And Here We Go: Goldman Says "News Reinforces Our Sense Of Downside Risk To Q1 Growth"

Tyler Durden's picture

That didn't take long: From Goldman's Hatzius "News Reinforces Our Sense Of Downside Risk To Q1 Growth." Ah, the propaganda bureau's primary dealers: predictable as a Swiss watch. Surely so much has changed since December... How long before RenTec's headline parsers read between the lines and realize that QE3 will launch at the latest by September. Of course, there are a few European near-defaults and passed stress tests in the interim, so the dollar may well jump for a month or two, only to plunge to fresh(er) all time lows once more QE is announced (just prior to which Gross will start buying bonds).

From Jan Hatzius:

BOTTOM LINE: Trade deficit much wider than anticipated on higher import volumes; news reinforces our sense of downside risk to Q1 growth, though it's still early in the quarter. Jobless claims higher but Labor Department cites school holidays as a potential distortion.

KEY POINTS:
1. Despite a healthy rise in exports, the US trade deficit widened substantially in January. The entire increase was due to non-petroleum imports, which rose $7bn on the quarter. The vast majority of this import increase was volume rather than price-related, pushing the real goods deficit in January at $49.5bn versus a fourth-quarter average of $45.2bn. Were this (real) deficit to be sustained through the first quarter, trade would be a substantial drag on Q1 growth - about 1 1/2 points (annualized). However, trade data can be revised and Chinese New Year-related distortions can have a significant impact on US import data in the first quarter, so for the moment we would view this simply as an additional source of downside risk to our 3 1/2% real growth estimate for the quarter.

2. The jobless claims report was a significant disappointment on first glance, with new claims back up near the 400,000 mark after a much lower print last week. However, the Labor Department cited the timing of school holidays as a possible influence on the number last week. Continuing claims--the total number of people in their first 26 weeks of jobless benefits--were essentially in line with expectations, and extended benefits fell by about 200,000 (though how much of this drop was due to people exhausting benefit eligibility is unknown).