from Follow the Money

Does the Journal think 6.2% is a credible forecast for the 2006 US current account deficit?

April 17, 2006

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The actual source for this forecast is Moody's Economy.com.   But the Journal now uses Moody's Economy.com regularly for their "Global economic snapshot" (page a8 of the print editition).  The quality of the their forecasts  - at least on topics I know well - hasn't been very good.

Afterall, the 2005 deficit was 6.4%, the q4 defict was 7% and all the data available so far suggests the deficit is growing.  

Remember, the US imports oil.  The US interest bill is rising.  Last I checked, the US current account deficit sure looked set to rise.

Getting good current account forecasts is hard - most US forecasters have treated the current account as a residual - but I don't know of any credible forecast that is close to 6.2% for 2006.   7% is about right. I would say a bit more.   

The Moody's Economy.com feed also has generated some really strange estimates for China's current account surplus in the past.   Just saying.

The funky numbers marred what otherwise was a great day for international news coverage, with nice articles from Mark Whitehouse on Petrodollars, Yuka Hayashi and Justin Lahart on the global consequences of rising JGBs yields, and Henny Sender on China Construction Bank's desire to buy some of the United States' (financial) dark matter.    CCB wants a stake in Bear Stearns.     And China's state remains the majority owner of CCB.

Given the amount of debt China buys from US broker-dealers, it isn't surprising that China might want to (sort of) own one ...   and given how many Chinese goods Wal-mart distributes, I wouldn't be surprised if China someday decides it wants to buy some of Wal-mart's retailing dark matter too ...

If the forecasts from Moody's economy.com were just a bit better - and the Oped page stopped printing generals delivering talking points ghost-written by Rumsfeld's PR shop - it really would be a great paper ...

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