Key U.S. Data Releases and Events

Progressively improving financial market conditions over the past two months are boot-strapping economic conditions, allowing for a nice surge in private equity issues, and downward pressures on output and employment are diminishing at encouraging rates. The economy is on track to mark a trough in the business cycle in the next several months, although continued sharp declines in banking credit flows still represent a yellow flag.

Indicators next week are not expected to upset the view that the economy is healing and the probability of a trough in the business cycle is increasing. While the April trade balance will widen slightly due to higher crude oil imports, May retail sales are expected to jump in response to higher auto and gasoline sales, and consumer sentiment should float a little higher in mid-June.

KEY U.S. DATA RELEASES THIS WEEK

Wednesday, June 10 – Trade Balance (Apr.)

• IHS Global Insight: -$29.2 Billion
• Consensus: -$28.8 Billion
• Last Actual: -$27.6 Billion (Mar.)

What to Look For

• We expect the trade deficit to widen to $29.2 billion in April.

Implications

We expect the trade deficit to widen to $29.2 billion in April, from $27.6 billion in March, entirely on an increase in oil imports driven by higher crude oil prices. The non-oil trade gap may narrow slightly, based on some better export data from U.S. ports. The headlong declines in global trade activity appear to be coming to an end, but the rest of the world still looks weak, so we do not expect the U.S. recovery to be export-led.

Thursday, June 11 – Retail Sales (May)

Total

• IHS Global Insight: +0.9%
• Consensus: +0.5%
• Last Actual: -0.4% (Apr.)

Less Autos

• IHS Global Insight: +0.6%
• Consensus: +0.2%
• Last Actual: -0.5% (Apr.)

What to Look For

• Top-level retail sales up by 0.9%.
• Sales excluding autos up 0.6%, boosted by gasoline sales.

Implications

Retail sales increased an estimated 0.9% in May, led by a surge in gasoline prices and a pickup in light-vehicle sales. Excluding the automotive group, sales likely rose 0.6%, reversing April's decline. Consumers are beginning to spend the extra income resulting from the federal stimulus package and income tax refunds. But overall spending remains lackluster, as rising unemployment leads to cautious discretionary spending.

Friday, June 12 – Michigan Consumer Sentiment Index (Preliminary Jun.)

• IHS Global Insight: 71.0
• Consensus: 69.2
• Last Actual: 68.7 (Final May)

What to Look For

• The Reuters/University of Michigan Index of Consumer Sentiment is expected to rise from 68.7 in May to 71.0 in early June, marking its fourth consecutive monthly increase.

Implications

The stock market rally and signs of stabilization in housing and financial markets are raising hopes for an economic recovery in the year ahead, although rising unemployment, tight credit conditions, and shrinking wages and salaries are expected to restrain consumer outlays overall in the second quarter.