The big news of the week was market's negative reaction to another quarter point cut in short-term interest rates. But the price data later in the week showed that the slower pace of economic activity is not resulting in less inflation pressure. Indeed, the price data showed more life in November than a month earlier. That should not have been a surprise. And it keeps the Federal Reserve from cutting further. But the Fed was quick, along with central banks elsewhere, to pump more money into financial markets in an effort to keep liquidity in credit markets from freezing up.

Tuesday, December 18

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

Home building was very slow in October but probably not much slower in November. Indeed, home building could remain at about its current low pace for the next few months, but unlikely to slow substantially further.

Thursday, December 20

8:30am Gross Domestic Product & Corporate Profits (3Q — 2007) (Bureau of Economic Analysis)

Trade and inventory data resulted in revising growth up to almost 5 percent, annualized in the third quarter. Additional revisions are likely to have been small. Meanwhile, the economy might not even be growing at half that pace now in the fourth quarter.

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

The Leading Economic Index has been soft all through 2007, signaling that growth would slow sharply. The Coincident Economic Index, which tells us where we are right now, softened in October. Did that continue in November?

Friday, December 21

8:30am Personal Income and Outlays (Bureau of Economic Analysis)

Two trends have been clear in the income and spending data. First and more important, consumer income growth remains moderate. It probably did not slow in November. Second, income has been rising faster than spending. Both trends probably continued in November and very likely will continue right through winter.

BY THE END OF THE WEEK

The US economy is slow and could slow further after the holidays. The housing slump, financial market turmoil, higher gas prices, higher food prices, and now the uptick in overall inflation have all contributed to weaken consumer and business expectations, and resulted in less spending and investment growth. Economic growth is better in Euro land, but growth is beginning to weaken a little there too. Also, Japan is losing some steam, as indicated in the latest Tankan survey. Altogether, the global economy heads into a new year with less momentum than was the case this time a year ago. There are questions about how high energy prices may go in 2008. And there remains continued concern, justifiably, about financial turmoil. Peace on earth indeed. But we could use a little prosperity to go along with it.