Economic Data

Lot's of data, so lets just dig in...

In March, the trade deficit increased by 10.4% from the April numbers. The numbers came in at $63.9 billion. That's an annual rate of $766.8 billion dollars. Bloomberg reports that the majority of this increase came from oil imports. So what happens to the trade deficit when oil jumps to $80 /barrel this summer? I don't think I need to answer that question. Another quick note on the topic, import prices in general rose 1.3%. Again this is do large in part to oil prices. The issue on a larger scale is that all of these pools of liquidity are trying to find a home, and I expect some of that liquidity to get real cozy in consumer prices.

Bloomberg reports:

U.S. retailers posted the biggest sales decline on record, trailing already-reduced estimates.

Bloomberg blames the cold. I don't buy that for a second. We are starting to see signs that the American consumer is maxed out. Consumers are no longer able to use their declining home equity to buy big ticket items. That hasn't necessarily stopped them, but it has just slowed them down. This is prevalent in the rising amount of credit card debt. Don't forget about the ARMs that are planned to recent in the coming months and years. Look for this to effect GDP for the 2Q, and I promise you that the consumer hasn't come close to bottoming out yet.

The Bank of England raised their overnight lending rates to 5.5% which is a 6 year high. The ECB is likely to follow suit in June. Even as the FOMC holds rates steady, foreign central banks continue to raise rates putting more downward pressure on the USD. I don't like to forecast or predict to much but I am going to do just that for you now:

I think that the rhetoric that Bernanke and company has been using is just that. They are trying to 'battle' inflation with words, but it doesn't really work like that. As long as they can use core CPI measures and manipulate the manufacturing data before the FOMC meetings, they will not be faced with pressure from the general public on inflation. The crazy thing is that the majority of Americans want a rate cut. I think that Bernanke will continue his 'tough' stance on inflation for a good part of this year. He and his cronies at the Federal Reserve will cut rates as GDP growth, or lack there of, continues to fall. Look for a rate cut at the end of this year or the beginning of next year.