Current Account Deficit Shrinks, NY Manufacturing Decelerates, Prices Paid Falls, International Demand for US Assets Surges

- The 3Q Current Account Deficit fell to -$178.5 billion versus estimates of -$183.0 billion and a downwardly revised -$188.9 billion in 2Q.

- Empire Manufacturing for December fell to 10.3 versus estimates of 20.0 and a reading of 27.4 in November.

- Net Long-term TIC Flows for October rose to $114.0 billion versus estimates of $50.0 billion and a downwardly revised $15.4 billion in September.

BOTTOM LINE: The US current-account deficit narrowed in the third quarter to the smallest in two years, as the trade deficit shrank and Americans earned more on overseas investments, Bloomberg reported. The gap amounted to 5.1% of the economy, the smallest since the first quarter of 2004. I expect the current-account deficit to narrow further this quarter.

Manufacturing in New York expanded this month at a slower pace as companies cut inventories, Bloomberg reported. The Outlook component of the index, which measures the manufacturing outlook for the next six months, rose to 32.4 from 30.5 the prior month. The New Orders component fell to 14.3 from 24.5 the prior month. The Inventories component fell to -10 from -1.2 the prior month. The Prices Paid component fell to 35.0 from 42.9 the prior month. I still believe manufacturing will help boost overall US growth over the intermediate-term as companies gain confidence in the sustainability of the current expansion and rebuild depleted inventories as a result of booming exports.

International buying of US financial assets accelerated to the fastest pace in five months in October, when financial-market strains diminished as Federal Reserve policy makers lowered interest rates, Bloomberg said. The increase came as foreign investors bought more Treasuries than in any month in almost two years and bought the most US equities since May. International holdings of US equities rose a net $30.2 billion in October versus $2.6 billion in September. Foreign investors’ demand for US Treasuries rose by $49.8 billion versus $26.3 billion the prior month. International demand for US assets will likely increase further over the intermediate-term.