Fellow
Shortrunners,
It was another tough week for the equity markets, as uncertainty continues to surround the global economy. There were several noteworthy pieces of economic data for the US economy on the international side. First, a surge in imports has helped to spark a massive rise in the trade deficit to a new monthly record of $35.9 billion in April. The Commerce Department's release signals a complete reversal of the meager signs of recovery the deficit had been showing. This could be bad news for the dollar's value. Even more, as long as uncertainty, both of terrorist threats and business ethics, continues to damage the US economy, foreigners are likely see the US as a much less desirable investment opportunity. A shift in global capital flows from dollars to say Yen or Euros will likely continue to damage the dollar.
At the same time, strong imports are a sign that the economy is recovering and that consumer activity is picking back up. If indeed the dollar continues to fall, more and more of this consumer activity will likely shift to domestic consumption as imports continue to rise in price. This is good news for US retailers and relatively bad news for the global economy. A strong dollar, over the past decade, has allowed the United States' seemingly insatiable appetite for imports to help prop-up a number of international economies by providing a large market for their exports.
Next week, yet another important conference will help to chart the future course of global trade. The G8 summit, held in Canada will continue talks on trade and development. The summit comes at an important time, for it provides a key place to discuss fighting terrorism through international cooperation. A number of worries have struck at the heart of international trade since September 11th, not the least of which concerns container shipping which is a major crux of the global trade flow. In spite of the importance of the summit, for reasons other than trade proliferation, protestors have already begun to gather. It will be interesting to see if the world's politicians have the resolve to push forward a significant compromise.
Sincerely,
Daniel Hicks
Economic Releases
The data section
provides charts and data for the most important economic indicators.
Consumer
Price Index: 0.0%
Release Date: 6/18
- Overall consumer prices were unchanged during May. The core CPI rose as energy prices were a drag on the main index. Petroleum prices, which contributed to the rise in April's trade deficit figure, have begun to fall, as Venezuela recently announced plans to increase its output.
Release Date: 6/18
- Housing starts jumped a hefty 11.6% percent from May to April. The housing market, which has been and continues to be a strong source of growth for the US economy has recently raised eyebrows among economists. Many fear the creation of another housing bubble, which, if it bursts, could damage our fragile recovery.
Jobless
Claims: 393,000
Release Date: 6/20
- Jobless claims dipped 2,000 from an upwardly revised figure of 395,000 last week. Initial jobless claims, while below 400,000 still remain elevated and suggest a weak labor market.
Trade
Deficit: $35.9 Billion
Release Date: 6/20
- From March to April, while the dollar steadily dropped in value, the trade deficit rose over 10%. A ballooning trade deficit should cut headline growth in the US. It should also work against the dollar's value, as described above.
Index
of Leading Indicators: 0.4%
Release Date: 6/20
- The Conference Board's Index of Leading Indicators rose 0.4% in May, suggesting a healthy economic future for the US. The coincident index, a measure of the economy's current growth rate rose as well. The lagging index, which charts where the economy has been, declined 0.2% during the month.
ECRI Weekly Leading Index: 122.6
Release Date: 6/21
- The ECRI WLI continued to edge forward last Friday, reaching 122.6. It's long-term growth rate remained strong at 5.6%.
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Issue #108
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