Being the beginning of the new year, not all of the economic data for January is known just yet. Still, indicators have been published that point to another very strong year for the US Economy.
Recently, the new Chairman of the Federal Reserve Board, Ben Barnanke, gave a presentation on Capital Hill. The core message was: a low inflation rate will continue to sustain economic growth. This will probably mean yet another rate hike in the federal lending rate in March to 4.75 percent. Below are highlights as they have become public.
Trade Deficit: $725.77 billion for the year 2005 - No surprise here.
Trading partner with largest surplus to US: China - $ 201.63 billion in 2005. No surprise here either.
Unemployment: 4.7% in Jan '06
Wages/Earnings: + 3.3% in Jan '06
Retail Sales January: + 2.3% over the previous months, triple the expected pace.
Projected Budget Deficit for 2006: $423 billion
Estimated Gross Tax Gap for 2006 (Uncollected Taxes): $345 billion (a solution to the budget deficit?)
Housing Starts: an eye-popping 2.276 million units in Jan '06, up 14.5% over Dec '05, facilitated by unseasonably warm weather.
Overall Industrial Production for January 2006: - 0.2% compared to Dec '05 (caused by a steep decline in utility output because of unseasonably warm weather)
Factory Output for January 2006: + 0.7% from December '05 level
Output by motor vehicle and part makers for January 2006: + 2.3% compared to Dec '05
Special Concerns: Health care expenditure in the US has reached 15 percent of the GDP (by far the highest rate in the industrialized world) and almost 60 percent of health care costs are borne by private institutions through employer-provided health care. Health expenditure continuously out-paces the general inflation rate and has developed into a major concern for US companies.