The U.S. and global economies are sending more negative signals about the future today than at any time since the U.S. business cycle upturn began almost ten years ago. The basic economic numbers, however, are not giving a clear indication as to which way this economy is going to go. Retail sales are weak. Manufacturing is in a recession. The stock market is in the pits and probably going to decline further.
Consumer confidence is way down.
On the other hand, existing home sales continue to rise, the leading index rose in January after declining the previous three months, and people's actual reports on their economic situation have not deteriorated. But the fundamental fact of the economy is a shift in sentiment that is so strongly negative that it is hard to imagine a new burst in consumer and investment spending. And you can forget about the accuracy of economic forecasters. Most soft-landing scenarios rest on the assumption that Alan Greenspan has everything under control and a few interest rate cuts will tweak the economy sufficiently to restart growth. It is certainly the case that his knowing hand on the money spigot will be tested this time around.