Category Archives: Economic Indicators

September Spending and Income

KEY DATA: Consumption: +1.0%; Disposable Income: +0.4%; Prices: +0.4%; Savings Rate: 3.1%

IN A NUTSHELL: “Consumers spent like crazy in September, but the declining savings rate is a warning sign that they may not be able to keep it up.”

WHAT IT MEANS: Last week, the third quarter GDP report was released and it indicated that September consumer spending was really strong. And it was. Indeed, the rise was the largest in eight years. But before we get too excited, keep in mind that much of the gain was due to a surge in vehicle sales. That was likely the result of many people replacing their hurricane-destroyed vehicles. Thus, we cannot take too much solace in the robust durable goods number. There was also a jump in nondurable goods demand, but much of that may have come from the sharp rise in energy costs that resulted from the temporary supply dislocations. Indeed, when the nondurable goods increase was adjusted for price changes, the increase was solid but nothing great. Finally, spending on services, the largest component, was also decent but nothing that would indicate the consumer has become irrationally exuberant. On the inflation front, prices were up sharply but when food and energy were removed, there was only a modest increase in consumer costs.

As for income, there was a solid increase as wage and salary gains rebounded from a minimal rise in August. Not surprisingly, given the surging stock market, dividend income was up sharply. Still, the gain in incomes did not come close to matching the jump in spending and the savings rate fell again. It is down to 3.1%.  

MARKETS AND FED POLICY IMPLICATIONS: On the surface, this looks like a really strong report and the consumption rise did keep third quarter consumption from faltering significantly. But it is doubtful we will see a repeat of the huge vehicle sales going forward and that means household spending may slow in the coming months. But what really worries me is the steady decline in the savings rate. Since 2010, the savings rate has averaged 5.8%, but while it has bounced around, the trend is down. Lately, that decline has accelerated. In 2015, it averaged 6.1%, fell to 4.9% in 2016 and it looks like it will average about 3.7% this year. That would be the lowest rate since 2007, which was the last year before the Great Recession. On a monthly basis, the rate hit its lowest level since December 2007, when the last expansion ended. Looking at the past few recessions, the savings rate tends to decline until just before a downturn starts and that pattern has started. I am not saying a recession is coming. But consumer incomes are not rising fast enough to sustain solid growth and that is a warning sign of future trouble. However, this red flag is not likely to be viewed as particularly important by investors. They are focusing on the tax plan, which is still undergoing changes and will have to go through a lot more in committee. But the faltering savings rate could give some Fed members pause. At the least, it will provide further ammo for those who want to raise rates very slowly.

September Durable Goods Orders, Existing Home Sales, August Home Prices and Investment Tax Cut Commentary

KEY DATA: Durables: +2.2%; Excluding Aircraft: +0.9%; Capital Spending: +0.7%/ New Home Sales: +18.9%/ Home Prices: +0.7%; Over-Year: 6.6%

IN A NUTSHELL: “The expected September hurricane driven slowdown doesn’t appear to have occurred.”

WHAT IT MEANS: Normally, after a major catastrophe such as hurricanes, the economy slows. But soon afterward, as rebuilding begins, activity accelerates. Well, we may not have gotten that much of a softening in growth from the disasters. First of all, durable goods orders were up sharply in September. That was not a major surprise as demand had been solid and the impacts from the hurricanes were localized. While we did get a huge bump from aircraft orders, even excluding that sector, orders were still robust. There were increases in demand for communications equipment, fabricated metals and a modest rise in motor vehicles. But most importantly, the best measure of business capital spending, nondefense, nonaircraft orders, rose sharply. Over the year, business investment orders are up a very solid 3.8%. Backlogs increased again, another sign that economic conditions are improving.

If the strong durable goods numbers were not enough, we also saw today that the housing market is coming back with a vengeance. New home sales skyrocketed in September and it wasn’t just a huge rebound in the hurricane-battered South. Sales were up in every region and the percentage rise in the Northeast (33%) was even greater than in the South (26%). Before we get too bulled up about the housing market, we need to recognize that outsized gains are usually signs of special factors. So don’t be surprised if there is a pull back in October.

Housing prices continued their inexorable trek upwards in August. The Federal Housing Finance Agency’s index surged over the month and is up quite strongly over the year. Regionally, the increases range from a low of 5% in the MidAtlantic area to 9.5% in the Pacific region. The rise in home prices has been slowly but steadily accelerating for three years now. While we aren’t near the double-digit pace posted in 2005, we are betting closer to nosebleed levels that raise concerns about affordability.

MARKETS AND FED POLICY IMPLICATIONS: Today’s data point to a solid third quarter GDP growth pace. It may not match the 3.1% posted in the second quarter, but it should be pretty good. But the real eye-opener was the private sector capital spending. It has been picking up rapidly and the increase over the year is accelerating. It looks like business investment on durable goods will be up this year by between 4% and as much as 5%, if the gains continue.

Commentary: The rising pace of private capital spending raises a major question: Do we really need tax cuts targeted to increase investment? If companies are already investing more without any certainty they will get a tax cut, why would one be needed? Economic activity, not tax policy, is driving capital spending and that is the way it should, especially since tax incentives for capital spending are incredibly inefficient and massively expensive. They reward businesses for doing what they would have done anyway given all firms that invest get the break, not just those incented to spend more.

Consider this example. Nonresidential investment will likely total about $2.5 trillion this year, in nominal dollars. Let’s assume there was going to be no increase next year but the tax changes cause investment to rise by a huge 10%, to $2.75 trillion. That’s great, so what’s the problem? The first $2.5 trillion in investment would have occurred anyway, yet those firms still receive a tax cut. That is, 91% of the tax break goes to firms that have done nothing different than they would have without the tax change! And I used a pretty large impact from the tax cuts. If it is smaller, which is likely to be the case, the percentage is even higher. A five percent increase would put the percentage at 95%. Depending on the size of the tax break, the government might actually be paying for most if not the entire rise in capital spending. To me, that makes absolutely no economic or fiscal sense. It is just a tax giveaway. With businesses already indicating by their actions that they are willing to spend more on capital goods, do we really need an investment tax cut? Comments welcomed.

September Existing Home Sales

KEY DATA: Sales: +0.7%; Over-Year: -1.5%; Prices: +4.2%

IN A NUTSHELL: “A lack of supply is keeping housing sales down but prices up.”

WHAT IT MEANS: It is hard to buy homes that are not for sale and that is a problem facing the housing market. On Tuesday, we learned that new home sales fell in August, in no small part because Houston was underwater. That it is hard to sell properties you cannot get to should have surprised no one. Today we found out that once the waters recede, sales proceed. The National Association of Realtors reported that existing home purchases rose in September. Now that was a bit of a shock since Florida took a licking. Apparently, demand in Houston start ticking again and sales in the South were off only modestly. The Midwest and West reported increases but purchases were flat in the Northeast. Over the year, however, sales did drop. While the inventory of homes for sale edged up in September, it was down over 6% from September 2016. That is limiting buyers’ options and forcing them to pay up for what is available. There is little reason to think that will change anytime soon.

MARKETS AND FED POLICY IMPLICATIONS: Housing is critical to not just growth but inflation as well. We tend to think of all the sectors that are affected when home construction and sales rise sharply. But you also have to consider the impact of home prices on consumer inflation. This enters the Consumer Price Index through the category called “owners equivalent rent”. Basically, it is what homeowners think they can rent their homes. Prices and costs of operations are included in this, so it is not strictly a housing price measure. But in September, this component was up 3.2% over the year, well above the 2.2% rise in the overall index. Since it constitutes almost one-quarter of the index, continued housing price pressures will add to inflation. Of course, that may be good as far as many Fed members are concerned. If they are to defend a rate hike, it would be better if inflation is accelerating and the lack of supply in the housing market is just the factor that could help that happen. As for the markets, earnings do matter, at least sometimes, and this is earnings season. However, paraphrasing Animal Farm, “all earnings are equal but some earnings are more equal than others”. Thus, when there are big misses, even when they come from huge companies, investors continue to buy, buy, buy. Of course, there also may be some exuberance setting in.

September Leading Indicators, October Philadelphia Fed Survey and Weekly Jobless Claims

KEY DATA: LEI: -0.2%/ Phila. Fed (Manufacturing): +4.1 points; Orders: -9.9 points/ Claims: -22,000

IN A NUTSHELL: “There are no indications the economy will break out to the upside after hitting a bump due to the hurricanes.”

WHAT IT MEANS: In August and September, Mother Nature ruled. The weather made a mess of large parts of Texas, Florida and Puerto Rico. But we are expecting an economic rebound as households replace lost vehicles and damaged homes while businesses fix up their operations that were set back by the storms. Will that upturn occur? It is way too early to know, but one measure, the Conference Board’s Leading Economic Index, usually provides some insight and it didn’t say conditions were going to improve quickly. Indeed, the index fell in September, the first decline in a year. Should we worry? Not really. The biggest issues were the labor market and residential construction components and those were likely temporarily depressed. Unemployment claims have already fallen to if not below where they were BH (before hurricanes) and don’t be surprised if the October employment report is a biggie. Since it is hard to build during a hurricane and in flooded areas, I suspect that we will soon see a pick up in building permits. So, don’t conclude that the economic data are flashing a slowdown ahead.

One indication that economic conditions have remained solid is the Philadelphia Fed’s Manufacturing Survey. The Index rose moderately in early October, though the details really don’t support any real improvement in activity. New orders and backlogs continued to grow, but less rapidly. Hiring improved yet optimism faded. Businesses are still positive about the future, but not quite as exuberant. And of more concern, their costs are rising and respondents believe they will rise even faster going forward.

Jobless claims pretty much bottomed last week. The sharp decline took us to a level not seen in nearly forty-five years. Then, the labor force then was only about 55% of what it is now. Adjusting for the size of the labor force, the level of claims is at an historic low.

MARKETS AND FED POLICY IMPLICATIONS: Today’s data don’t really change a whole lot as far as the outlook for growth is concerned. But we need to pay attention to the labor market numbers. Undoubtedly, the ups and downs in jobless claims created by the hurricanes caused some strange doings in the data, so the historically low claims number has to be seen in that light. But there were other reports released yesterday that indicate the labor shortages are beginning to bite. The ADP Job Vitality Report indicated that “job holders” are seeing better wage gains. In many sectors, the increases between third quarter 2016 and 2017 exceeded 4%. The information, leisure and hospitality and construction industries are all under intense pressure as shortages persist and workers are moving to the highest bidders. Also, the Labor Department reported that median weekly earnings rose 4% in the third quarter. The trend in wages is up and it is hard to see that it will do anything but accelerate going forward. There are lots of different measures of wage gains and most have issues. The ADP numbers try to “individualize” and there are clear signs that in a lot of sectors and in many parts of the nation, wage pressures are building.

September Consumer Prices, Real Earnings and Retail Sales

KEY DATA: CPI: +0.5%; Excluding Energy: +0.1%/ Real Earnings: -0.1%/ Retail Sales: +1.6%

IN A NUTSHELL: “The sharp rise in consumer prices may have been hurricane driven, but for those on Social Security, it was great news.”

WHAT IT MEANS: Inflation accelerated in September – not! If all you do is read the headline number, that is your takeaway. But the reality, as usual, is in the details and that is a different story. There was, as we all know, a surge in gasoline prices as the Harvey hit the supply chain hard. Excluding energy, inflation remained quite tame. Food costs rose minimally even though the all-important snack category posted a large decline, vehicle prices fell, medical goods expenses dropped sharply and apparel prices were also down. Shelter costs, though, continue to rise at a moderate pace. Next month, the index could be flat to down as much of the gasoline price gain has already dissipated. In other words, there really is little to worry about when it comes to inflation.

But the increase in prices, even if temporary, is having impacts. First of all, while hourly earnings rose solidly in September, when adjusted for inflation, household earnings were down. As I always say, it is hard for consumers to buy more when their purchasing power is going nowhere. On the other hand, Social Security recipients are going to be quite happy. The cost of living adjustment is based on the third quarter over third quarter rise in the Consumer Price Index for wage earners and that was up 2%, in no small part because of the surge in gasoline costs. The adjustment will be the largest since 2012, when gasoline prices surged as well.

The hurricanes had a large impact on retail sales, as well. Total retail demand soared in September and the major reasons for the gain could be traced to the weather. Gasoline sales jumped as prices surged. Vehicle sales exploded as households who had their vehicles damaged started replacing them. And sales at home supply stores were up sharply as people bought everything they could to first batten down the hatches and then start to rebuild. Since so many had abandoned their homes, they wound up eating out and restaurant sales were up solidly. Just as consumer prices will likely reverse in the next month, it is likely that retain sales will be quite weak when the October report is released.

MARKETS AND FED POLICY IMPLICATIONS: The sudden increase in retail demand is likely to cause third quarter growth to come in somewhat better than expected before the hurricanes hit. But what Mother Nature may have given in the third quarter, she will likely take away in the fourth. That is true when it comes to consumers spending as well as inflation. I warned the data would be choppy and it looks like the waves will be fairly high. The Fed will not be swayed by the inflation report as there will be two more reports before the December FOMC statement is released. By then, the members should have a better idea about the pace of consumer prices. Therefore, investors will likely continue to focus mostly on earnings.

August Factory Orders and Trade Deficit and Weekly Jobless Claims

KEY DATA: Orders: +1.2%; Durables: +2%/ Deficit: $1.2 billion narrower/ Claims: -12,000

IN A NUTSHELL: “The hurricanes may have caused havoc, but the economy seems to be bouncing back.”

WHAT IT MEANS: This is one resilient economy. Neither rain, nor wind nor the gloom in Washington seems to stay businesses and consumers from their appointed rounds of producing and buying. Factory orders were strong in August, led by solid increases in durable goods demand. But orders for nondurable products were also up decently, indicating that the manufacturing sector is experiencing broadly based increases in sales. Indeed, the only major sector that posted a decline in demand was furniture products.

There was also good news on the trade front. Rising exports, especially consumer and capital goods, led to a narrowing of the trade deficit. However, the decline in imports is a warning. We bought less of most products, except vehicles and consumer goods. A strong economy should mean that our demand for all products, including foreign goods, should rise. It didn’t. Still the narrowing trade deficit implies that trade will likely be a nonevent in the third quarter GDP report. It shouldn’t help or hurt growth.

Consumer spending looks like it was pretty strong in September, though not for the reasons we would want to see. The destruction of so many vehicles led to a surge in sales as households began to replace their flooded out autos and SUVs. We also saw this week that job cuts in September were modest. Challenger, Gray and Christmas noted that the third quarter layoff announcements were the lowest third quarter total in 21 years. Jobless claims came down last week, but they remain well above what they had been before the hurricanes blew up the data. And finally, the Conference Board reported that there was a modest increase in online help wanted ads. In other words, most of the data reported this week were positive.

MARKETS AND FED POLICY IMPLICATIONS: Tomorrow is employment Friday and it is hard to really know what the report will look like because of the hurricanes. It is likely that the unemployment rate will rise, if the elevated number of jobless claims is any indicator. We could also see an unusually small number of jobs created. Houston was largely back online by mid-September, but some firms may never reopen. In Florida, Irma’s timing may have led to a lot of workers not being employed during the survey week. Thus, don’t be too surprised if the number of jobs added is well below the even modest consensus of 75,000 – 100,000. I am on the lower side, but I have been surprised at how well the economy has held up despite the hits it has taken. My point is that if we get a truly ugly report, don’t assume that is anything more than temporary. Just as vehicle sales rebounded well above what they would have been without the storm damage, expect job gains to bounce back as households and business start repairing and rebuilding.

August New Home Sales, July Home Prices and September Non-Manufacturing Activity


KEY DATA: Home Sales: -3.4%/ Case-Shiller (Over-Year): +5.9%/ Philadelphia Fed Index (Non-Manufacturing): +1.4 points; Orders: +7.3 points


IN A NUTSHELL: “Housing sales may not be strong, but a lack of inventory is causing prices to continue to jump.”


WHAT IT MEANS: The housing market is likely to be a puzzle over the next few months as the two hurricanes created havoc in the market in Texas and Florida. And since Harvey hit during August, that month’s data are likely to be a bit skewed. So it wasn’t surprising to see that new home sales fell in August. But the decline could not be blamed on the weather as no region posted a gain. There was a little bit of good news in the report. Though still low on an historical basis, the number of homes on the market was the highest since June 2009. As for prices, the median declined while the average rose. What we are seeing is an increase in moderate priced homes and solid demand for the extremely high cost homes.


The reality is that home prices are likely to continue increasing and may even gap up a little if mortgage rates start to increase. There just isn’t a lot of supply out there and that goes for not just new homes but existing homes as well. The S&P Case Shiller National Home Price Index posted a faster gain in July. Only one of the twenty metro areas, Chicago, was down over the month. Except for Seattle on the high-side and Chicago and New York on the slow-side, most of the other cities saw their prices increase by between 5% and 7.5%, a pretty tight shot pattern.


As for the services component of the economy, if the Philadelphia region is any indicator, and it tends to be just that, the industrial sector is doing just fine. The Philadelphia Fed’s Non-Manufacturing Index rose in September, led by a jump in new orders. Even with sales rising faster, backlogs are building. Looking toward the future, while respondents were less certain about the general economy, they were more optimistic about their own companies.


MARKETS AND FED POLICY IMPLICATIONS: Next week, when we start getting September data, we will begin to see how the two hurricanes affected the economy. Until then, we can only assume that they slowed third quarter growth. I have marked my forecast down to under 2%, which puts me toward the bottom of most panels. I suspect other economists will be coming down if the data keep coming in as soft as they have. But fourth quarter is likely to be quite solid, assuming some rebuilding starts up and the government actually spends part of the money it has allocated to the recovery process. Meanwhile, the Fed will also be entering the equation as it will be reducing its balance sheet a touch. It is never easy to forecast any given quarter’s growth and when Mother Nature and the government combine to create chaos, it is almost impossible. So, the third and fourth quarter growth numbers should be viewed as aberrations. Whether investors get that is a different story as there is still hope that taxes will be cut (hope for reform is fading) and that alone is viewed as positive for stocks. But the rubber still has to meet the road and the politicians remain unwilling to actually work on a plan that both sides of the aisle can structure and support. That means the risk of another health care debacle is real if the Republicans overreach again and fail to get Democrats to buy in to their tax proposal.

September 19-20 2017 FOMC Meeting

In a Nutshell: “In October, the Committee will initiate the balance sheet normalization program.”

Decision: Fed funds rate maintained at 1.00% to 1.25%: Balance sheet normalization begun.

The great experiment of quantitative easing is over. The Fed calls the act of reducing its ownership of assets “balance sheet normalization” and it is to begin in October. This is important and we need to view the normalization of both the funds rate and the balance sheet as a dual process. The Fed considers quantitative easing to be a tool that ranks only just behind interest rate (fed funds rate) management.

The process of raising the funds rate to its normal level, which today’s report indicates to be roughly 2.75%, started in December 2015. Eleven of the sixteen members expect another hike in December and at least three more next year. The funds rate normalization process is proceeding at a reasonable rate and should continue to do so, barring a major economic problem.

The second tool, quantitative easing/tightening, had yet to begin before this meeting. Before the financial crisis, the Fed’s balance sheet was below $1 trillion. Now, it is about $4.5 trillion. When interest rates approached zero, the Fed turned to asset purchases to increase liquidity in the system and keep the whole range of interest rates low. This was supposed to add to growth.

The consensus is that the Fed needs to shed somewhere in the range of $2 trillion to get to a “normal” balance sheet. The process, as outlined in June, is for this reduction to begin slowly so the Fed will start rolling off only $10 billion per month starting in October. That will slowly ratchet up to at maximum of $50 billion per month by the end of next year. But the process has a long way to go and it needed to get under way. Balance sheet reduction is expected to continue unabated, barring an economic crisis.

So, why is the Fed normalizing the levels of its tools? Inflation is still below its target and while the economy is near full employment, there may be room to for the rate to decline further. The answer is simple. The Fed’s quiver is largely empty. If the economy falters, does anyone believe The Fed can really add another few trillion dollars to its balance sheet? As for the funds rate, would a reduction of only one percentage point provide much policy impact?

The Fed needs to positions itself so it can provide all the stimulus needed if the economy falters. That is their thinking now and it is why they have begun to reduce their balance sheet and raise rates. The members will move as quickly as reasonable, though the process could take over two years for the funds rate and as much as five or six years for the balance sheet.

(The next FOMC meeting is October 31-November 1, 2017.)

August Import and Export Prices and Housing Starts and Permits


KEY DATA: Imports: +0.6%; Nonfuel: +0.3%; Exports: +0.6%; Less Fuel and Food: +0.1%/ Starts: -0.8%; 1-Family: +1.6%; Permits: +5.7%; 1-Family: -1.5%


IN A NUTSHELL: “With the housing sector entering a period of hurricane-induced uncertainty and inflation pressures building only slowly, the Fed’s decision tomorrow will not be made easily.”


WHAT IT MEANS: The Fed has started its two-day meeting and the data they are looking at couldn’t be less clear. Take today’s numbers. Import prices jumped in August, led by a surge in petroleum and petroleum-related goods costs. It also looks like food expenses are picking up. But excluding those two volatile components, there really were not a lot of cost issues coming from the import side. Consumer goods, vehicles and capital goods prices increased a touch, but over the year every one of those three categories were up less than 0.5%. That is hardly anything for the Fed to fear.   In contrast, U.S. firms are beginning to push through somewhat higher price increases for the goods they sell overseas. A wide variety of non-food or fuel prices were up decently in August.


Meanwhile, the housing market continues to post strange numbers. In August, housing starts fell, but only for multi-family dwellings. Single-family construction improved. Did Harvey have a hand in the overall decline? Hard to say since single-family starts rose in the South, even as multi-family activity dropped sharply. The Northeast was the weakest link and I don’t remember us getting hit by any major storm. And then there were the permit requests. While they were up, it is the levels that are odd. Over the past three months, permit requests have run about 6% above starts, implying that that construction should surge in the months ahead. That is especially true for single-family units. But starts have outpaced permits by 33% for multi-family structures and that points to a major slowdown in that sector. And when you add in the uncertainty from the hurricanes, who knows what the housing data will look like in the months ahead?  


MARKETS AND FED POLICY IMPLICATIONS: The summary of the data going into the FOMC meeting was that growth in the third quarter looked like it was moving back toward trend before the storms hit. Now, it is likely to come in below 2%. But all those vehicles, homes, businesses and infrastructure have to be rebuilt, demolished, repaired or whatever, and that means an awful lot of spending will have to occur over the next six to twelve months – at a minimum. With labor shortages already an issue in the construction sector, much of the rebuilding will have to wait, possibly for years. If you can do anything in construction, there will be a job waiting, and at a very good salary. But that means inflation could pick up, especially for building supplies and used vehicles. I believe that Fed will indicate, in both the statement and during Chair Yellen’s press conference, that they will monitor the data, but will be moving forward with the interest rate and balance sheet normalization process. The only issue is timing. I expect a specific start-data for balance sheet reduction will be communicated, if not at tomorrow’s meeting, then after the October 31/November 1 meeting and a rate hike to occur before year’s end.

August Retail Sales and Industrial Production

KEY DATA: Sales: -0.2%; Less Vehicles: +0.2%/ IP: -0.9%; Manufacturing: -0.3%

IN A NUTSHELL: “The early returns from Harvey are trickling in and the news is not good.”

WHAT IT MEANS: It looks like Harvey was not invisible, not a buddy and clearly not a cuddly bunny (anybody remember the movie?). It was, however, an economy wrecker – at least initially. Retail sales fell in August, largely due to a sharp drop in vehicle sales. Large parts of Texas and segments of Louisiana shut down and demand dropped, which should surprise no one. Vehicle sales this month will probably be bad as well, since Florida is shut down and much of the insurance payments, when they do arrive, will likely go to used vehicles. But there should be a rebound in October. Excluding vehicles, sales weren’t anything special, especially when you consider that the biggest winners were gasoline dealers, which were charging a lot more. Households spent money on food, both in restaurants and at supermarkets, while furniture stores saw things pick up. Despite the hurricane, sales at home improvement stores fell. I have no idea why that happened.

Not only did consumer spending slow in August, but industrial production cratered as well. Of course, utilities going offline does have a tendency to depress output. But even manufacturing activity hit the skids. Yes, the expected suspects, chemical and energy firms, were down, but there were a variety of other sectors that posted production cut backs. Still, the hurricane impacted industries are already turning around, though the lack of utilities in Florida will make it anyone’s guess what the September industrial production report will look like. As a counterpoint, the Empire State Manufacturing Index, produced by the New York Fed, was up sharply in August and held onto most of the gain in September. That gives some insight into how much the hurricanes changed the direction of the data, at least in the short run.

MARKETS AND FED POLICY IMPLICATIONS: The economic data are being distorted by the hurricanes and the first signs of how much the monthly numbers may be affected were seen in the August data. It looks like it is a lot. All I can do is report the data and suggest how they will likely change in the months ahead. Judgments on whether the longer-term trend in growth has been altered cannot be made until we see how quickly the recovery takes hold, how much money is poured into the affected states and the timing of the spending.   What can be said is that most economists are likely marking down third quarter growth and marking up the fourth quarter. I would not be surprised if the third quarter comes in below 2%. As for investors, they seem to be looking past the economy. They want nothing to rain on their parade.