Wednesday, October 14, 2009

More Good Economic & Market News

ISM Non-Manufacturing Index Rose to Best Level Since August 2008
The ISM Non-Manufacturing index rose to a better-than-forecast 50.9 in September from 48.4 in the previous month. This is the first time since August of 2008 that the index moved above 50, which is the level that separates growth (greater than 50) from contraction (less than 50). Indexes of orders and business activity advanced the most. While the employment index edged up modestly, it continues to remain at a level indicating contraction (44.3).

Employment Claims Improve
Latest claims data swung back toward modest improvement with both claims figures at new lows since the cyclical peak earlier this year. Initial Jobless claims fell 33k to 521k while continuing claims fell 72k to 6.04mm. It is likely that the continued downward drift in continuing claims represents exhaustions of eligibility for regular benefits rather than actual rehiring. Additionally, given the volatility of the data, we look for continued declines rather than reading too much into one week.

Trade Deficit Narrows
The trade deficit narrowed in August by $1.2bn to -$30.7bn, contrary to expectations of a modest further widening. Exports inched up 0.2% following three months of increases averaging 2% per month. Imports swung to -0.6% in August following large increases in June and July, with imports of crude oil being the primary driver on both sides of this swing. In real terms, the deficit narrowed by $1bn. This reduces, but does not eliminate, the likelihood of a trade drag on Q3 GDP growth.