This was a pretty pathetic week for economic data. There was really only one report of note and that was the monthly retail sales report. That was a fairly anemic report, but I wouldn't be too concerned about it just yet.
May Retail Sales
The headline was weak at -1.2% month to month, ex-auto was weak at -1.1% and ex-auto ex-gasoline was weak at -0.8%. It was a tough month all the way around. Not much more can be said than that. However, this is a volatile series and it actually has had a fairly decent run of late. A quick look at the chart below tells the story:
April International Trade
The data here suggested some weakness in exports and imports in April, but it is hard to glean much from that tidbit of information. The recovery in trade overall has been fairly strong and leaked Chinese export data suggests that it will continue to be. The widening trade deficit, though it is happening gradually and we are still well below pre-recession levels, suggests that global rebalancing has not occurred. The rapid decline of the euro will only worsen the return to previous global imbalances. In the long run, that will put some pressure back on the dollar, but don't look for that to happen just yet.
One thing I want to point out to some who have been concerned that we are at risk of having serious damage done by an export contraction due to impending disasters in Europe and possibly China is that our exports are a small portion of our overall GDP. On an annualized basis, they are about 12% of GDP. The idea that our economic recovery so far has been dependent on overseas demand is truly laughable. Of that chunk, much goes to Canada and Mexico. China ranks a fairly distant third on that list. The Eurozone overall is fairly important, but it would still take epic declines to derail us solely from an exports perspective. The financial contagion channel is far more important.
Yep, it was a pretty slow week, so let's rip through the rest.
Weekly retail sales were actually pretty good once again. Put a couple more weeks like that together and June could be a decent recovery from May.
Jobless claims were stubborn at 456,000. We've not made significant progress on this front in some time. Ideally, we would start seeing numbers around 420,000 and then 400,000, but that has not happened yet. I would caution against believing that the stagnation at these levels is prelude to a surge in claims, though. There is little evidence that will happen.
Wholesale and Business Inventories showed continued improvement in both sales and inventory growth. The inventory to sales ratios are now at record lows and will probably continue the downward trend that they have been on for years. How low can the ratio get? That is truly difficult to say. Many sectors now have less than a month's inventory in stock. If there was ever a major shipping disruption, things could get ugly. The major inventory adjustments are all behind us for now, though.