Initial Claims Beat While Trade Deficit Surges
Those expecting a massive, epic miss in Initial Claims to keep the critical Baffle with Bullshit narrative going into NFP, did not get it, with Initial Claims printing at 343K, in line with expectations of a 345K print, following the obligatory upward revision in last week's print from 346K to 348K. Continuing claims dropped from an upward revised 2987K to 2933K, below expectations of a 2958K number. And as has been the case for the past year, Americans collecting Emergency and extended claims continue to drop, with 1 million less Americans on EUCs now, at 1.66 million, compared to the 2.62 million a year ago. These are all people who ultimately drop out of the labor force and lead to a "better" unemployment rate.
And while ADP and Claims were better than expected, it was the trade deficit that offset the good news, soaring 12% from a revised $40.1 billion to a whopping $45 billion, far above expectations of $40.1 billion, the worst miss in 7 months, and dragging all Q2 GDP forecasts lower with it. This was driven by a drop in exports of $0.5 billion offset by an increase in imports by $4.4 billion. The total May imports were $232 billion - the highest since March of 2012.
Specifically, broken down, the April to May decrease in exports of goods reflected decreases in consumer goods ($1.2 billion); industrial supplies and materials ($0.9 billion); and foods, feeds, and beverages ($0.1 billion). Increases occurred in capital goods ($0.8 billion); automotive vehicles, parts, and engines ($0.3 billion); and other goods ($0.2 billion).
The April to May increase in imports of goods reflected increases in industrial supplies and materials ($1.0 billion); consumer goods ($1.0 billion); automotive vehicles, parts, and engines ($0.8 billion); other goods ($0.5 billion); foods, feeds, and beverages ($0.4 billion); and capital goods ($0.3 billion).
As for the key question, when it comes to making a determination if today's data is Taper worthy, the answer is - it's completely irrelevant: the only thing that still matters is how much the gross US debt issuance will be in the coming year. All the other "economic dependent" data narrative, that's continues to be just (very effective) smoke and mirrors.
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