-tenth of a percentage point (to 9.5%, still a 26-year high). But the damaging effect of rising unemployment on wages was evident in hourly earnings, which were flat on the month. With high and rising unemployment keeping wage increases near zero, fears of inflation based on "excessive" monetary and fiscal stimuli are premature. This week will be light on major releases. The key report will be the trade balance (Friday), for which we are projecting an improvement, with real goods exports probably up slightly, but imports still falling. After four consecutive monthly increases, the Reuters/University of Michigan's Index of Consumer Sentiment (also on Friday) is expected to take a small step backward in early July because of rising gasoline prices and job losses. Finally, the ISM index for services (Monday) is expected to move up, given that stock markets moved up in June, while risk spreads narrowed. KEY U.S. DATA RELEASES THIS WEEK Monday, July 6 – ISM Non-Manufacturing Report (June)
What to Look For
Implications Financial markets and financial services continued to improve in June, as equity markets rose, banks issued new capital, and risk spreads continued to edge downwards. But freight activity continued to decline, with inventories remaining under downward pressure. Friday, July 10 – Trade Balance (May)
What to Look For
Implications In April, there was a much steeper drop in real goods exports (down 4.3%) than in real goods imports (down 2.7%), and we expect to see a correction for May, with real goods exports probably up slightly, but imports still falling. Increased aircraft exports should help. Working in the opposite direction, the bill for imported oil should increase, although the impact of higher oil prices will be dampened by a reduction in the volume of oil imports. In the second half of the year, we expect to see imports reviving before exports, as the U.S. economy begins to recover ahead of most of the rest of the world. Friday, July 10 – Michigan Consumer Sentiment Index (Preliminary July)
What to Look For After four consecutive monthly increases, the Reuters/University of Michigan's Index of Consumer Sentiment is expected to take a small step backward in early July. Implications Falling employment and rising gasoline prices are hurting real income growth, while the stock market rally that boosted spirits this spring has flattened out. Led by a pickup in auto sales, real consumer spending is expected to grow at a modest 1.9% annual rate in the third quarter. by Patrick Newport and Nigel Gault
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