Economic Indicators

After rising from late Aug. through early Oct., the weekly leading indicators have leveled
off leaving the recent improving trend unpersuasive. The  weekly coincident indicators
remain essentially flat and have not sustained progress since the end of Jun. My heavy
industry indicator -- steel output -- made a cycle-to-date peak in Aug. and has been
tailing off.

The monthly coincident economic indicators are on the flat side as well with the
exception of retail sales, which has firmed up over the past two months and will help
the Q3 GDP report.

One factor which has contibuted to the flattening out of the data has been a round of
quantitative tightening by the Fed which, by various measures, has been in effect since
Feb. 2010 (monetary base especially).

There has been no positive turn yet in private sector credit demand. On the plus side,
here are a couple of factors: The banks have amped up the deposit base somewhat, and
the system wide loan loss provision has finally started coming down. That reserve
has dropped over $17 bil. or 7.3% since this past spring. Let us be thankful for little
favors.

With a deterioration in positive momentum of the recovery, the stage is set for the
Fed to put up or shut up for awhile on fresh easing, and the stage setting is ripe for
an interesting couple of months for a lame duck Congress as well.