Sep 18 2006 12:29PM | Permalink | Email this | Comments (0) |
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More evidence is accumulating that spending picked up during the summer after a weak spring. This will keep a high floor under the slowing housing market and enable nonresidential construction to keep expanding. All of the recent economic reports, except for the housing and motor vehicle markets, describe an economy that is growing steadily, if modestly.

Consumers boosted retail buying only 0.2% in August but that was on top of a huge 1.4% rise in July. This is consistent with consumer confidence rebounding in September to the June/July level and weekly layoffs staying steady at 315,000. The money saved at the gas pump is going to other purchase rather than being saved.

Business behavior is also consistent with steady growth that is expected to continue. Inventories increased only in line with sales growth in August after two months of inventory accumulation. That translates to sales targets being met or exceeded at this stage of the business cycle. Business confidence and activity survey were steady or slightly higher in August at a level that is typically consistent with about average business growth. The Monster index on online job listings rebounded to an all time high in August confirming that job monthly growth is likely to continue at the recent 125-130,000 pace.

The inflation indexes have begun to rise more slowly as a result of a little slowing in the world economy and the catch up of commodity supplies to demand. The Consumer Price Index increased only 0.2% in August, right in line with inflation expectations. Smaller gains, possibly even a decline are likely in the next few months.

Interest rates have softened in the last month as result of the combination of slower inflation and slower demand growth for the overall economy. Thirty year fixed mortgage rates slipped 30 basis points since the late June peak level.