Strong Last Quarter

How about 4Q growth of 5%?

GDP is expected to rise at a 5% annualized rate in the fourth quarter, with strength coming from almost every segment.

“This is going to be the most balanced [report] we could ever see,” said Joel Naroff, chief economist at Naroff Economic Advisors. “Consumers have continued to spend, it looks like residential construction is going to be good, exports have been growing, clearly business investment is up and we know the government has been spending like crazy.”

Although economic growth undoubtedly slowed from the third quarter and some of the strength in the last three months of the year was a result of continued fiscal stimulus, Naroff said the report is likely to prompt further speculation about a hike in interest rates this year.


Read that last line again, and you’ll know half the reason I expect the dollar to appreciate against the euro this year. Think the ECB can afford to raise rates with enemic economies to deal with?

(Actual rates, however, may rise in response to Germany and France’s refusal to live within the spending constraints of the Growth & Stability Pact. Those higher rates, however, would be at least partially offset by the inflationary pressures created by those same deficits.)


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