Behind the Headlines September, 2006

Article Excerpt

The U.S. economy has slowed since the start of this year. Gasoline prices hit new highs in early August. And the once-soaring U.S. housing sector has cooled. A number of factors this year have contributed to the slowdowns. Interest rate hikes increased borrowing costs for consumers, and dampened housing markets. As well, rising energy and gasoline costs have left consumers with less money to spend. All this raises fears of a recession, or two consecutive quarters of negative economic growth. It will take significant bad news for U.S. growth to turn negative. If housing prices were to crash, if geopolitical events sent oil prices soaring, or if China pulled its money out of U.S. dollars, then the U.S. economy might move into recession. However, none of these events seems likely. Interest rates and inflation are holding steady, oil and gasoline prices are moderating, and the economy absorbs unexpected events like terror attacks these days more like natural disasters. As we mentioned last month, U.S. growth…

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