University of Michigan consumer confidence extended its rebound at the start of the new year. According to the preliminary estimate, Michigan consumer confidence rose from 69.9 to 74.0, beating market expectations (71.5). This is already the fifth consecutive increase, after the indicator fell sharply in August. The details show that consumers became more optimistic about both the current economic conditions (82.6 from 79.6) and the economic outlook (68.4 from 63.6). Inflation expectations edged slightly up, both 1-year ahead (3.2% from 3.1%) and 5-year ahead (2.8% from 2.7%). The remarkable improvement in consumer sentiment over the previous months is an encouraging sign and bodes well for the start of the new year. We hope to see an improvement in spending as retail sales were somewhat disappointing during the Christmas shopping season.
In November, the US trade deficit widened more than forecast. The deficit grew from a downwardly revised $43.3 billion to $47.8 billion, while a more moderate expansion was expected. The details show that exports dropped by 0.9% M/M, the second straight decline, while imports picked up by 1.3% M/M. Much of the increase in imports was due to higher petroleum related imports due to an increase in the price of petroleum products. As a result, the widening in the ex-petroleum trade deficit was more moderate (-$20.119 from -$19.014). It looks as if the US is starting to feel the pain from the debt crisis in Europe and slowing growth in some Asian countries. Together with the disappointingretail sales yesterday, this suggests that US fourth quarter growth might be somewhat weaker that earlier predicted.