Economic First Look: Focus on International Trade

 | Feb 05, 2012 | 8:00 AM EST  | Comments
  • Comment
  • Print Print
  • Print

Monday

  • No major economic releases 

Tuesday

  • Consumer Credit, 3:00 p.m. (all times Eastern)

Wednesday

  • EIA Petroleum Status Report, 10:30 a.m.
  • John Williams, President of the San Francisco Fed (voter), speaks, 10:40 a.m.

Thursday

  • Jobless Claims, 8:30 a.m.

Friday

  • International Trade, 8:30 a.m.
  • Consumer Sentiment, 9:55 a.m.
  • Treasury Budget, 2:00 p.m.

If I were an economist solely interested in the economic reports on tap, this would be a good week for me to take a vacation. This week's calendar is extremely light, as far as scheduled releases. Of course, plenty of other (unplanned) news will claim my focus, such as developments in Europe, but here at home, International Trade and Jobless Claims are perhaps the only top-tier reports of the week.

Jobless claims on Thursday have the potential to move the markets if they deviate significantly from their general, gentle trend downward. With American Airlines' recently announced plan to lay off 13,000 people as part of its bankruptcy reorganization, we are reminded that not all is well in the employment world.

Aside from the obvious reason, Friday's International Trade report is important because it is the missing piece of data from the recently released first GDP estimate. The Bureau of Economic Analysis estimated these data, but this report contains the actual numbers for December. Since we are now into February, this report is a bit dated.

That said, it will tell us two things. One is how well our exports are faring, particularly in relation to Europe, since that region is in, or near, recession. Another data point is whether American consumers and businesses are buying more from abroad. Imports subtract from GDP, but the report could show that people are spending more, whether it's on a toaster or a tractor. So, an increase in imports can offer an important signal, even if it might count as a negative in output here at home.

What can we expect from the International Trade report? Let's look at two surveys from the Institute for Supply Management for December. One is the manufacturing survey; the other is the non-manufacturing survey, which includes retailers and wholesalers. I will focus on the export component of the manufacturing survey and the import component of the non-manufacturing survey.

For the ISM-Manufacturing survey, consider the following table that shows trends in the "New Export Orders" component. Note that "50" is the dividing line between growth and contraction for the index value.

Month

% Higher

% Same

% Lower

Net

Index

Jan-12

20

70

10

10

55

Dec-11

18

70

12

6

53

Nov-11

15

74

11

4

52

Oct-11

14

72

14

0

50

Thus, we see that exports from U.S. manufacturers have steadily risen in each of the past several months. This is good news for the manufacturing sector and seems to belie concerns about Europe. The Eurozone, by the way, accounts for 13% of our exports. In turn, our exports, account for 14% of our economy. Of course, trading is linked globally, so an item we export to, Asia, for example, may end up as a component in a manufactured good that is eventually sold in Europe. (International Trade does not factor in direct investment of U.S. companies abroad. A U.S. restaurant chain, for example, may have a location in France that imports nothing from the U.S., even though the profits of that company accrue to a U.S. corporation.

The ISM Manufacturing report containing data for December -- corresponding to the International Trade report -- notes that the New Export Orders Index registered 53 in December; the New Export Orders Index has registered 50 or greater for the past 30 consecutive months. The five industries that reported growth in new export orders in December are Apparel, Leather and Allied Products; Computer and Electronic Products; Fabricated Metal Products; Machinery and Transportation Equipment.

Now let's turn to imports. Why am I using the ISM-Manufacturing data for exports, but the ISM Non-manufacturing data for imports? Well, the ISM Non-manufacturing survey includes retailers and wholesalers, so I'm interested in what they import because that is what eventually gets sold here. Meanwhile, exports  of these companies tend to be services, such as airfares, entertainment royalties and financial services, which don't interest me as much as goods. Exports of some services, like entertainment, don't necessarily translate into more jobs here at home, although services exports, such as agriculture, are still an addition to our GDP. As to manufacturer's imports, they do matter, of course, but since they may be components that might eventually be exported, we do not get a "clean" read on U.S. economic activity from those data.

That said, the ISM Non-manufacturing report shows imports steadily increasing:

Month

% Higher

% Same

% Lower

Jan-12

17

76

7

Dec-11

13

82

5

Nov-11

12

73

15

Oct-11

10

76

14

As such, we may see more import orders in the December numbers from the Census Bureau in the International Trade report. The report containing data for December notes that the six industries reporting an increase in the use of imports in December are, in order: Information; Arts, Entertainment and Recreation; Retail Trade; Construction; Professional, Scientific and Technical Services; and Wholesale Trade.

Overall, these data may point to increased trade activity. However, I caution you that the data I presented are survey data. They are not measured in output or dollars. The size of orders is not presented in the ISM data -- just the percentage of respondents reporting "more" or "fewer" orders. So, while these data are a guide, they are not entirely predictive of Friday's report.

Columnist Conversations

There was a string of good news out of Germany recently. The latest is that the business confidence indicator,...
AAPL needs to clear this hurdle IF this last low is any good!! View Chart » ...
The Fed didn't raise interest rates, but the market did via lower bond and note prices. The recent run in Trea...
WHR has regained all the of the ground lost over the last nine sessions during today's rip higher. The st...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.