U.S. consumers have been increasing their spending much faster than their incomes.
Of course, we don't know whether the price is going to stay at $3. But the longer prices stay at this level, the harder it is to believe that consumers will just carry on doing what they were doing.
The bottom line is that the job market carried good momentum and the economy can weather the temporary hit from the hurricanes.
Within a few months, the deficit will be widening to new records.
Companies have reached the limits of what they can do with their work forces. They have to hire more workers.
We believe the numbers today are confirming our view that growth will be soft throughout the rest of the year.
Energy prices were rising before Katrina hit, and while those costs didn't make their way through to finished goods in August, we have to expect higher core inflation in coming months. Firms are saying that they've absorbed so much already that they have to pass on these costs.
The goods and services deficit will continue to widen, especially since after Katrina the United States will be importing more energy products at higher prices.
Our equation says the economy ought to be good enough for Bush to win the election.
Copyright © 2024 Electric Goat Media. All Rights Reserved.