The price of a barrel of crude oil slipped below $100 before Hurricane Ike headed through the Gulf of Mexico. Hurricanes, natural and financial, have dominated the attention span of late. The problems of Fannie Mae and Freddie Mac were hardly off the front pages when concerns about Lehman reappeared. Financial markets are at a crossroads. If changes in Fannie and Freddie do not help narrow spreads in the credit markets, will anything else return credit spreads to something resembling normalcy?

Meanwhile, the latest reports show that employment fell again in August, and The Conference Board Employment Trends Index points to continued job losses, perhaps through year's end. But average hourly wages were still 3.6 percent higher in August than one year earlier. A sustained weak labor market is not delivering relief on labor costs. The latest numbers on wholesale prices show that prices for "core" goods (which exclude food and energy) are still rising 0.2 to 0.3 percent per month. Will business be able to pass costs along in this very soft economic environment? In short, the economic news hasn't been good for months. And it might not be good through the upcoming holiday period.

Monday, September 15

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

Demand is soft and business continues to reduce inventory (and carrying charges). Industrial production fell in August, probably by 0.2 to 0.3 percent. It will continue to decline this autumn.

Tuesday, September 16

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

Energy prices fell. Food prices are still rising. The "core" CPI (which excludes food and energy) has been rising at the 0.2 to 0.3 percent per month trend rate. That continued in August and will continue this autumn.

Wednesday, September 17

8:30am Housing Starts and Building Permits (Bureau of the Census)

Home building fell below 1 million units in March (annualized) and has remained close to that level ever since. In July, only about 965,000 new homes were built - not even half the pace before the market started to slow. Look for no more than 970,000 new starts in August, a pace that will continue through the winter. Home building is not slowing, but it is easily a year away from turning around and starting to recover. Home prices will take even longer to turn around.

Thursday, September 18

10:00am Composite Indexes of Leading, Coincident and Lagging Indicators (The Conference Board)

The Leading Economic Index was soft through the first half of 2008. The Coincident Economic Index, which tells us where we are right now, has been flat to declining over the past four months. What change, if any, was there in July?

BY THE END OF THE WEEK

The wild ride on oil prices is one of the dramatic changes in the past few weeks. It seems so long ago, February 1st actually, when the price of crude oil was $57.31/bbl. By early July, it had climbed to $145.66/bbl. But since then, it has fallen to just below $100/bbl. The most salient feature of this roller coaster is that even after that swift drop, the price right now is still almost double what it was back at the start of the year. No one knows what the price will be by February 2009. Even if the price then is not much different from today's price, it's clear that not only is driving around going to remain expensive, but utility bills this winter will be quite a shock. The bottom line to this story is that consumer spending, even with help on gasoline prices, will be strained by grocery and utility bills. And with strained consumption growth, total GDP growth is not likely to be much more robust this winter than it is now. And it is hardly robust.

This is no longer a domestic story. Perhaps, it never truly was. But Japan's GDP fell in the second quarter, though the expectation is for some modest recovery in the third quarter. Conversely, industrial production in the 15 countries of Euroland experienced a third straight monthly decline in industrial production. And few expect this to change over the next few months. Higher energy prices and panic in financial markets, especially credit markets, continue to exact a toll across the globe.