US: Exports, Imports, ‘Everything Weaker Across the Board’; Morgan Stanley Drops GDP Estimate to 1.5%; Expect to Hear the ‘R’ Word Soon

In case you missed it, economists have slowly ratcheted down GDP estimates for the first quarter. Morgan Stanley’s 1st quarter GDP estimate is 1.5% down from 1.9%. Barclays also lowered GDP estimates by a half-point to a range of 1.5% to 2%. 4% GDP estimates went out the window long ago.

Please consider U.S. Trade Deficit Narrows Less Than Forecast on Soaring Commodity Prices

The U.S. trade deficit narrowed less than forecast in February, indicating soaring commodity prices hurt the world’s largest economy at the start of the year.

The gap shrank 2.6 percent to $45.8 billion from a larger- than-previously-estimated $47 billion in January, according to figures from the Commerce Department today in Washington. Another report showed the cost of imported goods jumped in March by the most in almost two years.

“Everything was weaker across the board,” Ted Wieseman, an economist at Morgan Stanley in New York, said, referring to the trade data. “Import prices are reflecting surging energy prices,” he said, they “are going through the roof and that has been weighing on consumer spending.”

The median forecast of 71 economists surveyed by Bloomberg News projected the trade gap would shrink to $44 billion. Estimates ranged from deficits of $41 billion to $50.5 billion. The Commerce Department had previously estimated the January shortfall at $46.3 billion.

Morgan Stanley lowered its tracking estimate for gross domestic product in the first three months of the year to a 1.5 percent annual pace from a 1.9 percent forecast prior to the data. Barclays Capital in New York lowered it to a range of 1.5 percent to 2 percent, down a half point. GDP climbed at a 3.1 percent pace in the last three months of 2010.

After eliminating the influence of prices, which renders the figures used to calculate GDP, the trade deficit narrowed to $49.5 billion from $50.3 billion. The figures exceeded the fourth-quarter average of $45.3 billion.

Exports decreased 1.4 percent to $165.1 billion after climbing 2.6 percent in January to a record $167.5 billion. Decreased demand for autos and parts and for capital goods like semiconductors and engines contributed to the drop.

Imports fell 1.7 percent to $210.9 billion after climbing 5.4 percent in January, the biggest gain since 1993. Decreasing demand for autos and petroleum products led the decline.

The world economy will expand 4.4 percent this year and 4.5 percent in 2012, the Washington-based International Monetary Fund said yesterday in its World Economic Outlook report. Developing nations will grow 6.5 percent this year and next while advanced economies will expand 2.4 percent in 2011 and 2.6 percent in 2012, the IMF said.

Expect to Hear the “R” Word Soon

I will “take the under” on that 4.4% global growth estimate by the IMF.

  • The ECB is hiking and that will not do Europe much good.
  • Japan is obviously hurting.
  • In the US, state budgets are a wreck and little or no help is coming from Congress.
  • In the US, mall vacancies are high and rising
  • Residential housing in the US remains an absolute disaster
  • China is hiking to stave off property bubbles and inflation
  • The Australian housing bubble has popped.
  • The UK is a fiscal disaster.

The overall global economy is much weaker than most think and the global macro picture is awful.

Bear in mind the stall rate in the US is 2%. Beneath that, the odds of recession pick up sharply. Another bad quarter will have some economists chanting the “R” word once again.

Even if the “R” word does not crop up, is this anemic growth priced into the stock market?

For additional discussion of consumer spending and demographics please see Economic Optimism Plummets Across Demographic Groups

Mike “Mish” Shedlock
Tuesday, April 12, 2011 1:37 PM

Source: Global Economic Analysis

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