{"id":1523,"date":"2019-05-09T11:41:31","date_gmt":"2019-05-09T15:41:31","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1523"},"modified":"2019-05-09T11:41:31","modified_gmt":"2019-05-09T15:41:31","slug":"april-producer-prices-march-trade-deficit-and-weekly-jobless-claims","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1523","title":{"rendered":"April Producer Prices, March Trade Deficit and Weekly Jobless Claims"},"content":{"rendered":"\n

KEY DATA:<\/strong> PPI: +0.2%; Goods: +0.3%;\nServices: +0.1%\/ Deficit: up $0.7 billion; Exports: +1%; Imports: +1.1%\/\nClaims: -2,000<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cIt looks like the big bump the economy\nreceived from a narrowing trade deficit in the first quarter will disappear in\nthe spring.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  The events swirling around the economy\ncontinue to create chaos but economists still have to make sense of the\neconomic data.  Wish me luck.  Let\u2019s start with inflation, since that is the\nkey to Fed behavior.  As long as inflation remains\nnear the target, there is not likely to be any change in rates.  Well, that is likely to be the case.  Wholesale prices rose moderately in April<\/em><\/strong>,\nled by another sharp increase in energy prices. \nOffsetting that, though, was a decline in food costs.  As a result, producer goods prices,\nexcluding food and energy, were largely flat. \n<\/em><\/strong>Since April 2018, business costs are up between 2% and 2.5%,\ndepending upon which special index you look at.  As for the pipeline, there appears to be\nsome pressure building in the cost of food. \nThose higher prices tend to be passed through.<\/em><\/strong>  Still, given that the path from wholesale to\nretail prices is not straight and is often a dead end, it is hard to make the\ncase that inflation will accelerate significantly due to rising costs of\nproduction. <\/em><\/strong>  That is especially true given that the trend\nin services inflation, which had been leading the way, is down.   <\/p>\n\n\n\n

Meanwhile, all is not quiet on the trade front, even\nbefore the president made his threat to impose higher tariffs on Chinese\nimports.  The trade deficit widened somewhat\nmodestly in March<\/em><\/strong>, in line with what would have been expected given the data in the GDP\nreport. But while I don\u2019t expect a major revision to the trade numbers for the\nfirst quarter, it looks like the narrowing we saw has largely disappeared.  At least in March, the numbers were actually\nheartening, despite the widening.  Both\nexports and imports rose<\/em><\/strong>, which is what should happen when the economy\nis strong and the rest of the world is growing. \nOn the export side, the soybean farmers were back in the market, as\nsales surged.  But that could change\nquickly if the tariffs are imposed. <\/em><\/strong> Energy exports were also up.  On the other hand, aircraft exports cratered<\/em><\/strong>.\nAs\nfor imports, higher prices and growing demand led to a rise in demand petroleum-related\nproducts<\/em><\/strong>.  Indeed, imports of just about\neverything else rose<\/em><\/strong>, the major exceptions being cell phones and televisions.  <\/p>\n\n\n\n

Jobless claims remained slightly elevated<\/em><\/strong>, but there are few signs\nthe labor market is weakening.    MARKETS AND FED\nPOLICY IMPLICATIONS:<\/strong>The\nlatest research makes it clear that consumers are paying the cost of the\ntariffs.  But the volume of goods being\ntaxed is small given the size of the economy, so there is little pressure on\nprices.<\/em><\/strong>  That is likely to be the\ncase if the tariffs in Chinese products are raised.  But the threats, their imposition, their\nrelaxation, new threats and on and on just makes it impossible to determine\nwhere the trade deficit is going.  Clearly,\ngiven sufficient lead-time, firms will expand imports in the months before the\ntariffs are imposed and lower them afterward.<\/em><\/strong>  Just the threats change patterns.  With companies now making decisions on what\nto order for the holiday shopping season, the uncertainty over when and how\nmuch to order is heightened. If new tariffs do come on, as is likely to be the\ncase, then firms could hesitate importing goods, hoping that the tariffs will\nbe rescinded.  On the export side, the\nChinese will be true to their word and respond in kind.<\/em><\/strong> I suspect the\nfarmers are not a very happy bunch.  Since\ntrade flows have been modified by politics, it is necessary to look at growth\nexcluding this crucial sector.<\/em><\/strong>Trade\nadded one full percentage point to growth and could add nothing or even\nsubtract from growth this quarter.   That\ncould help create an artificially low growth rate in the second quarter, just\nas it created an artificially high number in the second quarter.<\/em><\/strong>  As for inflation, there is no reason to think\nit will accelerate or decelerate, which is good news for the Fed.  Finally, while today\u2019s data are important, the trade\nthreats matter and until some of the fog of trade war lifts, uncertainty will likely\ndrive investment decisions.  And that is\nrarely good for the markets.<\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: PPI: +0.2%; Goods: +0.3%; Services: +0.1%\/ Deficit: up $0.7 billion; Exports: +1%; Imports: +1.1%\/ Claims: -2,000 IN A NUTSHELL:  \u201cIt looks like the big bump the economy received from a narrowing trade deficit in the first quarter will disappear in the spring.\u201d WHAT IT MEANS:  The events swirling around the economy continue to … Continue reading April Producer Prices, March Trade Deficit and Weekly Jobless Claims<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1523","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1523","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1523"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1523\/revisions"}],"predecessor-version":[{"id":1524,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1523\/revisions\/1524"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1523"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1523"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1523"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}