Trade Deficit Widens, Import Prices Fall, Jobless Claims Steady, Consumer Confidence on the Rebound

- The Trade Deficit for September widened to -$66.1B versus estimates of -$61.5B and -$59.3B in August.
- The Import Price Index for October fell .3% versus estimates of a .2% decline and a 2.3% increase in September.
- Initial Jobless Claims for last week rose to 324K versus estimates of 320K and 324K the prior week.
- Continuing Claims rose to 2818K versus estimates of 2792K and 2795K prior.
- Preliminary Univ. of Mich. Consumer Confidence for November rose to 79.9 versus estimates of 76.5 and a reading of 74.2 in October.

BOTTOM LINE: The US trade deficit widened more than expected to a record $66.1 billion in September as oil imports surged and exports dropped by the most in four years, Bloomberg reported. Disruptions from the hurricanes on the Gulf Coast likely contributed meaningfully to the decline in exports. I expect the Trade Deficit to shrink modestly over the intermediate-term as the decline in energy prices more than offsets slightly decreasing demand for our exports as global growth slows.

Prices of goods imported into the US fell last month for the first time since May, reflecting cheaper crude oil, business equipment and consumer goods, Bloomberg reported. Excluding energy prices, import prices rose at the same rate as the prior month which is likely the result of companies’ limited ability to pass on higher commodity prices. As I forecast a few weeks ago, I still believe import prices will fall over the intermediate-term as commodity prices continue to weaken.

The number of Americans filing first-time claims for unemployment insurance rose last week as more workers displaced by hurricanes sought benefits. The US economy has created jobs at the second best pace since the peak of the stock market bubble in 1999 notwithstanding losses related to the hurricanes. The four-week moving-average of jobless claims dropped to 334,250 from 350,500 the prior week. The insured employment rate, which tracks the US unemployment rate, remained at 2.2%. I continue to believe the job market will improve slowly from depressed levels seen after the hurricanes, but not reach the levels seen prior.

Consumer Confidence rose this month as gasoline prices plunged from the record levels seen after the hurricanes hit. Unleaded Gasoline futures have now collapsed almost 50% since post-hurricane highs. The current conditions component of the index rebounded sharply to 100.3 from 91.2 the prior month. The International Council of Shopping Centers recently predicted same-store sales to rise 3-3.5% this holiday season versus a 2.3% increase last year. I continue to believe Consumer Confidence will rebound sharply from post-hurricane lows.