Economic Indicator Issues

with the economic recovery moving along, I am skipping the usual
detailed commentary to focus on a couple items of strategic interest
to the capital markets.

First, the group of weekly and monthly leading indicator sets I
follow are progressing, but we'll have to watch over the next
several weeks to see whether the indicators are at momentum
inflection points and whether further advances will be more
moderate. More moderate progress for the indicators would be
the normal development. What's interesting is that it is not clear
that we are there yet. This applies to global as well as US measures.

Secondly, with the pace of shrinkage in the banking system's short
term business loan book moderating and with non-financial top class
commercial paper demand rising, total business lending may be
nearing a positive turnaround. In fact, with the stronger market for
industrial commercial paper, my indicators behind whether the Fed
should raise rates have moved up from 30% to 50% in favor. This
development raises the "buzz" level on The Street re: Fed policy
as does today's news of an increase in payroll employment. The
weakness seen in the Treasury market in recent sessions reflects
sector swap rotation to pick up yield, but it could also reflect
"handicapping" on an eventual reversal in Fed policy.

Finally, the inflation pressure guides I use did level off early in
the first quarter of 2010, but with the strong action in industrial
commodities and petrol, these gauges may be firming up again.