FLASH UPDATE - April 9, 2009

JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS

FLASH UPDATE

April 9, 2009

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Reported Trade Deficit Narrowing Suggests U.S. Recession
Is Worse than Downturn in Rest of World

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PLEASE NOTE: Publication of the pending full newsletter is planned for Monday, April 13th. Its posting on www.shadowstats.com will be advised by e-mail.

– Best wishes to all, John Williams

Imported Oil Prices Hold at Bottom. To the extent that this morning’s (April 9th) Census Bureau report of a sharp narrowing in the February U.S. trade deficit can be believed, it suggests that U.S. demand (reflected in imports) is slowing faster than demand in the rest of the world (reflected in exports). On a seasonally-adjusted basis, U.S. monthly purchases from the rest of the world (imports) fell by 5.1% in February, while U.S. sales to the rest of the world (exports) actually increased by 1.6%.

As reported, the seasonally-adjusted February deficit narrowed to $26.0 billion from a revised $36.2 (was $36.0) billion in January. Even as officially adjusted for inflation, the deficit improved, with the January and February levels suggesting that the net export account in gross domestic product will make a net positive contribution in the upcoming "advance" estimate of first-quarter GDP.

The price of imported oil was reported at $39.22 per barrel for the month, down from January’s $39.81. The recent upturn in oil prices should widen the trade deficit anew in the months ahead.

Erratic reporting in the trade data, particularly tied to oil imports, leaves these numbers highly suspect. Distortions of paperwork flows through the Customs Service can generate meaningful distortions in the monthly reporting.

Week Ahead: Perhaps due to the holidays, I am not finding anything in the way of publicly published consensus expectations for next week’s economic releases. That said, aside from some possible minor month-to-month bottom-bouncing at a low level of activity, economic conditions still are deteriorating. Irrespective of reported month-to-month changes, year-to-year contraction in each of the economic series should deepen.

Nonetheless, March reports on Retail Sales (due Tuesday, April 14th), Industrial Production (due Wednesday, April 15th) and Housing Starts (due Thursday, April 15th) have a shot of coming in on the soft side of expectations for monthly changes. Consensus estimates will have been influenced heavily by some prior-month bottom-bouncing and some suspect reporting (i.e. prior-month results that received relative boosts from downward revisions to previous reporting or from unusual seasonal factors). Some downside catch-up is a fair possibility for retail sales and housing, in particular.

On the March inflation front, the PPI (due Tuesday, April 14th) is regularly volatile, but it should show some upside pressure from the recent rebound in oil prices.

Consumer prices are not surging anew, yet. Annual inflation as measure by the CPI-U (due Wednesday, April 15th) likely will continue to hover above zero, with a minor month-to-month boost from higher gasoline prices.

Annual CPI-U inflation would increase or decrease in March 2009 reporting, dependent on the seasonally-adjusted monthly change, versus the 0.38% monthly increase seen in March 2008.  The difference in growth would directly add to or subtract from February’s annual inflation rate of 0.24%.

Flash Updates will follow the retail sales and CPI releases, regardless of the timing of the pending newsletter’s publication.

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