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Economy in Brief

U.S. Budget Deficit Shrunk
by Tom Moeller June 10, 2004

The U.S. Government Budget deficit shrunk to $62.5B in May versus a deficit of $88.9B in May '03. The improvement was slightly greater than expected by the Consensus. For the first eight months of FY04 the deficit of $344.3 was 18.4% larger than last year.

Growth in net receipts for the first eight months of FY04 improved to 2.3% versus the first eight months of FY03. The rise from 1.3% growth last month reflected strong individual tax receipts, up 27.5% versus last May. That pulled fiscal YTD growth in individual tax receipts to -3.1% versus last year and compared to a 7.5% decline n FY03.

Corporate tax receipts continued to surge and for the fiscal year-to-date were up 46.6% ($96.0B) versus last fiscal YTD. Growth in contributions for social insurance contributions (FICA) improved to 2.5% with the rise in employment.

Growth in Federal net expenditures eased to 5.5% versus the first eight months of last fiscal year. Defense expenditures growth slowed to 12.5% from 16.7% in April. Growth in Medicare outlays slumped to 3.9% from 8.9% but interest expense fell only 0.7% versus a 3.8% y/y decline in April.

"Deficit-Financed Tax Cuts and Interest Rates" from the Federal Reserve Bank of Philadelphia is available here.

US Government Finance May April May '03 FY2003 FY2002 FY2001
Budget Balance $-62.5B $17.6B $-88.9B $-374.2B $-157.8B $127.3B
  Revenues $115.5B $220.1B 11.6% -3.8% -6.9% -1.7%
  Outlays $177.9B $202.5B -7.5% 7.2% 7.9% 4.2%
Initial Claims for Jobless Insurance Rose
by Tom Moeller June 10, 2004

Initial claims for jobless insurance rose 12,000 last week to 352,000 following two weeks of decline. Consensus expectations had been for 335,000 claims.

The 4-week moving average of initial claims rose to 346,000 (-18.7% y/y), the highest level since late April.

Continuing claims for unemployment insurance fell 106,000 to the lowest level since May 2001.

The insured rate of unemployment fell back to 2.3%.

"A Jobless Recovery With More People Working?" from the Federal Reserve Bank of St. Louis can be found here.

Unemployment Insurance (000s) 6/05/04 5/29/04 Y/Y 2003 2002 2001
Initial Claims    352 340 -17.0% 403 404 406
Continuing Claims    -- 2,881 -22.3% 3,533 3,573 3,023
Import Price Jump Led By Oil & Commodities
by Tom Moeller June 10, 2004

Import prices jumped 1.6% last month led by a 5.6% surge in industrial materials prices. The rise pulled the y/y gain in import prices to 7.0%, the fastest rate of increase since early last year.

The recent rise in import prices has been accompanied by a 20% decline in the trade weighted value of the dollar against major currencies since early 2002. During the last fifteen years there has been a (negative) 60% correlation between this value of the dollar and the y/y change in nonoil import prices.

Higher oil prices accounted for much of the gain in overall import prices. The 10.3% May increase in petroleum prices has been followed this month by a decline in the price of Brent crude to $34.74 yesterday from an average $37.50 last month.

Nonpetroleum import prices also rose a strong 0.4% (3.0% y/y) in May but the rise largely reflected a 2.1% (14.7% y/y) gain in nonoil industrial supplies such as iron & steel, lumber and natural gas.

Capital goods prices ticked up 0.1% (-1.0% y/y) following a 0.5% April decline. Computer & peripheral prices rose 0.1% (-5.0% y/y). Capital goods prices excluding computers also rose 0.1% (+1.2% y/y). Non-auto consumer goods prices fell 0.1% (0.6% y/y) for the second month. Motor vehicle & parts prices were unchanged (+1.3% y/y). Prices for imported foods, feeds & beverages fell 0.3% (+5.5% y/y), the first monthly decline since last August.

Export prices gained 0.3% led by a 0.5% rise in agricultural export prices (20.9% y/y). Nonagricultural export prices rose 0.2% (2.8% y/y).

Import/Export Prices (NSA) May April Y/Y 2003 2002 2001
Import - All Commodities 1.6% 0.2% 7.0% 2.9% -2.5% -3.5%
  Petroleum 10.3% -0.4% 43.9% 21.0% 3.0% -17.2%
  Non-petroleum 0.4% 0.3% 3.0% 1.1% -2.4% -1.5%
Export - All Commodities 0.3% 0.7% 4.3% 1.6% -1.0% -0.8%
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