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U.S. Trade Deficit Hits a 5 Month Low

“The trade deficit in the U.S. unexpectedly narrowed in June, reflecting the biggest drop in imports in a year as the economy moved closer to energy independence.

The gap shrank 7 percent to $41.5 billion, the smallest since January, from May’s $44.7 billion, Commerce Department figures showed today in Washington. The median forecast in a Bloomberg survey of 66 economists called for a deficit of $44.8 billion. The drop in purchases of foreign goods included declines in autos and cellular phones, while petroleum imports were the lowest in more than three years.

Demand for goods made overseas will probably rebound in coming months, helped by growinghousehold spending and business investment. Exports were little changed at a record, a sign markets overseas will represent less growth for American factories as Europe’s economy struggles to pick up and geopolitical tensions mount.

“Imports are going to bounce back because of the strength of the U.S. consumer,” said Jay Bryson, global economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “The U.S. is doing better than most advanced countries.” While exports also may rise, “overall, trade won’t add a whole heck of a lot to economic growth,” he said.

Stock-index futures held earlier losses after the report. The contract on the Standard & Poor’s 500 Index maturing in September dropped 0.4 percent to 1,905 at 8:48 a.m. in New York as a buildup of Russian troops on the Ukrainian border intensified investor concern that the crisis will escalate.

Bloomberg survey estimates ranged from trade deficits of $41 billion to $46.7 billion. The Commerce Department initially reported a $44.4 billion shortfall for May.

Fewer Imports…”

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Q2 GDP Comes in at a Whopping 4% vs Estimates of 3.2%

“U.S. economic growth accelerated more than expected in the second quarter and the decline in output in the prior period was less steep than previously reported, which could bolster views for a stronger performance in the last six months of the year.

Gross domestic product expanded at a 4.0 percent annual rate as activity picked up broadly after shrinking at a revised 2.1 percent pace in the first quarter, the Commerce Department said on Wednesday.

That pushed GDP above the economy’s potential growth trend, which analysts put somewhere between a 2 percent and 2.5 percent pace. Economists polled by Reuters had forecast the economy growing at a 3.0 percent rate in the second quarter after a previously reported 2.9 percent contraction.

The economy grew 0.9 percent in the first half of this year and growth for 2014 as a whole could average above 2 percent. The first quarter contraction, which was mostly weather-related, was the largest in five years.

Employment growth, which has exceeded 200,000 jobs in each of the last five months, and strong readings on the factory and services sectors from the Institute for Supply Management underpin the bullish expectations for the rest of the year.

The government also published revisions to prior GDP data going back to 1999, which showed the economy performing much stronger in the second half of 2013 and for that year as a whole than previously reported….”

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PPI Inflates Faster Than Expected

“U.S. producer prices rose more than expected in June with gains across most categories, pointing to some inflation at the factory gate.

The Labor Department said on Wednesday its producer price index for final demand increased 0.4 percent last month, reversing May’s 0.2 percent decline.

Economists polled by Reuters had forecast prices received by the nation’s farms, factories and refineries rising only 0.2 percent.

The government revamped the PPI series at the start of the year to include services and construction. The new series was viewed as an alternative measure of economy-wide inflation.

But big swings in prices received for trade services, a gauge of margins for retailers and wholesalers, have injected volatility into the series and made it difficult to get a clear read on producer inflation.

The dollar widened its gains against a basket of currencies after the data. U.S. stocks were set to open higher.

Inflation is edging higher, with key consumer price measures rising in both May and April, even though the main gauge watched by the Federal Reserve continues to run below its 2 percent target.

The U.S. central bank is widely expected to start raising interest rates in the second half of 2015, but labor market strength poses the risk of an earlier policy tightening.

Fed Chair Janet Yellen cautioned on Tuesday that the Fed could raise interest rates sooner and more rapidly than currently envisioned if the labor market continued to improve faster than anticipated by policymakers…..”

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Industrial Production Drops, Misses By Most Since January

“For the 3rd month in a row, Industrial Production missed expectations as hopes and dreams of follow through in Q2 remain dashed on the shores of hard data. IP rose 0.2% (missing the 0.3% expectation) and May’s jump was downwardly revised to 0.5%. What is stunning is that Industrial Production has slowed its gains from the polar-vortex Q1 ….”

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Will Payrolls Have a Breakout Year as Companies Gain Confidence ?

 

“A family-run concrete business in Michigan, the U.S.’s second-biggest carmaker, the largest railroad and a solar power provider in California are all hiring as industrial companies lead a broad labor-market rebound that’s on pace to add the most jobs in 15 years.

Employment may be headed for a “breakout year” as companies feel more secure adding to payrolls following several years of demand rising only to stumble on threats from U.S. budget standoffs, a debt-ceiling induced default and a European credit crisis, said Marisa Di Natale, a director at Moody’s Analytics.

“It’s the first year in several where we haven’t had some kind of manufactured fiscal showdown inWashington, which weighs on business confidence and consumer confidence,” Di Natale said.

Industries from construction to autos to oil and gas are increasing jobs as growth accelerates after a harsh winter stunted business. As some sectors, such as floor retail sales, have yet to rebound and wages have been kept in check, the recovery is likely to be a steady climb rather than a boom, according to Jeffrey Joerres, executive chairman of Milwaukee-based staffing company Manpowergroup Inc.

Nonfarm payrolls may rise by 215,000 in June, which would mark a fifth straight month of increases topping 200,000, according to the median of 89 economists’ estimates ahead of the Labor Department’s monthly employment report on July 3. That also would be the longest streak of monthly gains since September 1999-January 2000.

Help Wanted

Help-wanted signs at concrete company Kent Cos. is one indication of a hiring rebound that could create more than 2.56 million jobs, the most since 1999, if the pace is sustained. Warren Buffett’s BNSF Railway Co. plans to grow by 2,100 positions in 2014. SolarCity Corp. (SCTY) is adding 400 people a month at the rooftop power-system installer backed by Elon Musk. At Ford Motor Co., hiring is so strong that the automaker predicts it may beat a 2011 plan to bring on 12,000 new workers by 2015.

“We do see and feel and hear from our clients that there is a building of demand,” Manpower’s Joerres said. Many employers that once held off on hiring now can’t wait any longer because “they have stretched everyone for the most part to the maximum.”

Jeff VanderLaan, chief executive officer at Kent Cos., plans to add 100 people this year, a 27 percent jump in his workforce to a record 475. The Grand Rapids, Michigan-based provider of services such as pouring floors and installing piers is seeing business boom in Texas, North Carolina and Ohio.

Economic Growth…”

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Glorious Chinese Manufacturng Data Gets Western Markets Giddy

“U.S. stock-index futures rose, after the Standard & Poor’s 500 Index posted the longest streak of quarterly gains since 1998, as China’s manufacturing expanded and investors awaited U.S. factory data.

Netflix Inc. (NFLX) advanced 3.4 percent in early New York trading after Goldman Sachs Group Inc. recommended investors buy shares in the world’s largest Internet-subscription service. General Motors Co. lost 0.8 percent, signaling it may decline for a fourth day. Symantec (SYMC) Corp. dropped 1.9 percent after Bank of Montreal downgraded the biggest maker of anti-virus tools to the equivalent of hold.

Futures on the S&P 500 (SPX) expiring in September climbed 0.2 percent to 1,956.9 at 7:30 a.m. in New York. The benchmark equity gauge rose 4.7 percent in the second quarter, a sixth consecutive increase. Dow Jones Industrial Average contracts added 41 points, or 0.2 percent, to 16,781 today.

“I was expecting a good performance into the summer months,” Gerhard Schwarz, the Munich-based head of equity strategy at Baader Bank AG, said by telephone. “I’ve been hoping earnings would be better. That’s what’s still missing, but the odds are quite good. Our call was that we might see some improvement in the economic indicators and that was delivered today with the Chinese PMI. So we’re seeing some recovery.”

Manufacturing Reports

A report today showed manufacturing in China expanded in June by the fastest pace this year. Apurchasing managers’ index rose to 51.0 last month from 50.8 in May, the National Bureau of Statistics and China Federation of Logistics and Purchasing said. The reading matched economists’ median estimate. A similar gauge from HSBC Holdings Plc and Markit Economics advanced to 50.7 from the previous month’s 49.4.

Figures from the Institute for Supply Management at 10 a.m. New York time may show its manufacturing index climbed to 55.9 in June from 55.4 the previous month, according to a survey of economists. That would be the highest reading of 2014…..”

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Chicago PMI Falls More Than Expected

Source

“The pace of business activity in the U.S. Midwest fell more than expected in June, a report showed on Monday.

The Institute for Supply Management-Chicago business barometer fell to 62.6 from 65.5 in May. Economists were looking for a reading of 63.0 in the month.”

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GDP Falls 2.9% at an Annualized Rate

The U.S. economy contracted in the first quarter by the most since the depths of the last recession as consumer spending cooled.

“Gross domestic product fell at a 2.9 percent annualized rate, more than forecast and the worst reading since the same three months in 2009, after a previously reported 1 percent drop, the Commerce Department said today in Washington. It marked the biggest downward revision from the agency’s second GDP estimate since records began in 1976. The revision reflected a slowdown in health care spending.

Consumers returned to stores and car dealerships, companies placed more orders for equipment and manufacturing picked up as temperatures warmed, indicating the early-year setback was temporary. Combined with more job gains, such data underscore the view of Federal Reserve policy makers that the economy is improving and in less need of monetary stimulus.

The first-quarter slump is “not really reflective of fundamentals,” said Sam Coffin, an economist at UBS Securities LLC in New York and the best forecaster of GDP in the last two years, according to data compiled by Bloomberg. “For the second quarter, we’ll see some weather rebound and a return to more normal activity after that long winter.”

Durable Goods

Another report showed orders for business equipment climbed in May, showing corporate investment is helping revive the economy after the slump at the start of the year. Bookings for non-military capital goods excluding aircraft rose 0.7 percent after a 1.1 percent drop in April, according to the Commerce Department.

Demand for all durable goods — items meant to last at least three years — decreased 1 percent, reflecting declines in the volatile transportation and defense categories…..”

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NFP Shows Improved Labor Stance on Headline Number, Looking Into the Report We Find Something Different

There was good news in today’s NFP report: at 138,463K jobs reported by the establishment survey, the US economy has finally not only recovered the prior cyclical high of 138,365K, but surpassed it by 98K. Congratulations.

And now the bad news. As the next chart shows…”

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A Closer look into the report

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More Data Suggests China’s Economy May Be Firming Up

“BEIJING—Two more measures of China’s economic health showed improvement in May, adding to signs that the economy is stabilizing after its sluggish start this year and suggesting that government support policies may be starting to show results.

The government’s index of activity in the nonmanufacturing sector in May hit its highest level since November last year, according to data released Tuesday, while a private sector gauge of factory activity showed gains for the month as well.

Added to a stronger reading in May for the official manufacturing Purchasing Managers’ Index, released on Sunday, the overall economic picture appeared somewhat brighter following moves to accelerate spending on railways, offer business tax breaks and make more financing available to smaller companies.

“These are good signs,” said Citigroup C +0.40% economist Ding Shuang. “But real economic activity may not rebound that quickly,” he cautioned.

The official nonmanufacturing Purchasing Managers’ Index rose to 55.5 in May from 54.8 in April, according to the China Federation of Logistics and Purchasing, which releases the data along with the statistics bureau. The nonmanufacturing PMI covers services, including retail, aviation and software, as well as real estate and construction. The upturn was largely a result of the important services sector, a key source of employment, while construction was less robust as a result of weaker property prices.

A reading above 50 means expansion from the previous month while anything below that shows contraction.

Meanwhile, the HSBC China Manufacturing Purchasing Managers’ Index, a gauge of nationwide factory activity, rose to a final reading of 49.4 in May from 48.1 in April, HSBC Holdings HSBA.LN -0.64% PLC said Tuesday. The reading still remained below 50, where it has been every month this year, showing contraction from the previous month but at a slower pace.

“The final (manufacturing) PMI reading for May confirmed that the economy is stabilizing, but it is too early to say that it has bottomed out, particularly in light of a weaker property sector,” said Qu Hongbin, HSBC’s chief economist for China, in a statement accompanying the data.

China posted economic growth of 7.4% year on year in the first quarter, down from 7.7% in the final quarter of last year…..”

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Comdey Files: John Maynard Keynes and Paul Krugman Discuss Eating Dogshit

“………The following joke perfectly explains the ludicrosity of GDP.
Two Keynesian economists, John Maynard Keynes and Paul Krugman, were walking down the street one day when they passed two large piles of dog shit.

Keynes said to Krugman, “I’ll pay you $20,000 to eat one of those piles of shit.” Krugman agrees and chooses one of the piles and eats it. Keynes pays him his $20,000.

Then Krugman, feeling richer, says, “I’ll pay you $20,000 to eat the other pile of shit.” Keynes, feeling bad about the money he lost says okay, and eats the shit. Krugman pays him the $20,000.

They resume walking down the street.

After a while, Krugman says, “You know, I don’t feel very good. We both have the same amount of money as when we started. The only difference is we’ve both eaten shit.”

Keynes says: “Ah, but you’re ignoring the fact that we’ve increased the GDP by $40,000.

That is really all you need to know about GDP… it’s all dogshit….”

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U.S. GDP Growth Contracts for the First Time in Three Years

“The U.S. economy contracted in the first quarter for the first time in three years as it buckled under the weight of a severe winter, but there are signs activity has since rebounded.

The Commerce Department on Thursday revised down its growth estimate to show gross domestic product shrinking at a 1.0 annual rate.

It was the worst performance since the first quarter of 2011 and reflected a far slower pace of inventory accumulation and a bigger than previously estimated trade deficit.

The government had previously estimated GDP growth expanding at a 0.1 percent rate. It is not unusual for the government to make sharp revisions to GDP numbers as it does not have complete data when it makes its initial estimates.

The decline in output, which also reflected a plunge in business spending on nonresidential structures, was sharper than Wall Street’s expectations. Economists had expected the revision to show GDP contracting at a 0.5 percent rate.

The economy grew at a 2.6 percent pace in the fourth quarter. U.S. financial markets are likely to shrug off the report, given the temporary factors that weighed down on growth and the fact that economic activity is rebounding.

Data ranging from employment to manufacturing suggests growth will accelerate sharply in the second quarter.

Economists estimate severe weather could have chopped off as much as 1.5 percentage points from GDP growth. The government, however, gave no details on the impact of the weather.

Businesses accumulated $49.0 billion worth of inventories, far less than the $87.4 billion estimated last month…..”

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China PMI Plunges Again as Home Sale Fall by 47%

“For the 6th month in a row, China HSBC Manufacturing PMI missed expectations. With a 48.1 print for April (vs 48.3 flash) this is a very modest rise from March’s 48.0 but is the 4th month in a row of contraction for the broader-based HSBC-version of the PMI (as opposed to the official more-SOE-biased version which remains in modest expansion). This is the longest streak of contraction since Oct 2012 (and the 3rd consecutive month of new order contraction) as employment drops for the 6th month in a row. Most worrying new export orders dropped further showing no signs of a US-driven pick-up post-weather. As if that was not enough to upset the ‘recovery is around the corner’ crew, home sales in China in the most recent (most frenetic typically) period, collapsed 47% year-over-year (and a stunning 65% in tier-2 cities)But apart from that – everything’s great in the newly appointed largest economy on earth…

 

The gap between the official and HSBC/Markit PMI is at almost its widest in 2 years…”

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State of the Union: Everything is Just Fine, Go Back to Your Reality Show

“No, the economy is most definitely not “recovering”.  Despite what you may hear from the politicians and from the mainstream media, the truth is that the U.S. economy is in far worse shape than it was prior to the last recession.

Image: U.S. Dollars (Wiki Commons).

In fact, weare still pretty much where we were at when the last recession finally ended.  When the financial crisis of 2008 struck, it took us down to a much lower level economically.  Thankfully, things have at least stabilized at this much lower level.  For example, the percentage of working age Americans that are employed has stayed remarkably flat for the past four years.  We should be grateful that things have not continued to get even worse.  It is almost as if someone has hit the “pause button” on the U.S. economy.  But things are definitely not getting better, and there are a whole host of signs that this bubble of false stability will soon come to an end and that our economic decline will accelerate once again.  The following are 17 facts to show to anyone that believes that the U.S. economy is just fine…

#1 The homeownership rate in the United States has dropped to the lowest level in 19 years.

#2 Consumer spending for durable goods has dropped by 3.23 percent since November.  This is a clear sign that an economic slowdown is ahead.

#3 Major retailers are closing stores at the fastest pace that we have seen since the collapse of Lehman Brothers.

#4 According to the Bureau of Labor Statistics, 20 percent of all families in the United States do not have a single member that is employed.  That means that one out of every five families in the entire country is completely unemployed.

#5 There are 1.3 million fewer jobs in the U.S. economy than when the last recession began in December 2007.  Meanwhile, our population has continued to grow steadily since that time.

#6 According to a new report from the National Employment Law Project, the quality of the jobs that have been “created” since the end of the last recession does not match the quality of the jobs lost during the last recession…

  • Lower-wage industries constituted 22 percent of recession losses, but 44 percent of recovery growth.
  • Mid-wage industries constituted 37 percent of recession losses, but only 26 percent of recovery growth.
  • Higher-wage industries constituted 41 percent of recession losses, and 30 percent of recovery growth.

#7 After adjusting for inflation, men who work full-time in America todaymake less money than men who worked full-time in America 40 years ago…..”

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Planned Layoffs Spike 17% in April Do to M&A Activity

“Global outplacement firm Challenger, Gray and Christmas says planned layoffs surged in April.

The firm’s monthly survey of businesses found that employers announced more than 40,000 job cuts, 17 percent more than in March. And it’s up six percent from April a year ago.

John Challenger, CEO of the outplacement company, blames an increase in mergers and acquisitions. 

He notes that “companies don’t need two corporate headquarters” when they combine resources…..”

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Economic Expansion Threatened by Falling Asian Exports

“For decades, Asia fueled its development by selling products to the West. That engine is now sputtering, threatening to sap the region’s economic expansion.

Combined exports from Asia’s four export powerhouses—China, Japan, South Korea and Taiwan—slid 2% in the first three months of this year from the same period last year.

China’s drop is particularly striking. Beijing reported Friday that its first-quarter current-account surplus, which measures all trade and one-time transfers, shrank to a three-year low.

Toyota Aqua hybrid vehicles sat parked ahead of shipment at the port of Sendai, Japan, on March 7.Bloomberg News

Exports have seen sharp downturns over the past two decades, after the 1997 Asian financial crisis and the 2001 bursting of the dot-com bubble. But they quickly rebounded to double-digit growth after little more than a year as the world’s economy healed.

Not this time. Exports jumped in 2010 in the wake of the global financial crisis. But they have slumped since and now are barely in positive territory, even as the U.S. economy has stirred back to life.

This sluggishness reflects a sharp shift in the global economy. For decades, going back to the 1960s, Asian economies led by Japan, then South Korea, Taiwan and China, became the world’s factory floor, marshaling cheap labor to propel a wave of exports.

Today, it is unclear whether exports can still provide that oomph. Overall growth is slowing in many Asian nations, forcing policy makers to ponder whether demand from their own consumers can fill the void.

“That model that Asia had of relying on the trade channel—that’s gone,” said Markus Rodlauer, deputy director for Asia and the Pacific at the International Monetary Fund in Washington.

 

Theories for the shift proliferate. Prominent among them: The U.S. recovery this time is different. In the five years since emerging from recession, growth in all goods and services in the U.S. has averaged just 1.8%, half the pace of the previous three expansions.

The recovery is gathering steam, but is being powered by capital investment in areas like oil-and-gas exploration that don’t rely much on imports…..”

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China Factory Activity Shrinks for Fourth Month

“(Reuters) – China’s factory activity shrank for the fourth straight month in April, signaling economic weakness into the second quarter, a preliminary survey showed on Wednesday, although the pace of decline eased helped by policy steps to arrest the slowdown.

Analysts see initial signs of stabilization in the economy due to the government’s targeted measures to underpin growth, but believe more policy support may be needed as structural reforms put additional pressure on activity….”

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Core Inflation Rises

“Inflation unexpectedly accelerated in March due to increased costs of food and shelter, according to just-released data from the U.S. Bureau of Labor Statistics.

Both the headline consumer price index and the “core” price index (which excludes food and energy prices) advanced 0.2% in March from the previous month, ahead of consensus estimates for a 0.1% rise in both series, matching February’s pace.

The year-over-year change in the core index rose to 1.7% from 1.6%, while the year-over-year change in the headline index was boosted to 1.5% from 1.1%.

housing-inflation
Economists expected the former to hold steady at 1.6% and the latter to rise to 1.4%, due to a drop in energy prices in March 2013……”

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Empire Manufacturing Misses Again

“For the 8th month of the last 9, the Empire Manufacturing missed expectations. Tumbling to its lowest since December (despite the apparent let-up in weather freakishness), this is the biggest miss since Jan 2013. …”

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Initial Jobless Claims Fall to the Lowest Level Since 2007

“Initial claims filed for unemployment insurance fell to 300,000 in the week ended April 5, the lowest level since May 2007. Economists expected claims to edge down to 320,000 from the previous week’s upwardly-revised 332,000 reading.

Continuing claims filed in the week ended March 29 fell to 2.776 million from an upwardly-revised 2.838 million in the previous week.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, warns that the number may have been affected by favorable seasonal adjustments due to the shifting timing of the Easter holiday.

“We’d love to proclaim these numbers as definitive evidence of a real downshift in the trend in claims, but it’s even riskier than usual to put too much weight on single observations at this time of year,” says Shepherdson.

“The shifting date of the Easter holiday from year-to-year causes problems for the seasonal adjustments, so we need to see a few more weeks’ numbers before we can be sure where the trend now stands.”

Nonetheless, Shepherdson acknowledges that the trend is lower.

“Firings are low and that is good news for two reasons,” says Neil Dutta, head of U.S. economics at Renaissance Macro Research…”

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