UMI consumer sentiment index (Oct): Less pessimism
International Trading
THE TECHNIQUE OF GIVING A GOOD MASSAGE
14 years ago
Monday, October 11, 2010
, Posted by Usman Ali Minhas at 7:47 AM
FOMC minutes (Sep): discussion about QE2 and release of adjusted projections
Trade balance (Aug): widening partly due to petroleum imports
Consumer prices (Sep): annual core rate stagnates at 0.9%
NY Empire manufacturing index (Sep): modest rebound
Retail sales (Sep): stronger rise particularly due to car sales
UMI consumer sentiment index (Oct): less pessimism
After the last meeting, the FOMC expressed its inclination to provide additional accommodation if needed to support the slowed economic recovery. The willingness to extend the easing measures was supported by the view that underlying inflation is currently at levels somewhat below those regarded as consistent with price stability. However, the FOMC minutes could show that not all members agreed on the need for additional quantative easing. Nevertheless there will have been some discussion about the possible design of “QE2”. The FOMC minutes will also include adjusted projections for GDP growth, unemployment and PCE inflation. As the table shows, the projections for growth and inflation were reduced and the projection for unemployment was already raised three months ago. We think that this could happen again. However, the inflation forecasts were already quite low.
Import prices are likely to have fallen by about 0.3% mom in September, due to the decline in crude oil prices by about 6% in the statistically relevant first third of the month. The annual rate, which was 11.4% at the beginning of the year, could have gone down further to 3.6%. After having risen noticeably by 0.4% mom in August, producer prices might have increased moderately by 0.1% mom.
As adjusted gasoline prices could have risen again, we predict that consumer prices will have gone up by 0.2% mom in September. However, core CPI will probably have increased by a mere 0.1% mom, leaving the annual rate at 0.9% for the sixth consecutive month.
The trade deficit widened significantly in June, but corrected downward by almost $7bn in July, as imports fell sharply and exports rebounded. The ISM components for imports and exports remained elevated in August, and we therefore assume that exports and imports both have increased noticeably. However, imports are likely to have risen somewhat more than exports in August, because official figures from the Department of Energy indicate markedly higher oil imports. Thus the trade deficit could have widened to about $44.0bn. However, net exports are unlikely to have dampened the GDP growth rate in Q3, after they had accounted for –3.5 percentage points in Q2.
Initial jobless claims went down by 11k to 445k in the week ending 2 Oktober. The 4-week moving average has been declining for six consecutive weeks to 456k at present. We expect jobless claims to have remained more or less unchanged in the week ending 9 October.
The New York Empire manufacturing index fell by 3 points to 4.1 in September, but its weighted subcomponents improved slightly. Therefore we expect the headline figure to have improved to about 7.0 in October, especially as the last index level appeared low compared to the national ISM index. However, the inventory adjustment cycle could be in its final stages, thus giving manufacturing less support. The predicted October level of the New York Empire is still only modest compared to the peak of 31.9 in April.
We expect retail sales to have increased by 0.6% mom in September. This would be somewhat stronger than in August, particularly due to higher car sales, which will be additionally lifted by a favourable seasonal adjustment figure. According to industry reports, back-to-school sales developed favourably, and thus the increase less autos could have reached 0.4% mom again; although consumer confidence indicators deteriorated in September.
The University of Michigan’s (UMI) preliminary October consumer sentiment could have increased slightly from 68.2 to 69.5. The final September index was revised upwards noticeably, showing that late respondents were much less pessimistic. However, the weekly ABC consumer comfort poll deteriorated at the beginning of October.
The growth in business inventories accelerated to 1.0% mom in July. Factory inventories only increased by 0.1% mom in August, but wholesale inventories again went up sharply by 0.8% mom. We forecast that total business inventories will have gone up by 0.4% mom in August.
The Congressional Budget Office (CBO) estimates that the budget deficit in September, the last month of the current fiscal year, was $32bn,compared to –$46.6bn in the same month last year. Higher outlays will have been compensated for by a noticeable improvement in tax revenues. Accoring to the CBO, the total deficit in fiscal year 2010 would amount to $1,291bn. This would be $125bn less than in fiscal year 2009. The deficit would be equal to 8.9% of GDP, after 10% in 2009.
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