US DAILY DEFICIT

The US Daily Cash Deficit for 5/7/2013 was $4.8B bringing the May 2013 deficit through one full week to $44B.

As expected, given a full week, 2013 has more or less synchronized with 2012….and the two years look a lot alike. Looking just at total revenues, we are basically flat, with net revenues up a little over 1B…or 2%. Digging into the details, there are a lot of moving pieces. Taxes withheld are up $5B, or 12%…this is the main metric we are looking for, and it is slightly ahead of where we would expect it to be if 10% was our baseline. However, this is being offset by a $3B decrease in taxes not withheld…as discussed earlier they literally fell off a cliff after 4/30.

I’ve been saying for a while now that May and June of 2013 were going to be our first clean glance at tax revenues following the new tax hikes. The same could probably be said about outlays…we can more or less assume that a month into it, the sequester should be fully in effect by now…so whatever savings there are going to be should show up in cash. So 25% of the way through May, we can see tax deposits holding up and sticking to the same trendline…10-12% growth that we have seen for the last couple of months. This is more or less what we want to see…obviously the bigger the better. Through only 1 week, the gains in taxes withheld are being offset elsewhere, but these will likely become immaterial as the month goes on. Looking at outlays…pretty much spot on with last year…certainly no massive drop-offs, but nobody was really expecting that anyway.

Looking ahead to tomorrow…Social security payments went out today, so a deficit in the $10B range can probably be expected.

The US Daily Cash Surplus for 5/6/2013 was $6.1B riding traditionally strong Monday revenues, including a strong wave of “Unemployment” inflows from the states. I’m not sure why, but May is always the heaviest month for this particular revenue stream….of the $60B or so the government gets over a 12 month period, about $20B of it is in May. To date, we have seen $13B this May…pretty much in line with last year.

Looking at our charts, we see that through 6 days revenue is up $8B…a fairly large number for less than a week, but I suspect some of it is just timing…Through 6 days, May 2012 had not yet had a Monday…with the associated strong revenues. So tomorrow, the months will more or less sync up….giving us our first glance…though admittedly very preliminary glance at revenues. Outlays are more or less in line for now…expect that to start jumping around with the upcoming social security payments. So far…nothing out of the ordinary to suggest a deviation from 10% revenue growth and flat outlays…

The US Daily Cash Deficit for 5/3/2013 was $20.8B bringing the May 2013 deficit through 3 days to $45B. The large deficit was primarily caused by Social Security payments of $24B… Social Security payments go out in 4 rounds throughout the month. The first and largest at ~$25B goes out the 3rd….but is bumped up if the third falls on a weekend or holiday. The next three rounds go out the 2nd-4th Wednesdays of the month, each at $11-$12B. Because of this, it isn’t surprising that we almost always see a deficit on Wednesdays.

Looking at the charts…through 3 days, all is pretty much in line with last May…..certainly nothing indicating 15%+ revenues, but the month is young. If this month follows last years script, the rest of the month should be a gentle accumulation running up to about $100B…probably more.

Two notable events stand out. On 5/15 a large interest payment around $30B will go out….giving us some insight into how ZIRP manipulation is going. For a few months now, monthly interest paid has actually come in lower YOY, despite having an additional $1T of debt. So savings from lower interest rates are more than offsetting the growing principle….hey…it’s a good deal if you can get it. However, March and April are very light in interest payments anyway…May provides us about $35B or so…twice the last two months combined, so a much better glimpse. I’m not expecting anything, but always on the lookout.

In my data series…which goes back to 2000 (and a few months of 1999) I see a high of 4.639% in 12/2001, and a new low last month at 1.837%. What we are looking for is a bottom, and a new trend back up above 2%….that’s when the trouble starts.

The second notable event will be 5/31…a Friday, when we will probably see about $20B or so of payments due 6/1 be paid out a day early. This may be enough to push the May deficit into the $125-$150B ballpark…but it all depends on what happens with revenue. This same cost shift also makes it likely that June 2013 will run a surplus…we’ll see.

The US Daily Cash Surplus for 5/2/2013 was $1.8B on $9.9B in revenues and $8.1B of outlays leaving the May 2013 deficit through 2 days at $24B.

So far nothing out of the ordinary, but it did occur to me that with 5/31 being on a Friday, we will probably see about $20B of payments due 6/1 instead go out 5/31, essentially increasing the May deficit, and decreasing the June deficit by the same.

As you know, I am keeping a very close eye on revenues to see if what happened last month was a fluke, or an actual shift in the curve. 2 days is way to soon to tell much of anything, but it is worth noting that tax deposits not withheld…which grew 40% in April….have absolutely fallen off a cliff from $6.2B 4/30 to $327M yesterday. A drop off was expected, but I figured it would glide down under $1B over a week or so….not just stop once May came around.

Just a quick post to record the finals…more detailed analysis to come… The April 2013 Cash Surplus rings in at $117B compared to a $59B surplus in April 2012. The main story all month was revenues…up $87B…a 26% increase. Taxes withheld were up 10% as expected, but corporate tax receipts were up 27% and tax deposits not withheld were up a whopping 40%…or $56B. The revenue increases were somewhat offset by a $29B increase in outlays primarily related to timing.

So what does it all mean? Are we saved? Should we stop worrying about the deficit? Absolutely not. While it shouldn’t be dismissed, in the big picture, this is one month, and one $58B improvement…compared to an annual deficit still likely to be north of $850B, and debt outstanding of $16.8B. Give me two straight years of 26% growth and I’ll be forced to re-evaluate my central thesis. For now, it’s time to appreciate an admittedly impressive month, then sit back and see how the rest of the quarter turns out.