Vocabulary practice

The sustainable growth rate is a measure of how much a firm can grow without borrowing more money. After the firm has passed this rate, it must borrow funds from another source to facilitate growth.

While the latest figure for GDP in the October-to-December period was indeed anemic and marked the worst performance in three years, the new reading actually turned out to be slightly better than the 1.6 percent growth rate estimated a month ago, according to the Commerce Department's report released today.

A price index measures the change in price of a fixed basket of goods and services between two time periods. This change in prices over time is often called inflation.

The U.S. trade deficit increased 17% in 2005, and 9% in the fourth quarter alone. Rapidly rising oil prices and imports explained about two-thirds of the increase. 

Timothy Geithner, president of the New York Federal Reserve, on Monday dismissed the view that the US current account deficit was sustainable, suggesting the risk of a sudden fall in the dollar would grow the longer the trade gap widened.

Texts to translate:

25. Eurozone Recovery Boosts Confidence

The eurozone's economic recovery has pushed confi­dence to a fresh five-year high while core inflation has tumbled, according to data released yesterday.

But the generally upbeat picture provided by the European Commission's sen­timent survey was marred by Spain, which has been one of the 12-nation euro-zone's best performing econ­omies but where the mood has darkened dramatically.

The survey is the latest evidence that the general economic pick-up in the eurozone over the past six months is gaining momen­tum, without any serious inflationary impact so far.

Core inflation - exclud­ing energy prices - fell unexpectedly sharply in January, according to detailed figures released by Eurostat, the European Union's statistical unit. Inflation excluding energy, food, alcohol and tobacco -a measure watched closely by financial markets - fell from 1.4 per cent in Decem­ber to 1.2 per cent last month, - the lowest since February 2001.

The core inflation fig­ures compared with a head­line inflation rate of 2.4 per cent in January, up from 2.2 per cent in December.

But the Commission's eco­nomic sentiment index for Spain plunged in February to the lowest level since Feb­ruary 1994, largely because of a collapse of confidence in the construction and retail sectors.

Although the country has for many years outper­formed the eurozone aver­age, worries have mounted recently about its expanding current account deficit and vulnerability to a house price collapse. Spain's Janu­ary inflation rate of 4.2 per cent was the highest in the eurozone. The harsh winter might also have hit Spanish confidence, analysts said.

The data come as the European Central Bank is almost certain to raise its main interest rate tomorrow by a quarter percentage point to 2.5 per cent.

Unlike the US Federal Reserve, the ECB dislikes core inflation measures. As such it is likely to express concern about long-run inflation pressures cre­ated by high oil prices.

But the still modest underlying inflation pressures, and continuing doubts about the sustainability of the upswing, provided ammunition for those urging the ECB not to rush subsequent interest rate increases.

Labour market figures also took some of the gloss off yesterday's economic news. France's unemploy­ment rate in January nudged higher, and Ger­many saw a much smaller-than-expected fall of 5,000 in its seasonally adjusted unemployment total to 4.695m in February.

But the Commission's sur­vey showed manufacturing and service companies have become more optimistic about their employment expectations.

The Commission's euro-zone economic sentiment index rose from 101.5 in Jan­uary to 102.7 in February, the highest since June 2001. Economic sentiment improved in Germany.