So just what is below "stall-speed" growth in the New Normal? And with 48 out of 49 economists now predicting what we said would happen back in September, namely that the Fed will go all in with QEternity+1 and take its balance sheet to $4 trillion (and then $5 trillion in 2014) yet firmly holding their 2013 year end GDP forecast at 2.0%, lower than Q3 2011's 2.7%, does it mean that even $1 trillion in additional flow and stock from the Fed can barely keep the economy above the Old Normal stall speed definition? What exactly would happen if the Fed were to not monetize hundreds of billions in debt? We shiver to even think.
The October trade deficit widened, but by less than expected. Both imports and exports declined month-over-month, consistent with a potential impact from Hurricane Sandy.
1. The trade deficit widened in October to -$42.2bn (vs. consensus -$42.7bn) from a revised -$40.3bn in September. The wider deficit was accounted for by higher real petroleum imports and terms of trade changes, as the real trade deficit ex. petroleum narrowed.
2. Both exports (-$6.8bn) and imports (-$4.9bn) declined month-over-month, indicating a lower overall level of international trade. However, Hurricane Sandy likely depressed overall trade during the last several days of October on the East Coast. U.S. exports to the Euro area fell 8.7% year-over-year, consistent with weak growth or recession in many European countries.
3. We raised our Q4 tracking from 0.9% to 1.0%, as the real deficit was narrower than we had penciled in. The October CAI, however, dropped from 1.6% to 1.3%.