Vital Signs for the Week of Feb. 7

On tap this week: Trade deficit data and the consumer credit report for December, federal budget numbers for January, and more

By James Mehring

Those economy-watchers fretting about growing U.S. deficits will have some more numbers to crunch. Government reports on the trade gap, the federal budget, and consumer credit will all come out this week. What's more, President Bush will release his budget proposal for fiscal year 2006, which starts in October.

The numbers surrounding the yawning trade gap are likely to be a little smaller for December. The consensus among economists is for a deficit a little above $57 billion, following the all-time high of $60.3 billion in November. That month's original estimate will likely be lowered due in part to a miscalculation by Canada's government of U.S. goods and services imported to the country. But the U.S. import total will still be a record.


  Some fear that the recent growth in trade deficits is a negative for the U.S. economy because it increases America's need for foreign investment and raises the risk of higher interest rates and/or a lower dollar to keep attracting investors.

At the same time, the surge in imports is due in part to strong demand. Economic growth in the U.S. is still outpacing that of the Eurozone, Japan and other developed countries. Thus, uneven global growth is also a concern because consumers in other countries aren't buying American goods and services.

Exports were up 6% from a year ago in November, and are on track to post an 11.5% gain for all of 2004 vs. 2003. However, imports are on pace to grow more than 15% in 2004. Excluding crude oil, petroleum products, and fuel oil, the imports are still set to grow by 13.7%.


  The monthly level of imports is 50% greater than exports. The rate of growth in exports would have to accelerate sharply, or the growth in imports would have to slow down considerably, for that gap to narrow. Given the expected performance of the U.S. this year, demand for imports is unlikely to give much ground.

A weaker dollar is a positive factor for trimming the trade gap. The decline in the greenback should make U.S. goods more attractive abroad. However, with global growth unlikely to match the pace of last year, the dollar alone is unlikely to reverse the trend of steadily rising trade deficits.

Here's the weekly economic calendar:


President Bush presents his fiscal year 2006 budget proposal to Congress in Washington, D.C.


Monday, Feb. 7

Allergan (AGN ), Biogen Idec (BIIB ), Cendant (CD ), Clorox (CLX ), Electronic Data Systems (EDS ), Goodrich (GR ), Hasbro (HAS ), Humana (HUM ), Principal Financial Group (PFG ), WellPoint (WLP ), and more.


Monday, Feb. 7, 3 p.m. EST

Consumers probably added $7.8 billion in debt during December, according to the median forecast of economists surveyed by Action Economics LLC. Total credit posted an unexpected plunge of $8.7 billion in November, after gains of $9.5 billion in October and $17 billion in September.

The November fall came primarily from consumers paying down their credit-card balances. The amount of revolving debt, made up largely of credit card debt, fell by $7.2 billion in November.

Based on the December forecast, total consumer debt accumulation in 2004 was likely the smallest since 1997. Through November, consumers have added $74 billion of installment debt.



Tuesday, Feb. 8, 3 p.m. EST

U.S. Treasury Secretary John Snow testifies before the House Ways & Means Committee on the Administration's proposed fiscal 2006 budget proposal in Washington, D.C.


Tuesday, Feb. 8

Aon (AOC ), Cisco (CSCO ), Marriott International (MAR ), Prudential Financial (PRU ), Sigma-Aldrich (SIAL ), and more.


Tuesday, Feb. 8, 7:45 a.m. EST

This weekly tracking of retail sales, assembled by the International Council of Shopping Centers and UBS, will update buying activity for the week ending Feb. 5. In the week ended Jan. 29, seasonally adjusted sales fell 1.9%, after inching up 0.1% in the prior period, and falling 0.9% in the week ended Jan. 15.


Tuesday, Feb. 8, 8:55 a.m. EST

This weekly measure of retail activity will report on sales for the first fiscal week of February, ending Feb. 5. During the full month of January, sales finished 0.9% above December. For the month of December, sales were up 0.2% from November.


Wednesday, Feb. 9

Adolph Coors (RKY ), American International Group (AIG ), Cigna (CI ), Lincoln National (LNC ), MetLife (MET ), Torchmark (TMK ), XL Capital (XL ), and more.


Wednesday, Feb. 9, 7 a.m. EST

The Mortgage Bankers Assn. releases its tally of mortgage applications for both home buying and refinancing for the week ending Feb. 4. In the week ended Jan. 28 the purchase index was virtually unchanged at 440.3, after sinking to 439 in the prior period from 448.1 over the week of Jan. 14. The latest reading of the four-week moving average, however, moved up to 430.1, from 424.4 for the week ended Jan. 21.

The average rate on a conventional 30-year mortgage, according to HSH Associates, eased back to 5.74%, from 5.77% in the period ended Jan. 28.

The MBA's refi index bounced up to 2253.9 for the week ended Feb. 4. In the prior week, the index eased down to 1932.8, from 2048.6 in the week ended Jan. 14. The four-week moving average hit 1989, after rising to 1850.8 in the week ended Jan. 21.


Wednesday, Feb. 9, 10 a.m. EST

Wholesale sales should continue to grow, but at a slower clip. The consensus among economists surveyed by Action Economics LLC is a 0.8% rise in December, following a 0.7% gain in November and a 1.6% surge in October. Compared to the same month in 2003, sales were up 14% in November, after a yearly pace of 14.2% in October.

Wholesaler inventories also shot up in November, posting a second straight monthly gain of 1.1% in November. Over September, inventories rose by 0.6%, after growing by more than 1% per month from May through August.



Thursday, Feb. 10, 2 p.m. EST

Federal Reserve Bank of Minneapolis President Gary Stern gives a speech entitled "Formalizing the Success of Monetary Policy" at the Montana Ambassadors Annual Meeting in Helena, Mont.


Thursday, Feb. 10

Aetna (AET ), Analog Devices (ADI ), Dell (DELL ), DTE Energy (DTE ), Hercules (HPC ), Loews (LTR ), Simon Property Group (SPG ), May Department Stores (MAY ), Waste Management (WMI ), Winn-Dixie (WIN ), and more.


Thursday, Feb. 10, 8:30 a.m. EST

First-time claims for jobless benefits for the week ended Feb. 4 probably moved up to 325,000. Jobless claims eased to 316,000 in the week ended Jan. 28, after rising to 325,000 in the prior period, from 318,000 in the week ended Jan. 8.

The four-week moving average dipped to 331,500, down from 341,800 in the week ended Jan. 22. During the week of Jan. 22, continuing jobless claims fell to 2.7 million, from 2.81 million in the week ended Jan. 15.


Thursday, Feb. 10, 8:30 a.m. EST

The monthly trade deficit most likely narrowed a little in December. The U.S. trade deficit for goods and services is expected to be $57.2 billion. In November, the trade gap swelled to a record $60.3 billion. However, the government's original November estimate will likely be revised slightly lower when the December figures are released.

Canada's economics statistics agency underreported U.S. imports for November by close to $1 billion. Thus, if no other revisions were made, the November trade gap would be close to $59 billion. When all is said and done, however, it still should remain at a record level and doesn't alter the underlying trend in foreign trade.

Lower oil prices and mild winter weather during December should contribute to a smaller December deficit. The price of West-Texas intermediate crude stayed below $45 per barrel through most of the month. At the same time, natural gas prices could have an offsetting impact, as prices moved back above $7 per Btu in the middle of the month, after tumbling below $5 per Btu in late November. The Commerce Dept. report measures the value, not the volume, of goods or services.


Thursday, Feb. 10, 2 p.m. EST

The federal government most likely posted a small budget surplus during January. Economists surveyed by Action Economics LLC expect the Treasury Dept. report to show a $7 billion surplus for the fourth month of the 2005 fiscal year. In December, the deficit was just $3.4 billion, after two straight monthly shortfalls of over $57 billion. So far, the current FY budget gap is smaller than last year. Using the January forecast, the deficit for FY 2005 would be $111.5 billion vs. 131.5 billion through January of 2004.

According to the July forecast from the Office of Management & Budget, the budget gap for the current fiscal year should be $331.2 billion vs. $412.3 billion in the prior year, and a $377.1 billion shortfall in FY 2003.



Friday, Feb. 11, 8 a.m. EST

Federal Reserve Bank of San Francisco President Janet Yellen, Federal Reserve Board Governor Ben S. Bernanke, Treasury Dept. Undersecretary for International Affairs John Taylor, and others speak at a Stanford Institute for Economic Policy Research conference in Stanford, Calif.

Mehring is an economics editor for BusinessWeek in New York

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