Next week, there will be a relative dearth of indicators. The July trade balance likely showed a modest contraction, as import growth slowed considerably.

Notwithstanding the better tone to the overall economic indicators over the past week, the economy is still losing momentum in the third quarter, which should put considerable pressure on the FOMC to do something sooner rather than later.

KEY U.S. DATA RELEASES THIS WEEK

Thursday, September 9 – Trade Balance (Jul.)

• IHS Global Insight: -$47.0 Billion
• Consensus: -$47.3 Billion
• Last Actual: -$49.9 Billion (Jun.)

What to Look For

• The trade deficit likely narrowed to a level of $47.0 billion in July.

Implications

The trade deficit jumped by almost $8 billion in June, to $49.9 billion, as exports fell while imports surged. Given the underlying sluggishness in domestic demand, there is no fundamental support for such high import levels. Thus, we expect the trade deficit to fall in coming months, beginning with a drop to $47.0 billion in July, as exports bounce higher and imports begin to decline. Oil is always a wildcard and will probably dampen the narrowing in the deficit, with oil imports rising in both volume and price.