Thursday, September 23, 2004

Hmm, that "soft patch" out there in the yard seems to be spreading. Thankfully the gardener tells me not to worry, we just don't get moles around these parts . . .
A closely watched index of future economic activity fell 0.3 percent in August, the third consecutive monthly decline, the Conference Board said.

The research firm's index of leading economic indicators, forecasting activity in the coming months, dipped to 115.7, a reading weaker than expected on Wall Street.

"The leading indicators continue to soften," said Conference Board economist Ken Goldstein. "There is concern about weak consumption and the pace of wage and salary increases."

Both consumers and businesses are showing caution, the economist said.

"Consumers worry about their wages and salaries, which could limit spending," said Goldstein. "Businesses worry about their ability to raise prices and to cover rising costs."
The main reasons the leading indicator fell again were bad news on the interest rate spread and building permits. The interest rate spread between the 10-year and the federal funds rate was down to 2.85% in August; it was 3.70% in June. Building permits also fell markedly, by 5.5%.

The leading index had been on a steady incline for about a year before these three declines in a row. And lo and behold! the US economy grew pretty well from 2003:I to 2004:I, and then -- the "soft patch".

If your soft patch is indeed the first sign of mole tunnels, tamping them down and throwing on some aggregate isn't going to help matters. Neither is wishing them away. I'm pretty sure the tooth fairy doesn't do exterminations.


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