International Trade Balance
The U.S. trade deficit in goods and services widened to $40.6 billion in December from $38.3 billion in November. Exports increased 1.8% to $163 billion, and imports rose by 2.6% to $203.5 billion. The deterioration in the trade balance was the result of a change in the deficit for goods trade, mostly due to higher imports of oil. The trade deficit in goods rose by 4.5% to $53.6 billion while the balance in services was essentially unchanged at $13 billion in December. Net exports improved markedly in the fourth quarter of 2010 and we expect some retrenchment in the first quarter of this year.

Univ. of Michigan Consumer Sentiment
Consumer confidence increased 1.2% in February to 75.1 after decreasing 0.4% in January. February’s gain puts the index at its highest level since June 2010. The report reflected growing comfort in the present economy. The present conditions index surged to 86.8 from 81.8, although consumers’ expectations for the future declined slightly to 67.6 from 69.3 in January. Consumer confidence has stabilized and there are signs that it is slowly improving, however we remain well below prerecession levels.

Consumer Credit
In December total consumer credit grew 3.0% at an annual rate, or $6.1 billion, to a total of $2.41 trillion. Consumer credit increased for the third month in a row, driven by increases in both revolving and non-revolving credit. Notably, after 27 months of decreases, revolving credit rose 3.5% at an annual rate to $800.5 billion. The pace of nonrevolving credit slowed to a 2.8% annual rate, from 4.0% in November and 9.2% in October. Consumer credit balances increased more than expected in December as spending grew steadily and demand for credit increased. As labor markets improve, demand for both revolving and non-revolving credit will likely increase.