U.S. Budget Deficit Continued To Shrink

The U.S. federal government's budget deficit during the first eight months of FY 2005 continued to shrink versus FY 2004. Red ink of $272.2B was nearly one quarter lower than the $346.3B during the prior fiscal year and was the smallest deficit for the first eight months in two years.

Growth in net receipts continued strong. For the first eight months of FY05, growth of 15.5% y/y was powered by the economy's improvement which caused individual taxes (44% of total receipts) to surge 20.5% and corporate income taxes (10% of total receipts) to nearly double. The improved job market raised employment taxes (36% of total receipts) by 5.9%, up from 1.6% growth last year.

Federal outlay growth was stable at 7.1% versus the first eight months of 2005. Growth in Medicare spending (12% of total outlays) was strong at 9.1% and defense spending (19% of total outlays) grew 6.9%. Spending on social security (21% of total outlays) grew a steady 5.2% and spending on health programs (10% of the total) increased 4.4%. Spending on education & training (4% of the total) increased 18.7% and interest expense (8% of the total) grew 11.1% with higher interest rates versus declines last year.

Blowing the Cover on Stealth Tax from the American Enterprise Institute can be found here.

Total Industrial production in Ireland rose 2.9% in April from March while production in manufacturing rose 4.6%.

In addition to the usual industry and market sector breakdowns of total production, Ireland also classifies production between modern industries and traditional industries. The latter are included in the category, "All sectors excluding modern sector". The modern sector includes production of recorded media, chemicals including man-made fibers, computers and instrument engineering, and electric machinery and equipment.

The "Modern" sector has accounted for most of the growth in production over the past several years which has made Ireland one of the better performers among countries of the Euro Zone performers. As can be seen in the attached chart showing the ten year record of production of the modern and traditional sectors, the traditional sector has been virtually flat while the modern sector has risen rapidly.

Now, however, despite the sharp increase in the production of the modern sector in April, the chart also shows that the trend of production in this sector has been flat to negative since early 2003.