Non-manufacturing NAPM fell for the sixth month in a row, hitting an all time low. New orders, production and employment are comfortably below the 50 level. However, as a percent of the total labor force, initial claims are still a far cry from what they were during the last recession. So, the most recent labor market reports have not changed our view of a continued slight deterioration in the labor market. The longer the economy remains distressed, the higher the pressure on CEO's to restore profitability.
Demand remains too weak for current levels of production.
We also continue to watch energy prices and especially the USD for further clues about increasing inflationary pressures. Later this year, tax cuts will have a positive impact on consumer spending. However, we continue to expect the savings rate to continue to drift up slightly over the coming months. So, we're sticking to our call for consumption growth to rise at slightly below real income growth for the foreseeable future. Stronger growth has to come from investment.