Strong Trade Data Supportive of 2013Q4 GDP, Yellen Confirmed by Senate
- The U.S. International Trade Gap narrowed to $34.3 billion in November, a positive for Q4 GDP.
- The December ISM Non-Manufacturing Index fell to a still-positive 53.0 percent.
- U.S. light vehicle sales declined to a 15.4 million unit rate in December.
- Janet Yellen was confirmed by the full Senate to be the first chairwoman of the FOMC.
U.S. international trade data for November showed a moderate gain in exports accompanied by an unexpected decline in imports, resulting in a noticeable narrowing of the trade gap. Total exports increased by $1.7 billion for the month, with gains in industrial supplies and materials exports. Total imports declined by $3.4 billion as crude oil imports dipped by $2.5 billion for the month. Monthly trade data is volatile, but it is worth noting the energy component of U.S. international trade was favorable for the month. That trend is expected to continue over 2014 as U.S. oil production ramps up. For the year ending in November, real (price adjusted) petroleum exports were up 24 percent while real petroleum imports were down 11 percent. The average of the October and November real balance of trade in goods is well below the third quarter average. This implies that net trade will be a positive for 2013Q4 GDP. U.S. exports generally look like they are starting to turn the corner after two years of weak international demand. Merchandise exports to China were up 24 percent in November from a year ago. Exports to Europe were up 8 percent. Exports to Canada and Mexico were up 4 percent from a year ago.
The ISM Non-Manufacturing Index for December dipped from 53.9 in November to a still-positive 53.0. New orders contracted for the month, as did inventories. Severe weather was cited as a factor for some industries in December. That effect will be compounded in January. Auto sales for December were weaker than expected, declining to a 15.4 million unit annual rate after reaching 16.4 million in November. It looks like November was a catch-up month for auto and light truck sales following the government shutdown in October. The weak December sales may be a correction from the catch-up. If that is the case, then January should be a catch-up from the correction. However, bad weather will be a factor in January auto sales. In sum, auto sales data are muddy right now. It may take until March to get a clean read. In a historic vote, Janet Yellen was confirmed by the full Senate on Monday, by a vote of 56-26, to be the first chairwoman of the Federal Open Market Committee. Ben Bernanke’s last meeting at the helm of the FOMC will be the upcoming January 28/29 meeting. Yellen’s first meeting as chair will be March 18/19. This was a widely anticipated event that should not change expectations about fed policy over the course of 2014. We expect economic data to be supportive of an ongoing gradual wind down in the Fed’s asset purchase program over the year ahead. The fed funds rate will stay near zero into 2015.
Market Reaction: U.S. equity prices are up. The 10-year Treasury yield is up to 2.97. NYMEX crude oil is up to $93.62/barrel.
For a PDF version of this Comerica Economic Alert click here: Int Trade 010714.