New claims for state unemployment insurance slipped by 6,000 during the week ending July 13. But, the more-smoothly-varying four-week moving average of new claims edged up by another 1,750 claims to 359,750. The four-week moving average of new claims is one of the 11 components of the Composite Index of Leading Economic Indicators. Today's reported rise extends the duration of the recent uptrend in the moving average to seven weeks.

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NO PROGRESS IN REDUCING INTERNATIONAL TRADE DEFICIT

In other news today, the Bureau of the Census and the Bureau of Economic Analysis, through the Department of Commerce, announced that the international trade deficit for May was $10,877 million. This was the largest monthly change this year and the first reading higher than $10 billion since July of 1995. For the first five months of 1996, the cumulated deficit was $44,834 million. This was less than the $50,713 figure logged for the same period last year. When we translate the year-to-date number into an annualized figure we get $107,602 million. This compares with annual totals of $105,064 million in 1995 and $104,381 million in 1994. So, it looks like the balance of payments deficit will subtract about the same amount from the GDP in 1996 as it did in the two preceding years.

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FACTORY ORDERS AND DURABLE GOODS ORDERS DATA REVISED

If you liked the recently-reported government numbers for May factory orders and durable goods orders, you're gonna love the benchmark revisions on those numbers that came out this morning.

Every so often the government devises improved methods for measuring economic processes and, when it does, it issues upgraded "benchmark" revisions of the data that describe those processes. This time around it was the factory orders and durable goods orders data that got improved. The monthly data was revised for the period from January 1982 to May 1996. The near-term impact of this was an upward revision to the numbers for both durable goods orders and factory orders for May. The May change in the durable goods number was raised from an already favorable +3.4 percent to an even better +4.2 percent. The factory orders change from April to May, previously reported as +1.9 percent, was raised to +2.4 percent.

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GREENSPAN'S TESTIMONY CHEERS MARKETS

Federal Reserve Chairman Alan Greenspan made his semi-annual report to the Senate Banking Committee today. The financial markets, as you probably already know, responded favorably to what the Chairman had to say.

In his prepared statement, Greenspan stated that in the first half of 1996 "...inflation has remained quiescent." What's more, the chairman concluded "...we have yet to see early signs in prices themselves of intensifying pressures...".

For the second half of 1996 he predicted that the rise in bond rates over the past several months, the appreciation of the dollar over the past year, and a slowdown in household and business expenditures for durable goods, would all combine to slow economic expansion.

He stated that the Federal Open Market Committee forsaw GDP growth of 2 1/2 to 2 3/4 percent in 1996 and 1 3/4 to 2 1/4 percent in 1997. The FOMC also predicted that the unemployment rate for the next 18 months would remain in same range as the past 18 months. Inflation, as measure by the CPI, was expected to be somewhere around 3 to 3 1/4 percent for all of 1996 and to fall back to 2 3/4 to 3 percent in 1997.

Chairman Greenspan restated the Fed's dedication to fighting inflation. He said, "Whatever the long-run potential for sustainable growth, we believe that a necessary condition for achieving it is low inflation. As a consequence, the Federal Reserve remains committed to preventing a sustained pickup in inflation and ultimately achieving and preserving price stability." "I am confident that the Federal Open Market Committee would move to tighten reserve market conditions should the weight of incoming evidence persuasively suggest an oncoming intensification of inflation pressures...".

Byline: Lafferty (MF Merlin)