A Review U.S. and Latin American Macroeconomic Data and Foreign Exchange July 14th

John T. Sullivan
Thomson Reuters Analytics

The Dealing Room


July 14th 2011

United States:

Employment data continues to be soft. Seasonally adjusted initial claims for the week ending July 9th did fall by 22,000. However the previous week’s claims were adjusted upward by 9,000. The four week moving average for claims is a painful 432,250.

On Tuesday, the Bureau of Labor Statistics (BLS) released May’s Job Openings and Labor Turnover (JOLTs). Hire and separation rates were unchanged from the previous month, suggesting that job growth is anemic. Total job openings were 3 million, well below the 4.4 million when the recession began in December 2007. Total private sector job openings were 2.657 million with new hires of 3.797 million. Unfortunately, job separations were 3.76MM, a 6.6% m-o-m figure.

In late June, the BLS announced its May Mass Layoff Survey. It recorded the largest mass layoffs since October 2010. More than 143,540 workers filed for unemployment insurance. Current employment statistics even when massaged by the BLS’s corporate birth-death are insufficient to absorb these recently laid off workers. Little wonder that the BLS is recording greater numbers of discouraged workers.



The Census Bureau released May Manufacturing and Trade inventories and sales data. The Survey indicated that both inventories rose m-o-m across the three principal segments: Manufacturers (+0.8%), Retailers (+0.4%) and Merchant Wholesalers (1.1%) on a seasonally adjusted basis. Sales on the other hand had a more mixed result: Manufacturers (+0.1%), Retailers (-0.2%) and Merchant Wholesalers (-0.2%). The accumulation of inventory was most evident in clothing and cars where accumulation led to deterioration in the inventory to sales ratios, 2.38 and 1.97 respectively.

The Census Bureau also published May advance monthly retail and food services sales. The headline aggregate number showed an increase of 0.1% m-o-m and an 8.1% y-o-y. The increase in gasoline prices accounted for 11.5% of all retail expenditures including motor vehicle sales and parts. Gasoline related expenditures were up 23.6% y-o-y. The changing preference of the American consumer to use non-store retailers through such methods as the Internet boosted sales in this group by12.3% y-o-y by $24 billion. As the U.S. debates revenue increases, non-store retailers who pay little or no state and local taxes, represent low hanging fruit.




The Bureau of Labor Statistics released the June Producer Price Index that may give some relief to the consumer of energy based products. Energy related finished goods weakened 2.8% m-o-m for its first drop since July 2010. Total finished goods pricing declined 0.4% as a result. Tomorrow’s consumer price index will confirm if some of this decline has been passed on.





Latin America:

Chile: Later today the Central Bank of Chile (BCCh) will decide if the current level of inflationary expectations warrants another 25 basis point increase in the reference rate. The current rate is 5.25%. Local BCCh bonds Unidades de Fomento (BCU) fell slightly in anticipation that the interest rates would remain unchanged. The five year BCU fell three basis points to 2.74%. The Peso remained steady at 461.25. A close below 460 would signal a new high for the currency since October 2008.




Colombia:

The peso breached all resistance to set a new high for the year at 1745.00. Not since June 2008 has the peso been this strong. The Central Bank appears to have waved through portfolio flows with little sterilization evident in daily trading. Local bonds (COTES) continued strong with 6 months rates at 5.02%, extending to 7.675% in 2010.




Fortuna audaces iuvat,

John T. Sullivan