Its the Economy Stupid...Doesn't Economic Data Make You Feel Safe

What a day of economic news!

Consumer Price Index - up 0.2%
Core Consumer Price Index - up 0.2%
Industrial Capacity Utilization - 85.4%
Oil - under $63.00 a barrel
Natural Gas - under $5 per btu

What does it all mean, well, it means the consumer in America will be getting a break from high energy prices, but overall it means the consumer has slowed down and hidden his pocketbook. Finally the interest rates, oil prices, gas prices, and other high prices have put the breaks on the drunken spending of the consumer. The economy is slowing down, and this may mean an end to interest rate hikes, but it may mean that the housing sector which has been slowing may seem some very deep cuts in certain over valued markets.

However, there is optimism in the market that could push the Dow above 12,000. A slowing economy was desperately needed to calm the housing market, inflation, and rising commodity prices. The basic materials, industrial, and energy boom is being tempered, and hopefully the market will fall back into moderate growth and go into recession. We have a good head central banker who has tempered our economy and paused at the right time. Did he do too much, the verdict is still out.

Mainly, my personal opinion is the bloodbath for the consumer is just beginning. Business spending may go up, M&A will continue to grow, and the economy may progress, but the consumer is in for some problems in the housing market. My contention is that we haven't seen the hangover from Option ARM mortgages and the housing problem is still lurking. People are working, unemployment is down, business have money to spend (because they have been conservative), but anytime a mortgage jumps $500 per month in a span of four months is too much of a rise for most families to handle. Look for more foreclosures, and stay from consumer brands.

For some headlines on this economic news:

Inflation Pressures Moderate in August - AP

U.S. August Consumer Prices Rise at Half July's Pace - Bloomberg

Small businesses should be looking to secure sales to business customers. Those who sell to the consumer should hope that those consumers don't categorize those small business's products under discretionary spending. I feel that the word discretionary spending is tied to the equity in everyone's home and the home equity boom is drying up.