Falls in US retail sales and current account larger than expected

The economic news from the US yesterday was not particularly good. Reuters reports the fall in retail sales:

Retail sales fell a larger-than-expected 1.3 percent last month, the first decline since August and sharper than the 0.8 percent decline forecast by Wall Street.

But the Commerce Department revised up January sales to a 2.9 percent rise, the largest increase in more than four years, from 2.3 percent originally reported, and analysts shrugged off February's weakness as an inevitable pullback after warm weather boosted shopping in January...

The retail sales report showed demand outside the auto sector was down 0.4 percent in February, in line with analyst expectations, in the largest decline since April 2004.

...the rise in the current account deficit:

A separate report showed the U.S. current account deficit, the broadest measure of U.S. trade with the world, widened in the fourth quarter to a $224.9 billion as imports of goods jumped and net unilateral current transfers rose sharply.

The quarterly shortfall in the current account was much larger than Wall Street forecasts for a gap of $217.7 billion and pushed the 2005 deficit to a record $804.9 billion, or 6.4 percent of gross domestic product, from 5.7 percent of GDP in 2004.

...and the rise in business inventories:

A third report from the Commerce Department showed business inventories rose 0.4 in January, slightly above Wall Street forecasts for a 0.3 percent gain, while business sales climbed 1.3 percent. That pushed the inventories-to-sales ratio, a measure of how long it would take to deplete stocks at the current sales pace, to a record low 1.24 months.

Among bloggers covering the news, Mark Thoma compares the retail sales against long-term trends, Brad Setser forecasts a 2006 current account deficit of about $950 billion, while just about everyone ignores the news on business inventories.

Those hoping to see a reduction in the US current account deficit can expect little help from any revaluation of the renminbi after China's prime minister Wen Jiabao said that it is "no longer necessary for us to take one-off administrative means to affect the fluctuation of the RMB exchange rate either upwards or downwards".

Meanwhile, Japan's economic recovery appears to remain on track. From AFP/CNA:

Japanese plants and factories boosted output by 0.4 percent in January, more than previously thought, taking industrial output up to new record high levels, the government said... Industrial output was up 2.2 percent in January from a year earlier, figures from the Ministry of Economy, Trade and Industry showed...

January's performance marks a slowdown from December's 1.3 percent month-on-month growth and year-on-year expansion of 3.7 percent.

Sentiment in Europe appears to be moderating, according to the ZEW.

The ZEW Indicator of Economic Sentiment for Germany dropped by -6.4 points in March. Compared with +69.8 points in February, the indicator’s current level of +63.4 points is far above its historical average of + 35.1 points...

Economic expectations for the euro zone have slightly decreased in March. The indicator now stands at +61.1 points versus +66.0 points in February.