Narrowing the Gap

Fox Business Article

The U.S. trade deficit narrowed in July to its lowest point in six months as exports rose to a record high, supporting views of sturdy economic growth in the third quarter.

Economists polled by Reuters had expected the deficit to widen…

Exports increased 0.9 percent to a record high of $198.0 billion in July, supported by a surge in goods, automobiles, parts and engines, as well as non-petroleum products.

Imports rebounded 0.7 percent in July to $238.6 billion after declining in June. The rebound in imports is a sign of underlying strength in domestic demand.

My opinion: So not only did July show us that the US is selling more (exports) but we also had a boost in imports from June to July!  This is the spiral upwards that everyone loves to see.  More jobs means more demand and more demand means more jobs.

These results even come on the heels of another QE taper that occurred in mid June.

So what should be look out for? Well, as the proverbial snowball that is our economy begins to gain speed the Fed will continue to eye the inflation rate.  The current annual inflation rate is 2.0%. To put that into perspective, the inflation rate from 2005 – mid 2007 was around 3.0%.  Therefore, I wouldn’t suspect the Fed to raise interest rates until 3.0% is on the horizon.

When might we hit 3.0%? The new inflation rate update comes out September 17, so let’s make our guesses then!

featured image provided by economia.icaew.com

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