TRADE DEFICIT GROWTH STAYS ABOUT THE SAME
CONSUMER SENTIMENT AND EXPECTATIONS DROP

The Department of Commerce, announced today that total March exports of $68.8 billion and imports of $77.7 billion resulted in a goods and services deficit of $8.9 billion.

For the seven months preceding March, the deficit averaged a little more than $8 billion per month. So, the March reading is right in line with recent experience. For the 8 months ending in March the annualized deficit rate was about $98 billion -- smaller than the annual deficits of $106.2 billion and $111.5 billion in 1994 and 1995.

The international trade balance numbers are important because the amount by which imports exceed exports subtracts from the value of the nation's Gross Domestic Product (GDP).

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Also today, the preliminary estimate of the May value for the University of Michigan's consumer sentiment index became available. From April to May, the index dropped from 92.7 to 89.9. The index hit an eight-month high of 93.7 back in March, and declined in the two months since then. During the past twelve months, the index has ranged between a low of 88.2 and a high of 94.4. This month's reading is 1.4 points below the mid-point of that range and 1 point below the twelve-month average of 90.9. So, any way you look at it, the U of M consumer sentiment index reading for May is below average.

Perhaps more important, U of M's consumer expectations index dropped from 83.0 to 80.5 from April to May. The expectations index is a gauge of consumer optimism about the future and is one of the eleven indicators the Department of Commerce uses in formulating its Composite Index of Leading Economic Indicators (LEI). So, the next release of that widely-followed index will be receiving a negative input from the consumer expectations index.

Byline: Lafferty (MF Merlin)