United States

Statistics did not provide much guidance to the state of the American economy this week. Jobless claims fell when a rise had been expected and the running claims number is still short of levels usually reached in a recession. The trade deficit worsened and not only because of sky high oil prices but because exports barely rose at all. With the dollar close to record lows throughout the month such a small expansion in exported goods speaks directly to foreign demand. Falling consumer demand is the same worry besetting the US economy. The decoupling of the American and world economies is beginning to look fanciful.


European consumers made it quite clear that they are at best distant relations of their American cousins. November Retail sales fell as dramatically in the EMU as they rose unexpectedly on the western side of the Atlantic. The European consumer will not be prolonging the EMU expansion. This is not a positive sign for the decoupling theory that holds the EMU can continue to expand and avoid whatever economic ills may appear in the Americas.

Christine Legarde the French Finance Minister was perfectly clear in her assessment of the policy choices facing the ECB, If we have to choose between high inflation and high growth or stable inflation and lower growth I certainly have a preference for temporarily higher inflation and higher growth. The problem is that her conclusion is exactly opposite from Mr. Trichet and his colleagues.

Economic Releases January 7 - 11

United States

Tuesday: the Pending Home Sale Index fell 2.6% in November to 87.6 but the drop was countered by the +3.1% revision to October's figure up to 89.9 from 87.2. This is the third consecutive month of relative stability just above the August low of 85.5

Thursday: several large chain stores reported slow or negative sales figures for December: Wal-Mart's numbers were 2.4% ahead of last year but Target's sales shrank 5% and Macy's, JC Penny and Kohl's reported declines. Initial Jobless Claims for the week of January 6th fell 15,000 to 322,000, a rise to 340,00 had been forecast. The four week moving average fell 3,000 to 341,000.

Friday: the International Trade deficit widened almost 10% in November to $63.1 billion from 57.9 in October. A modest increase to -59.0 had been estimated. Rising oil prices and a decline in aircraft deliveries by Boeing were largely responsible for the much wider than expected shortfall. Imports rose by $6.0 billion, $4.8 billion for oil and related products, exports gained $0.6 billion. The price of imported crude jumped $7.16 almost 10% to $79.65 a barrel, but the volume of imported crude fell only slightly hence the increase in the value of oil imports. The average trade gap for October and November is higher than the average in the third quarter so without a large reversal in December exports will subtract from fourth quarter GDP. Most estimates for fourth quarter GDP have been reduced to the 1.0% – 1.5% range. Import prices rose 10.9% in 2007, the steepest increase since racking began in 1983; non fuel prices rose 3.0% in the year. The deficit with OPEC nations was as record $11.8 billion; it was $11.0 billion in October.


Monday: the EMU 'economic sentiment' index lost 0.1 in December to 104.7; the forecast had been 104.0. 'Industry confidence' dropped to 2 from November's 3, 'consumer confidence' slid to -9 from -8 and the 'business climate indicator ' skidded to 0.92 in December from 1.03 the prior month, itself revised down 0.1. EMU unemployment continued at 7.2% in November, the lowest reading since the series began in 1993. The Industrial Producers Price Index (PPI) added 0.8% in December a 4.1% yearly clip, +0.7% and +4.1% had been the forecasts; October had been +0.6% and +3.3%. It was the largest monthly jump since April 2006. As has been common with all inflation indices, energy prices were the driver, followed by food. Without energy prices PPI rose 0.1% in November, +3.2% on the year.

Tuesday: Retail Sales suffered a large deterioration in November falling 0.5% from October and settling at -1.4% on the year; +0.5% and +0.1% had been forecast. The yearly number was the weakest in sales since 1996. October's monthly result was unrevised at -0.7% , the yearly figure was adjusted up to +0.4% from +0.2%.

Wednesday: third quarter GDP added 0.1% on revision to +0.8% due to an unexpected upward adjustment in investment activity; the year on year number was unchanged at 2.7%.

Friday: the Organization for Economic Co-operation and Development (OECD) leading economic indictors dropped to 98.1 in November from 98.3 the prior month. It was the 6th successive monthly drop.


Tuesday: Wholesale Sales declined 1.7% in November and were down 1.1% on the year. The October results were revised to +2.1% m/m from +0.6% and to +4.0% y/y from +1.8%. Manufacturing Orders jumped 3.4% in November; expectation had been for a 2.0% decline after October's+ 4.0% surge.

Wednesday: machinery orders slowed sharply in November to +7.0% year on year from 20% in October as reported by the German Machinery Manufacturers Association (VDMA). The three month span ending in November was up 11% y/y; August – October gained 14% and July – September rose 12%. Industrial Output faltered in November coming in at -0.9% and +3.5% yearly; +0.4% and +4.4% were the forecasts. October was revised up to +0.1% from -0.3%. All components fell in November. Retails Sales as collected by the Federal Statistical Office (FSO) shrank 1.3% in November and were 3.2% lower than November last; +1.1% and -1.6% yearly had been predicted. It was the ninth month of negative result in 2007.

United Kingdom

Tuesday: British Retail consortium (BRC) like for like retail sales rose 0.3% month to month in December, far less than November's 1.2% gain. It was the lowest December reading since 2004 and the smallest for any month since March 2006. Total sales at 2.3% were also well below the November result of 3.1%.

Wednesday: nationwide consumer confidence registered 85 in December, the weakest since February; November had been 86. In September this index scored 102. This series began in 2004.

Friday: industrial production was lower than predictions in November, -0.1% m/m and +0.4% y/y, versus +0.1% and +0.6%; October had been +0.4% m/m and +1.0% y/y. Manufacturing output was also weaker than predictions at -0.1% m/m, +0.1% y/y against +0.2% and +0.4%; October had been +0.3% m/m and +0.3% y/y. These figures make it unlikely that manufacturing will add to 4th quarter GDP.


Friday: employment fell 18,700 in December a far cry from the +10,000 – +15,000 that the market had expected. The unemployment rate was stable at 5.9%. The Bank of Canada is now expected to cut rates by 25 basis points at its January 22nd meeting. The current rate is 4.25%.


Thursday: leading indicators registered 10 in November, the coincident indicators 33. They were 18.2 and 70 respectively in October.