<![CDATA[Economists are reacting to slower-than-expected economic growth in the fourth quarter of 2005, which disappointed Wall Street today. For about a year now I’ve been pointing to the rising trade deficit and ballooning federal deficit as huge red flags waving over the U.S. economy and the impact of both is clearly evident in today’s numbers. Basically, the domestic economy grew but we gave away hundreds of billions in interest payments and actually saw falling exports despite the devalued dollar (a cheap dollar should make our products more attractive globally).
Listening to the economists, it’s actually sort of entertaining how they spin this upside-down economic phenomenon:
“It’s sort of a back to the future report because we are back in a situation where domestic demand is growing strongly — at 4.7 percent — but GDP is only 3.1 percent. The difference is trade,” said Nariman Behravesh, chief economist at the research firm Global Insight.
“In effect, it means the US is still the locomotive of growth in the global economy. It’s really alarming in the sense is that while the US continues to chug along, we haven’t made any progresss in terms of rebalancing growth in the global economy.”
Steve Stanley, chief economist for RBS Greenwich, added, “It is difficult to make a case that the economy is slowing down. Rather, in our view, there was an unsustainably large negative shock on the trade side.”
Similar views came from Moodys Investors Service chief economist John Lonksi, who said, “the contraction of exports brings attention to the still sluggish rates of growth both in eurozone and Japan. And it also brings attention to a loss of global competitiveness on the part of US manufacturers.”
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