Going into the hurricane we had a shortage of refining capacity anyway. This just throws a hand grenade into the already delicate balance.
We may be seeing the unwinding of the boost from post-Katrina spending.
Not only are these numbers small compared to the economy, they don't reflect actual errors in reporting the sales of actual goods and services, ... WorldCom, for example, wasn't overstating the amount of phone service it provided.
The net effect on the economy is always positive. We have more consumers of energy than producers and the result is that the sector that benefits from low inflation and low interest rates comes out ahead.
It's the impact from Katrina, which in the first few weeks will be at a maximum, and it does increase our confidence that we will see a hit to the other sentiment indexes in September.
There has been a remarkable surge in spending and it will probably continue for another five or six months.
We will likely see payback in February for the outsized January surge. It is unlikely that the combined data for the two months alter the robust trajectory.
Producers tried to catch up with strong sales starting in June and July, but they can't keep up. Auto inventories took a big hit.
Consumers are always concerned about the economy but the key is whether they are predisposed to increasing caution when it comes to spending. I think today's report demonstrates that the hurricanes had an ambiguous affect on spending.
It's a slow week for releases, ... I think there's almost no chance the productivity revision or the wholesale inflation numbers will have much effect on the Fed's March policy decision.
