Thursday, April 09, 2009

U.S. Exports Up, Current Account Down, And New Jobless Claims Fall!

Today brought some startlingly good news. Our trade deficit fell from over $36 billion a month in January to under $26 billion in February. "Initial claims for state jobless benefits decreased 20,000 to 654,000 in the week ended April 4."

To put that in perspective, we had been running a current account deficit equivalent to 5% of GDP going into the current financial storm. Indeed, our deficit, which was being financed by external borrowing from China among others, is a major contributor to the current financial crisis. Take the February deficit multiply it by twelve months in a year and divide it by fourth quarter GDP and it represents just 2.2% of GDP. Given the month to month fluctuation in exports and imports, it is far fetched to project one month's performance, but we have seen a steady improvement in the trade deficit.

The improvement in February came in part from increased exports. Is this a straw in the wind that the world inventory correction has run its course? Or is this a random monthly fluctuation?

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