services that need to be standardized. there appear to be important tradeoffs among the convenience, confidence, and complexity variables that shape choices about electronic as well as other transactions. greater convenience in transacting through open data communication networks, for example, may increase security and privacy risks and reduce user confidence. greater complexity, in turn, may reduce the convenience of transacting electronically through data networks. one fundamental point, however, is that ongoing changes in technology are improving the terms of these tradeoffs, sometimes in several dimensions at the same time. for example, traditional constraints on the timing and location of economic transactions are being relaxed simultaneously and rapidly in a number of markets, leading to large potential gains in convenience. through the use of the internet and automated business systems, many markets can now be open twenty - four hours per day at very low marginal costs. transactions can take place at much more convenient times tailored to the specific needs of individuals and businesses, with either immediate delivery of services in some cases or with later delivery in others. new technologies are also reducing the need for buyers and sellers to meet at one location as well as the need for computers and telephones to be tied to traditional wire networks. the result is that even some traditional retail markets increasingly seem ubiquitous and global. in addition, as convenience factors such as time and location are changing, significant efforts are being made to strengthen confidence in electronic transactions. various encryption systems have been deployed. developments in public key infrastructure are being closely followed. considerable attention continues to be paid to strengthening the law governing electronic transactions. and privacy has reemerged as a crucial commercial and legal issue. electronic banking electronic commerce involving banks is subject to the same forces as those affecting many other industries. new communications channels and devices, coupled with automated systems, allow a bank and its customers to transact an expanding range of business at virtually any time. according to recent statistics, nearly 40 % of all us banks now provide some form of web site through which they can communicate with customers, and nearly 15 % provide web sites that can be used to conduct banking transactions. these numbers are growing rapidly. of the banks with more than $ 500 million in assets, nearly 50 % now provide web sites that can be used to conduct transactions. in parallel with the development of new transaction systems, there is an ongoing trend toward standardizing and automating banking products, including loan products, which traditionally required special attention and approvals along with thick files of documents. as in other industries

though equity prices are down this year, continued job growth, lower gas prices, rising house prices and some loosening in consumer credit look likely to support consumer spending over the second half of the year. moreover, domestic investment also looks to be increasing at a moderate pace despite the drag from the energy sector. new orders and shipments of nondefense capital goods have turned up recently, pointing to positive equipment investment going forward, and investment in nonresidential buildings looks to have risen noticeably in the middle of the year. while investment in energy - related structures will likely move lower over the second half of the year in response to the most recent step - down in oil prices, the decline should be smaller than the sharp decline in the first half. importantly, recent data suggest that the gradual recovery in housing continues. singlefamily building permits were close to an annual rate of 700, 000 units in august, up nearly 5 percent from the fourth quarter of last year. the improvement in single - family housing is welcome after having been somewhat slow to materialize. even so, current levels remain below what would be suggested by fundamentals, such as population growth. while private consumption and investment thus appear to be on reassuringly solid trajectories, growth in government expenditures on goods and services is likely to remain tepid. combined purchases at the federal, state, and local levels rose at an annual rate of only 1 – 1 / 4 percent in the first half of the year, and modest growth in revenue at the state and local level suggest continued limited gains going forward. in addition, spending restrictions in the budget control act and the winding down of defense spending related to afghanistan and iraq have led to restraint at the federal level, although there is some uncertainty on the federal budget outlook. in contrast to the considerable progress in the labor market, progress on the second leg of our dual mandate has been elusive. to be clear, i do not view the improvement in the labor market as a sufficient statistic for judging the outlook for inflation. a variety of econometric estimates would suggest that the classic phillips curve influence of resource utilization on inflation is, at best, very weak at the moment. the fact that wages have not accelerated is significant, but more so as an indicator that labor market slack is still present and that workers ’ bargaining power likely remains weak. overall inflation has been subdued, running persistently below our 2 percent target. the personal consumption expenditures ( pce ) price index increased only 0