Here Comes The U.S. Slowdown... How Bad, And How Long? -- presented by Ian C. Shepherdson

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By the way, does anything other than trouble
rhyme with bubble?
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Here Comes The U.S. SlowdownHow Bad, And How
Long?

• Ian C. Shepherdson
• Chief U.S. Economist, High Frequency Economics

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The Root Of The Problem
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Soaring Sales Have Driven Prices Up
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Soaring Prices Encourage Equity Extraction
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And Equity Extraction Boosts Spending
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Meanwhile, Construction Has Boomed Too
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But Homebuilders Became Greedy
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Now, Soaring Inventory Is Depressing Prices
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As Prices Slow, Real Mortgage Rates Rise
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And As Real Rates Rise, Home Sales Fall
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Put It Another Way Homes Are Expensive
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Plunging Home Sales Will Hurt Retailers
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Soaring Gas Prices Also Hurt Consumers
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Lower Confidence Implies Slower Spending
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Retailers Are Already Shedding Labor
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Broad Payroll Growth Is Slowing Too
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With More To Come
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Meanwhile, Manufacturing Is Doing Well
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But It Wont Last, As Higher Rates Bite
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The Manufacturing ISM Will Drop Next Year
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Expect A Sustained, Broad Slowdown
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In The Meantime, The Labor Market Is Tight
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Faster Wage Gains Are Pushing Up Costs
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Slower Growth, Rising Costs Hurt Earnings
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Core Inflation Has Clearly Picked Up
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Rents Aside, Not Much Is Happening
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The Fed Cant Stop Rents Rising
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The Lower Dollar Is No Inflation Threat
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The Good News The Trade Deficit Will Fall
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The Bad News
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Summary

• Growth will slow further housing first,
  then industry
• The Fed is done, easing starts late 06/Q1 07
• Rising labor costs threaten earnings more
  than inflation
• Treasury yields are set to trend lower
  stocks are in trouble