We still expect economic activity to slow over the next several quarters as consumer spending slows further and housing declines more because of higher interest rates and energy costs. The absence of inflation will be welcomed at the Federal Reserve.

These data suggest that a bottoming in economic activity is taking place, but that a bit more inventory adjustment is needed to insure a re-acceleration in growth.

The deterioration in economic activity would argue for a more aggressive move, but the Fed has rarely moved by more than (half a point) during Greenspan's tenure,

Worries of a housing-led consumer spending bust are overblown.

The sharp slowing in domestic demand has dramatically reduced imports. Weakening economic activity in our major trading partners has significantly reduced the foreign demand for American-made products.

Although we expect consumer spending to slow sharply in the fourth quarter, to below 2 percent, as a result of lower auto sales, we expect that GDP will still edge back above 4 percent on an inventory rebound, higher business spending, and hurricane recovery spending.