Monday, November 26, 2007

2008 - The Economic Slow Lane or the Off Ramp?

Do you do an economic forecast of your own? If not, consider that it is easy and worth it.

Martin Wolf puts up a great piece on the economic outlook - in three points:

The latter is “the great unwinding”: the re-import by the US of the stimulus it imparted to the rest of the world between 1996 and 2004, when its domestic purchases grew faster than GDP and the current account deficit exploded upwards.
Yet the [retracement] is still modest: US households still ran a financial deficit of 2.3 per cent of GDP in the second quarter of 2007. Moreover, household savings rates remain very low, at 2.5 per cent of GDP in the second quarter of 2007. Further correction in both is probable.
But exports are only some 12 per cent of GDP. They must grow by considerably more than 10 per cent a year, in real terms, if the contribution of net trade to the rate of growth is to be as much as 1 percentage point. It is likely to be much less.

So, how strong is 'domestic demand' in the U.S.'s key trading partners, China, Canada, Mexico, and the EU and how much do they want what the U.S. is exporting? humm....

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