US economy stronger than expected

The US current account deficit increased to $187.9 billion in the fourth quarter of 2004 from a revised $165.9 billion in the third quarter. The fourth quarter deficit is wider than most analysts were expecting. This may put further pressure on the US dollar, even though Asian central banks appear to be reluctant to let their own currencies rise.

Also higher but better was the news that US housing starts rose 0.5 percent in February to a seasonally-adjusted annual rate of 2.195 million units. Again, this is higher than what many were expecting.

US industrial production, though, rose a less-than-expected 0.3 percent in February. However, January's output gain was revised to 0.1 percent from an unchanged reading. And capacity utilisation in February rose to a higher-than-expected 79.4 percent.

What all these add up to is that the US economy is stronger than many had expected. This looks good at first glance. But it also means that underlying problems -- current account deficit, consumer debt -- are building up at a pace that could possibly be unsustainable, setting the economy up for a big fall later on.

When that fall might take place still remains a big question.