Europe slows while US retail sales dip

Europe's economy is struggling. The 12-nation eurozone's economy grew by 0.2 percent in the fourth quarter of 2004, down from 0.3 percent in the previous quarter, according to the EU statistics agency Eurostat. For the whole of 2004, the eurzone economy grew 2.0 percent.

In the meantime, the European Commission has cut its eurozone growth forecasts for both the first and second quarters of 2005 to a range of 0.2-0.6 percent from its earlier estimate of 0.3-0.7 percent. For the whole of 2005, the European Commission is predicting eurozone GDP growth of about 2.0 percent.

Eurostat said that growth in the final quarter for the whole 25-nation European Union was 0.3 percent, unchanged from the previous quarter. For the whole of 2004, the EU economy grew 2.3 percent.

Things appear better in the US. Although US retail sales dipped 0.3 percent in January, sales excluding the volatile car sector gained 0.6 percent, according to the Commerce Department. The Commerce Department revised December's total retail sales slightly lower to a 1.1 percent gain from the originally reported 1.2 percent advance, but the number excluding autos was unrevised at a 0.3 percent advance.

Meanwhile, in a survey by the Federal Reserve Bank of Philadelphia, 36 forecasters expect growth in the US to average 3.6 percent in 2005, up from an estimate of 3.5 percent in the previous quarterly survey. Inflation is expected to average 2.3 percent in 2005, up from 2.2 percent in the previous survey.

The main concern with the US economy remains the current account deficit. The latest Treasury International Capital data show that net foreign purchases of both domestic and foreign long-term securities from US residents remain high at $61.3 billion in December.