Devil in Deficit Details
Page 3
According to Joel Naroff, president of
Naroff Economic Advisors, the U.S. deficit with China is still on track to top
the $200 billion mark in 2005. China's exports to the U.S. would only slow
dramatically if U.S. consumption were to slow drastically.
The November deficit included an improvement of the U.S. deficit
with China, and the trend may continue because a slump in auto sales is
expected to have cut fourth-quarter U.S. consumption and growth. Meanwhile,
the overall U.S. trade deficit is still expected to have reached 6% of GDP in
2005.
"Trade is likely to restrain growth, and with consumption
soft, the GDP growth rate could be a lot less than most people are currently
thinking," Naroff says. He predicts GDP growth risks falling to 2% or
less in the fourth quarter after growing at a 4.1% rate in the third quarter.
That's good news for those hopeful that the Fed will stop lifting
interest rates sooner rather than later. But that's not likely to be good for
the dollar. For the stock market, the jury is still out. .
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