Comerica Economic Weekly

 It was a quiet week for U.S. data, but a busy week for European politicians and financial engineers. U.S. data is generally improving through the fourth quarter, visible this week through favorable trade data, unemployment insurance claims and consumer sentiment. The most recent news from Europe has Germany and France agreeing to a restructured European Union, with the U.K. balking. Agreement on a workable fiscal union appears to be the prerequisite for more aggressive action by the ECB and IMF. The timing and sequencing of events remains critical  to a credible solution to the multiple problems facing Europe, the European Union and the Euro-zone. The U.S. international trade gap narrowed slightly in October to -$43.5 billion. In October, imports declined by $2.2 billion while exports declined by $1.5 billion. The dips on both sides of the trade ledger fall within the range of typical monthly noise and do not show proof of deteriorating international trade due to a downshift in global demand. The inflation-adjusted trade gap in goods for October was below the average for the third quarter, pointing to a boost to GDP from trade in the current fourth quarter, if the trend continues. The total nominal trade gap for the U.S. has now narrowed for four consecutive months. The trade gap tends to widen during U.S. economic expansions as the demand for imports increases, but at least for the past four months, that pattern has not held. Looking at the merchandise trade balance with Europe, there are no signs yet of a significant deterioration in U.S. exports to Europe. U.S. labor market data is showing signs of improvement. Initial claims for unemployment insurance fell by a sizeable 23,000 for the week ending December 3, to hit a level of 381,000. Continuing claims fell sharply also, down by 174,000 for the week. The drop in continuing claims, in part due to the exhaustion of unemployment benefits, is an indicator of further declines in the unemployment rate. The Kansas City Financial Stress Index fell in November, its first monthly decline since last May. However, the series remains elevated at a level above normal, but also well below previous peaks. The University of Michigan Consumer Sentiment Index increased by 3.6 percent in early December, continuing its climb from the August low. Running counter to the trend for better U.S. data in Q4, the ISM Non-Manufacturing Index for November dipped slightly from 52.9 in October to 52.0 in November. A reading above 50 indicates expansion and so the November slip does not set off the alarms bells.

Click here for the complete Comerica Economic Weekly, with forecasts for upcoming data releases and an updated December economic data calendar: CMAEconWeekly120911.


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