Three developments headlined the past week. There was a big drop in consumer expectations. Coming off news about inflationary pressures not backing off, the domestic economy seems to be edging closer to falling into a recession. This was reflected in the PPI and CPI data. So did the "core" PCE deflator (which excludes food and energy).

This measure rose by 0.3 percent in January, after a 0.2 percent rise in December. It's clear that a nearly 2.5 percent annualized inflation rate could head higher in the first half of 2008, despite weak economic growth. Second, energy prices are rising, just as the annual spring run up in gasoline prices gets underway. Four dollars a gallon could be a reality in at least some parts of the country. Third, it's not just the domestic economy suffering from rising prices and slower growth. The degree of slowdown is not as steep in Euro land, but it's present and it's depressing consumer and business confidence on that side of the Atlantic Ocean.

The U.S. economy is anything but robust. Construction has been mired in a slump for more than a year. Manufacturing has not been as weak for as long. Retail activity, with expectations falling and income growth weak, could be next. It also matters where the economy is weak. The Northeast and Midwest have been the weakest regions until now. The big change appears to be in the South, as economic activity slows there. That possibly is tipping the overall economy closer to recession.

Meanwhile, the weak dollar continues to lose ground, especially to the euro. Rising energy prices, continued financial market turmoil, and unease in credit markets are combining to slow the global economy. There isn't much positive news, domestically or internationally. Spring is coming. Better economic conditions will take longer to develop.