With all eyes focused on the fiscal cliff it is easy to ignore or even dismiss other important data that is happening. Hint: It ain’t so bad! One piece of critical data that came out a couple weeks ago was about the deficit, which has been shrinking, albeit at a slow pace. The key here is shrinking and NOT growing.
A week before Christmas The NY Times stated the ‘nation’s trade deficit narrowed in the July-September quarter to the smallest level since late 2010‘. What kind of numbers are we talking about? ‘The deficit fell to $107.5 billion in the third quarter, down 9 percent from the second-quarter imbalance of $118.1 billion, he lowest trade gap since the final three months of 2010.’ It’s small, but progress. After all, if the deficit is not rising there is something positive happening with trade.
According to the article, ‘the improvement in the current account in the third quarter reflected a decline in the deficit on goods and a small increase in the surplus on services, led by a gain in foreign earnings made by financial services, insurance and professional services provided by companies in the United States. The surplus on investment earnings narrowed to $50.8 billion, down from $52.1 billion in the second quarter.’
Further, ‘the narrowing of the deficit in the third quarter left it at a level equivalent to 2.7 percent of the total economy, down from 3 percent in the second quarter. The third-quarter deficit represented the smallest percentage of the economy since the spring of 2009.’
While many are worried about another debt downgrade due to rolling over the fiscal cliff they ignore the positives that are coming from the data. The current quarter may only come in at 2.5% GDP or so (hurt some by Sandy and also consumers pulling back from being concerned) and if/when this fiscal cliff is resolved there could be a nice trajectory of growth, more decrease on the deficit and a better looking balance sheet. Only if…
