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2 Boring Data Points Spell Economic Doom
The first boring economic point was the May trade balance. The overall US trade deficit actually fell to $48.7 billion from $50.6 billion, and was dead in line with the consensus. There was some increase in food exports but mainly, as could be expected, a drop in oil prices reduced imports of petro. The problem though is that without petro, the deficit increased to $41.4 billion from $40.3 billion. And that has slightly negative implications for US production, as it implies that more of our goods consumption during the month was in products made out of the country.
Secondly there was the wholesale trade report with a headline inventory increase of 0.3% for May which was in line with consensus. Yet, the sales figure showed a 0.8% drop; that's the first overall drop in sales since last May, and the biggest drop since March 2009. Beyond that, there was a bit of bearishness in the fact that the previous month's inventory was revised down, and that means May's increase is technically not up to economists' expectations.
Taken together these seemingly dull, in-line with consensus readings, add up to a significant impact. That's because they both have slight implications on US GDP. In fact, Goldman Sachs lowered its 2Q GDP projections twice following the two releases, with each one estimated to reduce GDP by 0.1%. They now project 1.3% growth versus 1.5% previously.
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