But the deteriorating trend is so established that it will take something quite radical to turn it round.Have a look at the bottom graph. There may be some help from lower oil prices and the decline in the dollar that has already taken place may have some modest impact on export volumes. The consumption boom will continue to suck in imports and there really is nothing that can be done about this. If this line of argument is right, there will be no significant adjustment in the US external deficit in the coming year. After all, consumption is 70 per cent of US GDP, the highest it has ever been, and there is no sign of that ratio slipping. While on a three- or five-year view it would be reasonable to see savings back at, say, 5 per cent of disposable income, the rebuilding may not start this year.If consumption continues to rise at around 3.5 per cent, the US economy will go on growing at much the same rate.

The practical question that will determine US demand is: will it rise much this year?What might trigger a change in US habits? The obvious candidate is higher interest rates but rates are not going to go much higher. There is no dispute that US consumers will have to rebuild their savings at some stage As you can see from the next chart. As consumer credit has risen, so has the savings ratio fallen It is now close to zero. You can have a debate about the appropriate savings rate: should it be around 15 per cent as it was in the 1950s, or 6 per cent as it was a decade ago, or somewhere in between? But no one believes it can stay at its present level of less than 1 per cent forever. This would happen despite their record debt burden, despite their record level of debt service costs (see first two charts), and despite the prospect of higher interest rates.

Towards the end of last year they seemed to be easing back on purchases, a view that triggered the bout of dollar weakness. Now the view seems to be that they will continue to support the dollar - and fund the US Federal deficit - for a while yet.And the third is that the presumption that the dollar would fall became so widespread that people suddenly found themselves asking: "If everyone thinks the dollar is going to fall, why doesn't it do so now?" Of course the answer to that is that people did not want to put their money where their mouth was, and so evidently were not so sure at all.There has been a similar reassessment of the prospects for US growth, with the main shift being a rise in confidence that consumers would keep spending through 2005. The other is that US growth will continue strongly this year as American consumers seem likely to keep their spending going for quite a while yet.There have been three main driving forces behind the shift in the judgement about the dollar. One is that the gap between expected US growth and expected growth in Japan and the eurozone has widened.

Many forecasters have been downgrading their estimates for the eurozone, with many now coming in at 1.5 per cent or less. That would be too little to stop unemployment rising further and make it impossible for the European Central Bank to increase rates, even were it inclined to do so. Customers have told us they noticed the difference over Christmas."As part of previously announced cost savings, Sainsbury's said it expected that 750 head office jobs would be removed by April.. How long can the rest of the world continue to live with the United States' current account deficit and what, if anything, will start the correction process? The story is completely familiar and every time there are new US current account figures it pops up to the top of the agenda - as it did yesterday when the November trade gap, the largest ever, was revealed How long can the rest of the world continue to live with the United States' current account deficit and what, if anything, will start the correction process? The story is completely familiar and every time there are new US current account figures it pops up to the top of the agenda - as it did yesterday when the November trade gap, the largest ever, was revealed.