The leading indicator sets I follow point to continued
economic growth paced by consumer spending, export sales
and the service sector. The housing sector is continuing
to work off a still sizable inventory overhang, mortgage
applications remain range bound, and new concerns about
the sub-prime mortgage market will no doubt lead lenders
to tighten standards further, at least for the short term.
The manufacturing sector has shown an improvement in $
order levels, but only about half of the group is recording
improving order flow. On the plus side for goods producers,
distributor inventories have accelerated a run - off which
can set the stage for a rebound. On balance, growth potential
looks to be about 2.8 - 3.0%.
The longer term inflation indicator fell sharply again in Jan.
but is bouncing up here in Feb. on the sharp rise in oil prices.
A turn to unseasonably cold weather this month is helping this
market, and requires close scrutiny as a run up in oil cuts
into real consumer incomes -- the bedrock of the current period
of economic growth.
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