As we enter the fourth quarter, little in the way of hard economic data or anecdotal information suggests any sharp shift in the pace of economic activity. If that is so, the economy could be in the process of registering several consecutive quarters of growth below its potential rate, the first time it has done so since early 2003.
After three years of growth above potential, some slowing was inevitable and desirable. Trees do not grow to the sky, and neither do the stocks of houses and durable goods held by households and businesses. In addition, the run-up in energy prices sapped consumers' purchasing power and cut into firms' profit margins.