As the economy stumbles toward a slowdown, there is little help from overseas. These days, a vast proportion of the world’s merchandise is made in Asia, while U.S.-made goods go begging. The result is a spiraling trade deficit. Economist Sung Won Sohn says Friday’s figures for the November deficit will show another small rise, to $33.3 billion, from $33.2 billion a month earlier. “Lower prices for crude oil will help, and exports will be up a bit, but imports for the month rose across the board,” said Sohn, of Wells Fargo & Co. in Minneapolis. “Unfortunately, the trade deficit will continue to worsen,” he said. “While our economy is slowing, other world economies are slowing too.”
FED’S BEIGE BOOK
FUEL FOR RATE SPECULATION
With all eyes on the economic expansion’s tortoiselike progress, some analysts are calling for the Federal Reserve to lower interest rates Wednesday, when it releases its beige book, a region-by-region look at activity. But Chicago investment manager Marshall Front says it is more likely that central bankers will wait to ease rates by a quarter- to half-point on Jan. 31, after a two-day policy meeting. “While the economy will have a somewhat bumpy landing, we think it will skirt recession this winter and then begin to revive by midyear,” said Front, of Front Barnett Associates. “The Fed has room to ease interest rates further, and our forecasting model shows the central bank has been rapidly pumping up the money supply.”
HOUSING STARTS
LONE BLOOM ON THE ROSE
Manufacturing and technology may have tumbled into the doldrums, but one area of the economy continues to boom: construction. Watch for Thursday’s report on December housing starts to show a jump from the 1.56 million-unit annual rate reported a month earlier. As economist Ian Shepherdson points out, “mortgage rates have nose-dived in recent weeks to their lowest level since spring 1999,” helping to propel the market. Shepherdson, of High Frequency Economics, Valhalla, N.Y., is looking for additional strength for housing over the next few months.
EQUITIES
AWAITING PROFIT TEST
Stock, bond and commodity markets, as well as government offices, will be closed Monday for Dr. Martin Luther King Jr.’s birthday. The weekly auction of short-term Treasury debt is postponed until Tuesday. Meanwhile, the stock market, after suffering a stultifying attack of the midwinter blahs, is awaiting the full rollout of fourth-quarter corporate profits. They may not be stellar, but many analysts are taking the view that the bad news is already discounted and that the market can move higher. Among them is Flossmoor investment analyst Richard Evans, who is telling clients, “it appears that the market, including technology stocks, has found a bottom.”