Implications: Exports boomed in July, helping push down the trade deficit far more than the consensus expected. In fact, of the 74 economic groups that forecast the trade deficit, none thought it would be this low. Exports of autos and related parts led the way but exports also increased substantially for oil and capital goods outside the auto sector, such as telecomm equipment. We still have two months to go, but it looks like trade will make a positive contribution to real GDP growth in the third quarter, which is so far shaping up much better than the first half of the year. Meanwhile, revisions to prior months – for both trade and construction – suggest real GDP growth will be revised up slightly for Q2. Beneath the headlines, the total volume of international trade in and out of the US – imports plus exports – rebounded in July after a temporary setback in June. We expect the total volume of trade to continue on an upward trend in the second half of the year. In other news this morning, new claims for unemployment insurance increased 2,000 last week to 414,000. Continuing claims for regular state benefits dropped 30,000 to 3.72 million. These numbers are not at all consistent with a recession.
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