FLASH UPDATE - September 10, 2009

JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS

FLASH UPDATE

September 10, 2009

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Widening July Trade Deficit Played Some Catch-Up

Structural Limitations:
Consumer Unable to Support or Sustain Economic Growth

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PLEASE NOTE: Later today, the Census Bureau will release its annual poverty survey, along with updated detail of household income and national income distribution. A subsequent Consumer Liquidity Special Report will follow within a day or so, assessing new detail available on consumer conditions. A further Flash Update, planned for Saturday, September 12th, will update the money supply circumstance along with a preview of key economic reports in the week ahead. A brief overview of this morning’s trade report follows below.

– Best wishes to all, John Williams

Special Report Follows. As discussed in the above note, a Consumer Liquidity Special Report will be published within the next couple of days, detailing new information on conditions reflecting the structural nature of the current economic downturn. Without adequate income to stay ahead of inflation, consumers have not had, and do not have the ability to sustain positive growth in personal consumption and in the broad economy, shy of significant renewed debt expansion. As suggested by the deepening annual contraction in consumer credit — the worst of the post-World War II era — renewed debt expansion is not a current prospect. These and other concerns will be covered, with the key issues feeding into to the Hyperinflation Special Report, which will follow shortly thereafter.   

July Trade Deficit Reversed Some Earlier Automobile Distortions. As discussed previously, the still-unfolding U.S. depression has been of such severity in terms of declining economic activity and in terms of systemic disruptions that reporting on a number of economic series has faced serious distortions. The bankruptcies of Chrysler and General Motors, for example, had such impacts in a number of areas, including reported trade flows. Separately, delays in trade-flow paperwork continue to appear to be warping import data on oil, although the July numbers suggested some catch-up in both reporting of oil prices and in terms of imported physical volume. 

The July release also reflected widened trade deficits in revision for both the first and second quarters, which means the recent quarterly GDP contractions were somewhat understated. The second-quarter GDP numbers, though subject to one more near-term revision, likely will not reflect the new information until next year’s annual revision, when the first-quarter GDP also will be revised.

This morning, (September 10th), the Census Bureau and Bureau of Economic Analysis reported that the seasonally-adjusted July trade deficit widened to $32.0 billion from a revised $27.5 (previously $27.0) billion in June and from a revised $26.4 (previously $26.0) billion in May. Such is not a good a start for consensus forecasts looking for positive GDP growth in the third quarter.

Once again, exports picked up by less than imports. Oil imports jumped based both on higher oil prices ($62.48 average per barrel in July versus $59.17 in June) and on slightly higher physical volume (9.6 million barrels per day in July versus 9.3 million in June).  

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