The Trade Deficit Narrowed in November as Exports and Imports Both Fell: Week of February 4 – 8

The trade deficit shrank in November, as had factory orders. Here are the five things we learned from U.S. economic data released during the week ending February 8.  

#1The trade deficit narrowed in November. The Census Bureau and the Bureau of Economic Analysis estimates export activity slowed $1.3 billion to $209.9 billion (+3.7 percent versus November 2017) while imports fell by $7.7 billion to $259.2 billion (+3.2 percent). The resulting trade deficit of -$49.3 billion was down $6.4 billion from October but 0.7 percent larger than that of a year earlier. The goods deficit contracted by $6.7 billion to -$71.6 billion while the services surplus shrank by $0.3 billion to +$22.3 billion. The former was the result a $7.9 billion drop in imported goods, including steep declines for consumer goods (including cell phones) and industrial supplies/oil. The U.S. had its biggest goods deficits in November with China (-$35.4 billion, down $2.8 billion from October), the European Union (-$13.8 billion), Mexico (-$6.8 billion), and Japan (-$5.7 billion).

#2Factory orders slowed for a second consecutive month in November. The Census Bureau estimates new orders for manufactured goods declined by $3.1 billion during the month to a seasonally adjusted $499.2 billion. This was 4.1 percent greater than the value of November 2017 factory orders. Transportation goods orders grew 3.0 percent, boosted by strong gains for ships/boats (+72.6 percent), defense aircraft (+31.2 percent), and civilian aircraft (+6.9 percent). Net of transportation goods, core factory orders dropped 1.3 percent following a 0.2 percent gain in October. While orders grew for fabricated and primary metals (+0.9 percent and +0.8 percent, respectively), they slowed for nondurable goods (-1.9 percent), machinery (-1.7 percent), electrical equipment/appliances (-1.1 percent), and computers/electronics (-0.3 percent). New orders for civilian capital goods orders net of aircraft (a proxy for business investment) slumped 0 6 percent in November. 

#3Service sector activity remained strong, but softened, in January. The NMI, the headline index from the Institute for Supply Management’s Nonmanufacturing Report on Business slipped by 1.3 points during the month to a reading of 56.7. Even with the pullback, the NMI has been above a reading of 50.0 for 108 consecutive months, indicative of an expanding service sector. Only one of the NMI’s four components grew during the month, with employment adding 1.2 points to 57.8. Shedding points from December were components for new orders (down 5.0 points to 57.7) and business activity/production (down 1.5 points to 59.7. Holding firm was the measure for supplier deliveries at a reading of 51.5. Only 11 of 18 tracked nonmanufacturing industries expanded during the month, however, with the most robust expansion reported in transportation/warehousing, health care/social assistance, and mining. The press released noted continued optimism but also stated that “[r]espondents are concerned about the impacts of the government shutdown.

#4Manufacturing sector productivity edged up during Q4 2018. The Bureau of Labor Statistics tells us that manufacturing productivity grew 1.3 percent on a seasonally adjusted annualized basis during the final three months of 2018, an improvement from Q3’s 1.1 percent gain. Manufacturing output had expanded 2.3 percent, supported by a 1.0 percent advance in hours worked. The productivity gain for the past year was much softer, with a 0.7 percent increase. During Q4, durable manufacturing productivity increased 2.6 percent while the productivity improvement for nondurable manufactured goods was 1.2 percent. (The BLS was unable to report on overall productivity for the U.S. economy due to the partial government shutdown.)

#5Consumers took on credit at a marginally slower pace in December. American households had $4.010 trillion in outstanding consumer debt (not including mortgages and other real estate-backed loans) in December, according to the Federal Reserve. This was up $16.5 billion from November (smaller than the prior month’s $22.4 billion gain) and a 12-month increase of 4.7 percent. Consumers had $1.045 trillion in outstanding revolving credit balances at the end of December, up $1.7 billion for the month and 2.0 percent from a year earlier. Nonrevolving credit balances expanded $14.9 billion to $2.966 trillion (+5.6 percent versus December 2017).

Other U.S. economic data released over the past week:
Jobless Claims (week ending February 2, 2019, First-Time Claims, seasonally adjusted): 234,000 (-19,000 vs. previous week; +11,000 vs. the same week a year earlier). 4-week moving average: 224,750 (-1.4% vs. the same week a year earlier).
Senior Loan Officers Survey (January 2019)

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The Trade Deficit Shrinks, Job Openings Expand: June 4 – 8

The trade deficit narrowed while employers sought even more workers. Here are the five things we learned from U.S. economic data released during the week ending June 8.

#1A small rise in exports leads to a smaller trade deficit in April. The Census Bureau and Bureau of Economic Analysis find exports grew by $0.6 billion during the month to $211.2 billion (+9.9 percent versus April 2016) while imports contracted by $0.4 billion to $257.4 billion (+8.0 percent versus April 2016). As a result, the trade deficit narrowed to its lowest level since last September at -$46.2 billion. The goods deficit shrank by $1.0 billion to -$66.3 billion while the services surplus essentially held steady at +$22.1 billion. The latter was pushed up by a $0.3 billion gain in exported goods (led by industrial supplies, food/beverages) and a $0.7 billion drop in imported goods (driven by a $2.8 billion decline for consumer goods and a $0.9 billion drop for automobiles). The U.S. had its largest goods deficits with China (-$30.8 billion), European Union (-$13.2 billion), Mexico (-$6.0 billion), Japan (-$5.9 billion), and Germany (-$5.6 billion).Trade Deficit 060818

#2There were more job openings in April than the number of people unemployed. The Bureau of Labor Statistics reports that there were a seasonally adjusted 6.698 million job openings at the end of April, up 65,000 for the month, 9.7 percent from a year earlier, and the most in the 17+ year history of the data series. Further, there were more job openings at the end of the more than that were people unemployed (6.346 million). The number of private sector job openings has grown 10.0 percent over the past year to 6.117 million, with large 12-month comparables for transportation/warehousing (+46.2 percent), professional/business services (+22.9 percent), retail (+22.5 percent), manufacturing (+20.9 percent), and leisure/hospitality (+11.0 percent). Employers hired 5.578 million workers during the month, up 92,000 from March and 6.8 percent from a year earlier, with private sector hiring also rising 6.8 percent from April 2017 levels. 5.408 million people left their jobs during April, up 86,000 for the month and 5.8 percent from a year earlier. This number includes 3.387 million people who had voluntarily quit their jobs (+1.4 percent versus April 2017).

#3The service sector grew even hotter in May. The Institute for Supply Management’s NMI jumped by 1.8 points during the month to a seasonally adjusted reading of 58.6. This was the 100th straight month in which the measure has been above a reading of 50.0, indicative of an expanding service sector. All four components of the NMI improved from their April readings: supplier deliveries (+4.0), business activity/production (+2.2), new orders (+0.5), and employment (+0.5). Fourteen of 18 tracked service sector industries expanded during May, led by wholesale trade, mining, and real estate. The press release expressed optimism among survey respondents, but also noted some “concerns about the uncertainty surrounding tariffs, trade agreements and the impact on cost of goods sold.”

#4Fewer aircraft orders slowed factory orders in April. New orders for manufactured goods dropped 0.8 percent during the month to a seasonally adjusted $494.5 billion. This represented a 7.4 percent year-to-year increase for the Bureau of Labor Statistics measure. As we saw with the durable goods report a few weeks ago, the headline number was dragged down by a 28.9 percent drop in orders for civilian aircraft. Net of all transportation goods, factory orders gained 0.4 percent during the month and has grown 7.4 percent over the past year. Increasing during the month were orders for furniture (+2.2 percent), fabricated metal products (+1.8 percent), electrical equipment/appliances (+1.8 percent), primary metals (+1.4 percent), computers/electronics (+1.1 percent), motor vehicles (+1.0 percent), and nondurable goods (+0.1 percent). Shipments eked out a less than $0.1 billion gain to $492.8 billion (+7.2 percent versus April 2018) with shipments net of transportation goods up 0.4 percent for the month. Unfilled orders grew for the fifth time in six months (+0.5 percent to $1.153 trillion) while inventories expanded for the 18th straight month (+0.3 percent to $666.9 billion).

#5Productivity was more feeble during Q1 than previously believed. The Bureau of Labor Statistics estimates nonfarm productivity grew 2.7 percent on a seasonally adjusted annualized basis (SAAR) while hours worked grew 2.3 percent during the first three months of 2018. As a result, nonfarm productivity 0.4 percent during the quarter, down from the 0.7 percent previously estimates and below the 1.3 percent productivity growth rate during the final three months of 2017. Nonfarm productivity has grown 1.3 percent over the past year. Manufacturing sector productivity contracted 1.2 percent during the quarter, sharply down from a 0.5 percent gain previously reported. Even with the pullback during Q1, manufacturing sector productivity has surged 4.3 percent over the past year.

Other U.S. economic data released over the past week:
Jobless Claims (week ending June 2, 2018, First-Time Claims, seasonally adjusted): 222,000 (-1,000 vs. previous week; -12,000 vs. the same week a year earlier). 4-week moving average: 225,500 (-7.4% vs. the same week a year earlier).
Consumer Credit (April 2018, Outstanding Consumer Credit Balances (net of mortgages and other real estate backed loans, seasonally adjusted): $3.883 trillion (+$9.2 billion vs. March 2018, +4.8% vs. April 2017).

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied

Job Creation and the Trade Deficit Both Grow: March 5 – 9

Payroll growth surprised to the upside while the trade deficit widened once again. Here are the five things we learned from U.S. economic data released during the week ending March 9.

#1Employers accelerated their pace of hiring during February. Nonfarm payrolls grew by a seasonally adjusted 313,000 workers during the month, the most jobs added since June 2016. Further, the Bureau of Labor Statistics upwardly revised its estimates of December and January job gains by a combined 54,000. Nonfarm employers have added 2.281 million people to their payrolls over the past year, for a monthly average of 190,083 jobs. Private sector employers added 287,000 jobs to their payrolls in February, split between 100,000 in the goods-producing side of the economy and 187,000 in the service sector. The industries adding the most workers during the month included construction (+61,000), retail (+50,300), professional/business services (+50,000), manufacturing (+32,000), health care/social assistance (+29,100), and financial activities (+28,000). The average workweek inched up by 1/10th of an hour to 34.5 hours (February 2017: 34.4) while average weekly earnings grew by $4.06 to $922.88 (up 2.9 percent over the past year).Growth in Employment-030918

Based on a separate survey of households, the employment rate remained at its post-recession low of 4.1 percent for a third consecutive month. An impressive 806,000 people entered the labor force, leading to a 3/10ths of a percentage point increase in the labor force participation rate to 63.0 percent, its highest point since last September. The labor force participation rate for adults aged 25 to 54—arguably a better measure of the number of adults in their prime working years—rose by half of a percentage point to a post-recession high of 82.2 percent. The typical length of unemployment slipped by 1/10th of a week to 9.3 weeks (February 2017: 10.1 weeks). 5.160 million people held a part-time job but were seeking a full-time opportunity, down from the 5.670 million at the same time a year earlier. The broadest measure of labor underutilization published by the BLS—the U-6 series—held firm at 8.2 percent (February 2017: 9.2 percent).

#2The U.S. trade deficit widened for a fifth consecutive month. The Census Bureau and the Bureau of Economic Analysis reports that exports declined 1.3 percent to a seasonally adjusted $200.9 billion while imports shrank by less than 0.1 percent to $257.5 billion. The resulting trade deficit expanded by 5.0 percent to -$56.6 billion. The trade deficit has grown by 16.2 percent over the past year. The goods deficit jumped by $2.8 billion to -$76.5 billion while the services surplus eked out a $0.1 billion increase to +$19.9 billion. The former resulted from a $3.3 billion decrease in exported goods (thanks to a decline in exports of both civilian aircraft and industrial supplies/materials). The U.S. had its largest goods deficits with China (-$35.5 billion), the European Union (-$15.0 billion), Germany (-$6.3 billion), Mexico (-$5.6 billion), and Japan (-$5.6 billion).

#3The service sector continued growing at a solid if slightly slower rate in February. The headline index from the Institute for Supply Management’s Non-Manufacturing Report on Business shed 4/10ths of a point to a reading of 59.5. This was the 97th straight month in which the NMI was above a reading of 50.0, indicative of an expanding service sector. The NMI slipped because of a sharp 6.6 point drop in the index component associated with employment (to a still expanding reading of 55.0). Two other index components grew during February (business activity/production (up 3.0 points) and new orders (up 2.1 points)) while that for supplier deliveries held firm. Sixteen of 18 tracked nonmanufacturing industries expanded during the month, led by education services, transportation/warehousing, and utilities. The press release noted that a “majority of respondents continue to be positive about business conditions and the economy.”

#4Even with a small upward revision for Q4, productivity gains continued to disappoint. The Bureau of Economic Analysis raised its estimate of nonfarm labor productivity during the final three months of 2017from a 0.1 percent decrease to being unchanged on a seasonally adjusted basis. This was the outcome of output growing 3.2 percent and the number of worked gaining 3.3 percent. Manufacturing sector productivity surged 6.0 percent during Q4, thanks to a 6.6 percent increase in output resulting from a mere 0.5 percent increase in the number of hours worked. Durable goods manufacturing productivity jumped 8.1 percent while that for nondurable goods manufacturing increased 3.4 percent. For all of 2017, nonfarm business productivity gained by a feeble 1.2 percent, which was nevertheless an improvement from being unchanged for all of 2016. Manufacturing sector productivity inched up 0.6 percent during 2017 after having gained by only 0.4 percent and 0.3 percent in 2016 and 2015, respectively.

#5Consumers took on credit card debt at a slower rate in January. The Federal Reserve indicates that outstanding consumer credit balances (net of any real estate related loans—e.g., mortgages, home equity loans) totaled a seasonally adjusted $3.855 trillion at the end of the month, up $13.9 billion from December and 5.3 percent from a year earlier. Balances of nonrevolving credit (e.g., student loans, college loans) jumped by $12.8 billion during the month to $2.825 trillion (+5.0 percent versus January 2017). Not rising as much were outstanding revolving credit balances (e.g., credit cards), which inched up by $0.7 billion to $1.030 trillion (+6.1 percent versus January 2017). Revolving balances had risen by $6.1 billion and $11.3 billion during December and November, respectively.

Other U.S. economic data released over the past week:
Jobless Claims (week ending March 3, 2018, First-Time Claims, seasonally adjusted): 231,000 (+21,000 vs. previous week; -21,000 vs. the same week a year earlier). 4-week moving average: 222,500 (-8.6% vs. the same week a year earlier).
Factory Orders (January 2018, New Orders for Manufactured Goods, seasonally adjusted):$491.7 billion (-1.4% vs. December 2017, -6.6% vs. January 2017).
Wholesale Trade (January 2018, Inventories of Merchant Wholesalers, seasonally adjusted): $619.1 billion (+0.8% vs. December 2017, +4.8% vs. January 2017).
Beige Book

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.