The big news of the week was an especially strong productivity gain in the third quarter. But that tells one more about where the economy was, rather than where it is headed. Productivity and growth are unlikely to be as strong in the fourth quarter as in the third. The other big news of the week was the price of a barrel of crude oil hovering uncomfortably close to $100. Could energy prices push housing problems off the front pages of the business section? That could be in store for the post-holiday period.

Wednesday, November 14, 2007

8:30 AM Advance Retail Sales (Bureau of the Census)

Non-auto sales were relatively strong in September. The October count probably wasn't as strong. In fact, the data could show that income rose faster than spending in October. And that pattern may persist through the holiday period.

Wednesday, November 14, 2007

8:30 AM Producer Price Indexes (Bureau of Labor Statistics)

The "core" wholesale inflation rate has been running at about 0.2 percent per month. But oil isn't the only commodity to see prices start to rise. If material cost increases pick up, even as wage cost increases remain high, the inflation rate could soon start to pick up. Can the Federal Reserve lower interest rates further if inflation is poised to edge higher?

Thursday, November 15, 2007

8:30 AM Consumer Price Indexes (Bureau of Labor Statistics)

Retail inflation has been running at about 0.2 percent per month. But with some spillover from higher energy prices, it could begin to rise by 0.3 percent per month. October might be too early to see that, but that is what is coming, and soon.

Friday, November 16, 2007

9:15 AM Industrial Production and Capacity Utilization (Federal Reserve Board)

Industrial output won't be as strong in the fourth quarter as in the third, unless auto sales pick up. Sales have been slow for much of the past year, so a pick-up isn't likely. Therefore, after a nearly 4 percent rise in the third quarter (annualized), industrial production is likely to be no more than 3 percent this quarter.

BY THE END OF THE WEEK

The domestic economy could be facing a combination of slower growth and a little higher inflation to start the new year. And that isn't the most important development that could be on the way. Economic growth in Europe could be cooling off, as indicated by the latest readings on their Leading Economic Indicators, and is consistent with the latest IMF forecast. That could limit the ongoing export boom, the major strength of the domestic economy right now. And this is one more reason why the domestic economy is slowing now and could remain stuck in slow gear in the first half of 2008.