Ian Shepherdson Percent Quotations

With unemployment set to breach 6 percent over the next few months, people's view of the current economy is bound to deteriorate, ... But expectations are what matter for spending, and at this level the numbers suggest consumers spending will rise, albeit not rapidly.

Ignore the ISM at your peril, ... Assuming this report is not a fluke - everything we look at suggests it is very real - it is consistent with year-over-year GDP growth accelerating to 4 percent by the summer.

It is just too soon to be sure that the second-quarter slowdown will be sustained, ... The level of consumer confidence is still consistent with 5 percent spending growth.

The data suggest real consumers' spending rose marginally last month -- but we still expect only a 1.5 percent annualized increase in the fourth quarter,

The data confirm that the labor market is still not generating the sort of cost pressures many analysts expected with 4 percent unemployment.

Core exports are trending up at about 10 percent year over year, not enough to prevent a widening of the deficit.

After the attack on Pearl Harbor, the New York stock market fell 5 percent over two days. As the United States mobilized and expressed its resolve in the ensuing days, the stock market came back.

This is a surprise but it cannot last. We think the other elements of the report give a better indication of the strength of the market, with supply of single-family homes up to 5.3 months, compared to just 4.0 a year ago. Price gains have slowed to 7.8 percent year-on-year, down from 10.4 percent in Feb and a 19-month low. Much lower sales will follow.

This jump in inventories will marginally lift second quarter GDP growth expectations. We look for growth of between 2.5 percent and 3 percent, with inventories adding some 0.75 percent.

A strong U.S. corporate recovery is brewing right now -- this survey implies 4 percent gross domestic product growth,

It now seems appropriate to start thinking about a fed funds rate as low as 4 percent by the summer.

If real spending rises at this pace in February and March, consumer spending will rise just 2.3 percent for the quarter, the softest since Q2 1997,

If claims remain at their current level, we could expect the unemployment rate to be down to 4 percent or so by mid-summer.

The key number in this report, in our view, is the rise in the supply of homes for sale. There are now 14.4 percent more homes for sale than a year ago, while actual sales are up just 3.3 percent. With mortgage demand slipping a bit and supply rising, price gains cannot continue at their current pace.

The headline reflects a 3.2 percent rise in gasoline prices. Natural gas and electricity prices were also much stronger than the PPI suggested. The good news is the 0.1 percent core, which supports the Fed's view that transitory factors have boosted inflation in recent months.

The gains were uneven, however, with small declines in clothing and electronics, a decent 0.7 percent rise for general merchandise and a huge leap for non-store retailers. Provided January holds up -- surveys suggest so far, so good -- the overall holiday season will have been pretty good.