What trends can be expected in the net export sector?
We expect the net export deficit to narrow modestly in 2007. Real exports, which have grew 9.1% through 3Q 2006 are projected to continue to grow strongly, reflecting sustained healthy growth overseas and the lagged impact of the weaker U.S. dollar, while U.S. import growth moderates. Specifically, the U.S.’s largest trading partners are expected to maintain their economic momentum in 2007: Canada and Mexico are projected to grow at a healthy pace; continued improvement is expected in Europe, despite below-trend growth in the U.S. and Asia is projected to expand strongly, with healthy growth in Japan and robust expansion continuing in China and India. U.S. imports are projected to slow substantially from their 7.2% growth pace, as the moderation in consumption and business investment spending constrains the demand for imports and the weaker dollar encourages substitution toward domestic production. In fact, through October, real goods exports have accelerated to over 13% year-on-year g
