NEWS / Foreign Exchange

Retail Sales & Excluding Autos (February)

Retail Sales & Excluding Autos (February)

Actual: 0.1, -0.1% Consensus: 0.3, 0.3% Prior: 0.0, 0.2%

Retailing figures showed that consumer spending early in the first quarter was weak. Adjusted by CPI inflation, total sales fell 0.3% in February; 0.8% higher than the level of a year earlier. Excluding autos and gasoline, sales dropped 0.3% in February offsetting a 0.3% gain in January. Most of the reported losses were influenced by older-than-average weather conditions. Retailers were hit by one of the coldest months on record in the U.S. Thus, as weather returns to normality, sales are likely to rebound in March.

Current Account Balance (4Q06)

Actual: -$195.8B Consensus: -$203.5B Prior: -$229.4B  

The current account deficit narrowed in the fourth quarter. The decrease was mostly the result of a lower deficit on goods. In addition, the surplus on services increased, the balance on income turned positive, and net unilateral transfers fell. The deficit on goods and services fell to $178.6 in Q406 from $201.4 in Q306. Goods exports rose led by capital and consumer goods, while goods imports declined on lower imports of petroleum and products. As a share of GDP, the current account deficit slipped to 5.8% in Q406 from 6.9% in Q306. We expect the current account balance to improve further favored by lower energy prices, a weakening dollar and a solid demand overseas.

Import Prices (February)

Actual: 0.2% Consensus: 0.7% Prior: -0.9%

Import prices inflation came lower than expected at 0.2%. A 2% surge in petroleum prices was partially offset by a decrease of 0.2% in prices excluding fuels. Core inflation moderated to 2.5% (year-over-year) in February from relatively high rates in the previous three months (2.8% on average). Overall, pressures from the three main components of core inflation ??“autos, capital goods and consumer goods other than autos- remained contained. Nonetheless, we think that import prices could surge in March boosted by higher oil prices and dollar weakness.

Headline CPI & Core (February)

Actual: 0.4, 0.2% Consensus: 0.3, 0.2% Prior: 0.2, 0.3%

Core CPI prices rose 0.2% in February with the 12-month change steady at 2.7%. A 0.3% increase in shelter accounted for about one half of the February increase in core inflation. Excluding shelter, core inflation has risen recently, mainly pushed up by significant increases in medical services during the last two months. Though core inflation will remain elevated in coming months, the 12- month change will slow gradually (see Inflation Observatory, February 2007). On the other side, headline CPI rose 0.4% and the 12-month inflation rate picked up to 2.4% from 2.1% in January. The food and beverages index rose 0.8 percent in February, largely the result of weather-related conditions.

Industrial Production and Capacity Utilization (February)

Actual: 1.0, 82.0% Consensus: 0.3, 81.3% Prior: -0.5, 81.2%

Output in the manufacturing sector expanded 0.4%, led by gains in motor vehicles and high technology goods. The output of utilities climbed 6.7% as unusually colder temperatures boosted production of both electric and natural gas utilities. The output in the mining sector rose 0.1%. The rate of capacity utilization edged up 0.6 pp. to 82%, 2.2 pp. above its average of the past ten years. Manufacturing seems to be recovering from an inventories-correction process; nonetheless, its twelve month change (2.8% in February) was below the maximum of 6.8% reached in September, indicating moderation when compared to the level of a year earlier.