US Economic Indicators Preview (Week of 9 to 15 November 2009)

• Trade balance (Sep): widening deficit
• Import prices (Oct): annual rate much less negative
• UMI consumer sentiment (Nov): slight improvement

Initial jobless claims went down by 20k in the week ending 31 October. This was the lowest level since the second week of January, but jobless claims above 400k continue to signal job cuts in the US economy. We expect initial jobless claims in the week ending 7 November to have risen slightly to 515k after their marked decline.

The federal government recorded a total budget deficit of $1.4 trillion in fiscal year 2009, about $960bn more than in 2008. The deficit as a share of GDP rose from 3.1% to 9.9% - the highest ratio since 1945. The Congressional Budget Office (CBO) estimates that the deficit in October, the first month of fiscal year 2010, will amount to $175bn, compared to -$156bn in the previous year. The deterioration will have been entirely due to lower receipts.

The trade deficit narrowed by $1.1bn in August, as imports fell despite higher oil prices, and exports only rose slightly. The high level of the ISM export component indicates that exports will have risen more markedly in September due to the global recovery. But the fact that domestic demand rebounded in the 3rd quarter could have pushed imports up, just as the Commerce Department assumed in its first GDP estimate for Q3. Moreover, nominal petroleum imports which fell in August might have gone up too, supported by a moderate increase in oil prices. We forecast that the trade deficit will have widened from $30.7bn to at least $32.5bn in September.

Import prices had only increased slightly by 0.1% mom in September; however, as oil prices rose by around 2% in the statistically relevant first third of the month, import prices could have gone up by about 0.5% mom in October. The annual rate will have remained negative, but, at -6.1%, it will only be about half the August rate.

Due to uncertainty about the economic outlook, the University of Michigan's (UMI) consumer sentiment fell back from 73.5 to 70.6 in October. But as the preliminary level was only 69.4, late respondents in the survey were much less pessimistic. We thus predict that UMI's preliminary November consumer sentiment will go up to 71.5. Reports about the growth rebound in the 3rd quarter could have lifted consumer mood, but it is unlikely to have reached September's level, because the unemployment rate has hit a 27-year high.

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