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Wednesday, May 11, 2005

Another Way To Read The US Data

The NYT's Jennifer Bayot puts a different spin on the data referred to in my last post. Basically the trade reading is good news:

"An unexpected retreat in the United States' demand for imports trimmed the trade deficit in March to a six-month low, the government reported today, creating a far brighter picture of the economy than previous data suggested."

The reason for this view? Well second quarter GDP estimates are being hurriedly revised upwards, and just maybe the long term 'adjustment' of the dollar is finally having an impact.

""Coupled with last week's employment report showing a surprise surge in hiring last month, today's data suggest that warnings of a slowdown in the economy may have been hasty.

"It was such an abrupt decline in imports," said Mickey Levy, chief economist at Banc of America Securities. "One of the critical questions for the economy is, 'Is this the beginning of a turn in the trade trends?'""

I'm not so sure. True exports also went up by 1.5% but this was partly a result of aircraft sales which may also be volatile on a month by month basis. The drop in demand for imports could be good or bad depending, we need to wait and see, but maybe like the above quoted Mickey Levy I'm just letting my critical faculties work too hard. Maybe the simpler explanation is the good one:

After all, Mr. Levy noted, other economic reports for March had showed a much bleaker picture than today's data, including that companies were stockpiling inventories while consumers were buying less. "It may be just too big a decline to reconcile with all the other data," Mr. Levy said. "But maybe I'm overanalyzing it."

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