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THIS WEEK, Nov. 9-13

Twin deficits will help gauge economic health

The September trade deficit, to be announced Friday, is expected to show a widening from August.
The September trade deficit, to be announced Friday, is expected to show a widening from August. (Patrick Semansky/bloomberg)
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Monday, November 9, 2009

This is the week to get a read on the nation's twin deficits.

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The United States is importing (a lot) more than it exports, creating a trade deficit, and the government is spending (a lot) more than it brings in, the cause of the budget deficit. Together, these realities are part of a global story of imbalances that probably contributed to the financial crisis and could cause yet more economic damage if they unwind in a rapid, disorderly manner.

On Thursday, the Treasury will report on the federal budget in October, which is expected to show that the government spent $150 billion more than it took in, compared with $155.5 billion in September. Friday, the Commerce Department will report on the September trade deficit, which is expected to show a $31.8 billion deficit, up from $30.7 billion in August. That expected increase represents primarily the higher price of oil, which means that the United States spent more on its oil imports.

Beyond one month's data, the longer-term course of the trade and budget numbers are keys to watch to help determine whether the economy in the United States -- and elsewhere -- is moving at a more sustainable pace. The United States needs to export more, and Asia needs to import more. And as Asia, particularly China, consumes more, it will probably save less -- meaning less money available to finance large U.S. budget deficits.

Also coming this week is the University of Michigan Consumer Sentiment Survey, which is expected to show that Americans were slightly more confident about the economy in early November than in October.

-- Neil Irwin


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