Joshua Shapiro Higher Quotations

We believe that consumer spending is going to bear the brunt of higher energy prices that we have seen leading up to and immediately following Hurricane Katrina as discretionary spending is curtailed.

We continue to expect the Fed funds target to reach 5 percent in the second quarter of next year, which is where we see the tightening process ending. Comments from Fed officials suggest that they expect only a temporary hit to growth from higher energy prices, while concern about a drift up in core inflation is increasing.

While we have seen an increase today versus a forecasted decline, housing starts are currently doing on a trend basis what many have forecasted: remaining on a high plateau, unable to move higher but not seeing demand fall off enough to take starts lower.

With anticipations of higher rates still clearly in the minds of buyers, we cannot rule out fence-sitters rushing ahead of higher rates.

The big question now is how much companies will be able to raise prices for finished products to offset the hit to profits from higher unit labor costs.

It's a wait and see. If we get another powerful storm that does damage to refining capacity in particular, I think all bets can be off if gasoline prices will go higher and stay there.

Economic growth in the autumn and winter is likely to be soft, ... and there is going to be heightened pressure on companies to try to pass through some of their higher costs into finished goods prices.

In general, consumers seem to be taking the view, at least initially, that higher energy costs will not disappear anytime soon and that they are likely to take a toll on the economy as a whole and on labor markets in particular.

An aggressive effort by business to pass through higher energy prices will probably largely fail as an increasingly strapped consumer proves resistant.