Economy Still Healthy But Rate of Growth Starting to Slow

摘要

The U.S. economy is growing and more gains are expected through the first half of 2005 for most markets. Plan on additional business activity over the next two to three quarters but understand that the rate of growth is likely to be diminishing as we head through the year. The first half of 2005 is expected to be better than the second half of the year. There are already empirical indications regarding the virtue of being cautious when budgeting for 2005, especially the second half. Clear empirical evidence in the leading indicators is foreshadowing the coming slowdown in the U.S. economy. The first glimpse came with the shift in Corporate Bond Prices in mid-2003. Now, we have supporting evidence from the ITR Leading Indicator, Housing Starts, the Purchasing Managers Index, and the U.S. Leading Indicator. There has also been a discernible deceleration in the trend for Retail Sales. Individually these changes may not be especially significant, However, taken together, a picture is taking shape as the U.S. economy slows in its rate of growth, moving towards a soft landing, as opposed to a recession, in the second half of 2005 and the first half of 2006. Expect gradually rising interest rates and ongoing lofty prices for oil, natural gas and other energy commodities. There will likely be some mitigated price relief in metals during 2005.