Better Trade Data But It Doesn’t Stop Consumer Sentiment from Plunging

A bit of a mixed bag of economic numbers and a somewhat surprising take on second quarter GDP highlight the economic news today.

First, consumer sentiment took a dive. It went from 70.8 in June to 64.6 this month. The expectation had been that it would drop to 70.5 which once again stands as a testament to the ability of the economics profession to forecast anything. It would seem that the people actually out living in the economy and feeling the pain have a slightly different view of things than do the computers.

Second, though it might not be that surprising, the trade deficit declined. Exports were up by 1.6% and imports down 0.6% from last month. That resulted in a decline in the deficit of $2.8 billion as it decreased from $28.8 to $26 billion. Now while a decline in the trade deficit is always a welcome development some economists are reading a lot into this number. This is from the WSJ Real Time Economics blog:

Was the better-than-expected May trade report enough to finally push GDP into the black? Macroeconomic Advisers thinks so.

Prior to Friday’s data (which showed a surprising narrowing in the trade gap to $25.96 billion in May) Macroeconomic Advisers expected a 1.6% GDP decline in the second quarter, at an annual rate.

Now, the firm sees second-quarter GDP up 0.2%, a 1.8 percentage point upward revision. That would be the first positive GDP result since the second quarter of 2008.

RDQ Economics also noted the potential for a positive GDP number. “At a minimum, this suggests that the decline in real GDP should be less than current forecasts (we think that a drop of 0.5% rather than 1.5% in the second quarter is now a central forecast for GDP) and there is a significant possibility that real GDP could actually grow slightly in the second quarter, which would further add to our view that the recession ended last quarter,” economists said.

Other economists didn’t see as large an effect. Morgan Stanley revised its forecast to a 1.1% contraction from a previous forecast of a negative 1.5% print.

Goldman Sachs said the report means their forecast for a 3% GDP contraction is likely too negative. Nigel Gault of IHS Global Insight also didn’t offer an exact figure, but said the trade data indicate that any second-quarter GDP contraction will be under 2%.

I’m not sure I buy into their arguments but it’s always nice to see some positive opinion. As this chart from EconomPicData shows the declines might be leveling off but there isn’t any obvious growth.

More second derivative type of stuff.

more: here and here

Graph: Econompicdata

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About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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