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Economy in Brief

U.S. Trade Deficit Eased
by Tom Moeller July 13, 2004

The U.S. foreign trade deficit narrowed in May to $46.0B versus the little revised record deficit of $48.1B a month earlier. Consensus expectations had been for a deficit of $48.3B.

Exports rebounded 2.9% to a record high following a 1.0% decline in April. Notably strong were capital goods exports, up 6.3% (22.1% y/y). Exports of food & beverages rose 2.8% (9.5% y/y) and exports of industrial supplies jumped 6.0% (22.6% y/y). Non-auto consumer goods exports fell slightly for the second month (17.6% y/y).

Total imports rose by 0.4% for the second month. Imports of petroleum products fell for the third consecutive month (-1.9% y/y). Imports of non-petroleum goods rose a modest 0.1% (11.1% y/y) following a 1.5% jump in April.

Imports of capital goods rose 0.2% (14.2% y/y) following a 2.0% April rise. Imports of non-auto consumer goods slumped 3.0% (+11.0% y/y) led by large declines in imports of apparel & household goods, TVs and stereo equipment.

By country, the US trade deficit with China deepened m/m to $12.1.0B ($124.1B in 2003). The US trade deficit with Japan eased to $5.5B ($66.0B in 2003) and the deficit with Western Europe eased to $8.2B ($100.3B in 2003).

Foreign Trade May April Y/Y 2003 2002 2001
Trade Deficit $46.0B $48.1B $40.8B(5/03) $496.5B $421.7B $362.7B
  Exports - Goods & Services 2.9% -1.0% 17.6% 4.6% -3.1% -6.0%
  Imports - Goods & Services 0.4% 0.4% 15.9% 8.5% 2.1% -5.5%
Small Business Optimism Fell Again
by Tom Moeller July 13, 2004

The Small Business Optimism Index published by the National Federation of Independent Business (NFIB) fell 1.4% last month. It was the fifth monthly decline this year.

The percentage of firms expecting the economy to improve fell sharply to 26% from a high of 51% last November. The percent of firms planning to raise capital expenditures also fell sharply but the percentage planning to raise employment rose slightly.

The percentage of firms raising average selling prices jumped to a record high and the percent reporting higher earnings this quarter deteriorated.

During the last ten years there has been a 50% correlation between the level of the NFIB index and the y/y change in real GDP.

About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

Nat'l Federation of Independent Business June May Y/Y 2003 2002 2001
Small Business Optimism Index (1986=100) 103.0 104.5 1.3% 101.3 101.2 98.4
Chain Store Sales Unchanged
by Tom Moeller July 13, 2004

Chain store sales were unchanged last week following the 0.9% rise the prior period, according to the International Council of Shopping Centers (ICSC)-UBS.

So far in July sales are up 0.1% versus the June average.

During the last ten years there has been a 59% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.

The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

ICSC-UBS (SA, 1977=100) 07/10/04 07/03/04 Y/Y 2003 2002 2001
Total Weekly Retail Chain Store Sales 438.5 438.5 3.4% 2.9% 3.6% 2.1%
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