In general, the twin deficits (trade and federal) will be an ongoing source of volatility in the dollar and interest rates.

I am surprised we did not see higher demand.

The idea of the Fed at least pausing is helping to support the market. We're looking at the economy as having continued fundamental strength going forward, and we're looking at generally good business activity numbers.

The issue for 2006 will be momentum. So far the expansion has been able to withstand shocks such as rising energy prices. A slower ISM number is consistent with an economy likely to slow over the coming months and quarters.

The improvement in the trade gap is always welcome but the continued high level is always a concern. Strong exports (are) a confirming sign that growth is picking up in the rest of the world.

A report like this will continue to fuel the debate about how strong consumer spending will be over the holiday season.