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The U.S. trade deficit rose, exports fell, consumer confidence is down -- and Stratfor is upbeat about the U.S. economic recovery. However, we see storm clouds in China, the eurozone and Latin...

The U.S. trade deficit increased from $38.4 billion to $45.2 billion in January 2004, while U.S. exports of goods and services fell 0.2 percent to $90.4 billion, the U.S. Commerce Department reported last week. Separately, the University of Michigan's latest consumer confidence index -- watched closely by financial analysts and journalists -- fell to 93.1 in early February 2004 after climbing in January to 103.8.

These reports added fuel to last week's public debate among Bush administration officials, market pundits and editorialists in the financial media about whether the U.S. economic recovery is gaining momentum or running out of steam. Administration officials claim that a surge in new jobs is imminent. However, the majority opinion outside the administration as of Feb. 15 appears to be that the economic recovery is in trouble. Critics note that the budget and trade deficits are increasing, the dollar is weakening, and job creation at this stage of the recovery is lagging compared with previous recovery cycles, while exports declined and consumer confidence is ebbing.

This downbeat view was reflected in a new ABC-Washington Post survey published Feb. 12 that showed President George W. Bush's approval rating falling to 50 percent due to growing concern among voters about the health of the U.S. economy.

Stratfor is always skeptical about whatever happens to be the majority consensus in the financial markets. However, our natural skepticism deepens in election years because the political heat generated in election campaigns tends to create distortions in how the news media gather, prioritize, interpret and disseminate information about the U.S. economy.

In our view, last week's reports didn't indicate that the U.S. economy is heading south. Instead, they confirmed Stratfor's forecast that the U.S. economic recovery is leading -- indeed, lifting -- the rest of the world, especially Europe, China, Asia and Latin America. The U.S. trade deficit is up, and exports dropped slightly in January 2004 because the U.S. economy is much stronger structurally than, for example, the economies of Europe or China.

Consumer confidence tracks the labor market. Lately there has been a lot of critical reporting in the U.S. news media about the jobless economic recovery, so we're not surprised by the dip in public confidence.

However, spending accounts for 70 percent of the U.S. economy, and is tied more to a person's view of future personal wealth. Most Americans are more likely to buy something today, even on credit, if they believe that six months or a year from now they will be doing better in their individual economic situations. If the U.S. trade deficit is rising, it means Americans are spending more, which is a sign of confidence in the future.