CHICAGO – Americans’ confidence in the future is at a 3-year high, according to surveys taken in recent days, but some indicators show their faith in the economy is not entirely unshakable.
Note that investors are voting with their feet, and their dollars. In hopes of reaping big returns overseas, they have been yanking money out of domestic stock mutual funds and shipping money to distant shores. That is prompting pessimists to say that the best years of Yankee invention and ingenuity may be behind us.
The troubling theory dovetails with gloomy reports about the nation’s trade deficit, which has mushroomed to nearly $700 billion a year. Everywhere we look, a torrent of Asian-made goods has replaced small items made in the USA.
Replacing American output: foreign money flowing here to acquire prime office buildings and other assets.
That brings us to Friday’s report of the trade shortfall for December. Economist Brian Wesbury expects it to decline for a second month in a row, to about $63.5 billion from $64.2 billion a month earlier.
“Exports for the month grew, while imports held flat, partly because oil prices slipped, at least slightly,” said Wesbury, of First Trust Advisors in Lisle, Ill.
Looking ahead, he expects the trade outlook to improve this year, because overseas markets are picking up. That means more U.S.-made goods are being bought in foreign lands.
“We shouldn’t overlook the fact that we are the world’s biggest exporter, despite the enormous level of imports,” Wesbury said. “If we view it another way, our exports are equivalent to two-thirds the size of China’s entire economy.”
Some may consider it a mixed blessing, but Thursday will mark the return of the government’s famed long bond.
The Treasury Department is bringing back a debt security it had discontinued issuing five years ago when the government’s finances were in better shape. Now, thanks to the costs of a war, programs for the elderly and rebuilding the Gulf Coast in the wake of Hurricane Katrina, deficits have soared. The sale of $14 billion in 30-year bonds is part of a three-day auction that will raise $48 billion for government coffers.
The stock market has seen more than a few hiccups as fourth-quarter corporate profits roll in, even though most of the news has been supportive of equity prices.
As of late last week, positive earnings surprises were running ahead of disappointments by a ratio of nearly 3 to 1, with nearly half the Standard & Poor’s 500 stock list having reported, says Dirk van Dijk, research director of Zacks.com.
“Energy leads the pack with median year-over-year growth of 78 percent, followed by technology stocks with 25 percent growth,” he said.
Overall, van Dijk said, profits are growing at more than a 14 percent rate, year-over-year.
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AP-NY-02-03-06 1737EST
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