Economic Indicators

The theme is easy enough: Weakening economic growth and
continuing inflation pressure. It may have started in the US,
but it has gone global.

The weekly leading indicator sets have reversed mild, shortlived
uptrends of early spring and are headed back down. They remain
consistent with development of recession in the US.

The monthly leading indicators weakened in June, but are not yet
consistent with recession as new order diffusion indices remain
significantly above recession levels. But, the trend is down in
both manufacturing and commercial sectors.

Underlying growth potential in the US (real wage plus employment
growth) has dropped to -0.9% reflecting a persistent slowing of
nominal wage gains, accelerated inflation in recent months, and a
slight downturn in yr/yr civilian employment. The situation looks
measurably better when the current flow of tax rebates are added
in. Potential swings to a +0.6% then, but, keep in mind that the
former measure was +3.9% at the end of 2006.

Inflation is reducing consumer purchasing power and is becoming
well established in the cost structure of businesses, with the latter
leading to reduced margins of profit for many companies worldwide.

My inflation thrust measure is as strong as it has been for many
years and is consistent with development of a 12 month CPI of
5%. The weight given to the commodities price component is now
dominant by far. This gives the thrust measure low visibility and
high volatility.