Economic First Look: Focus on International Trade

 | Nov 05, 2011 | 8:45 AM EDT
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  • Consumer Credit, 3:00 p.m. (all times EST)


  • National Federation of Independent Businesses (NFIB) Small Business Optimism Survey, 7:30 a.m.


  • EIA Petroleum Status Report, 10:30 a.m.


  • International Trade, 8:30 a.m.
  • Jobless Claims, 8:30 a.m.
  • Import and Export Prices, 8:30 a.m.
  • Treasury Budget, 2:00 p.m.


  • Veteran's Day: Markets Open, Banks Closed
  • Consumer Sentiment, 9:55 a.m.

The economic calendar for the week is very light. However, Thursday brings the International Trade data. This is a top-tier indicator that usually does not receive a lot of press. However, with the current spotlight on Europe, this report will show us an inkling from macroeconomic data (rather than company reports) of how our exports to Europe may fare amid the ongoing Euro problems. Still, this report is not the timeliest of barometers: Thursday's data cover the month of September.

Because this report covers September, and these data were not available with the recent GDP release, the data in this report will feed into the next GDP estimate, due Nov. 22. (Another GDP estimate will come out after that one, as part of the usual three revised estimates.) So, with the release of this report, economists will update their third-quarter GDP estimates in advance of the official government GDP data.

My main interest in these data is exports. We export both goods and services, but I'm not particularly interested in services, which include music and entertainment royalties, financial services, airfares and other items that might not always to be tied to employment here at home. (Selling another movie ticket in, say, Germany does not necessarily translate into more studio jobs here, since it still takes just so many people to make a movie, no more, no less.)

My focus is on the export of goods. Within goods, I break out manufactured goods from commodities, especially agricultural commodities. The U.S. is a big exporter of agricultural products and, while this is important to our economy, it does not tell us much in the way of how Europe is affecting U.S. manufacturers.

What U.S. manufacturers are reporting in the most recent ISM-Manufacturing Survey is that there is no growth, or contraction, in export orders, as on balance, their export books are at the break-even line. The ISM-Manufacturing survey new export orders metric printed at "50." (Fifty is the dividing line between expansion and contraction in this diffusion index/sentiment survey.)

This reading shows a bit of deterioration from the prior 53.5 level , so manufacturers are basically seeing orders that are flat from last month, after growing in the previous month. (The way to read the ISM data is to focus on the level as telling you whether the sector is expanding and contracting; the change in the level as the "second derivative" that tells you how many more respondents are showing expansion vs. contraction vs. the data for the prior month. This drop in the level does not tell you that export orders actually fell; instead, it says that orders did not grow or shrink, but stayed at the same level as in the prior month, when they grew from the prior month.)

The report, which includes snippets of companies' responses to the survey, does not mention Europe at all. Still, even this report, covering the month of October, might not be forward-looking enough to tell us where Europe is headed. What it does tell us, though, is that we may see some growth in exports (as per the September ISM export print of 53.5), and imports, which registered 54.5 in September and 49.5 in October, might also show some growth. In the coming months, however, we may see trade activity for both imports and exports remain basically flat, using just this report as a guide.

The final  -- and most important -- caveat, though, for using the ISM data in this way, is that it measures the general direction indicated by respondents, but not magnitude of change. Thus, the ISM data are helpful, but do not construe them as a precise indicator of the International Trade report, by any means.

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