Economic growth remained solid, and financial markets, after freezing up temporarily following the Russian default, are again channeling an ample flow of capital to businesses and households. Labor markets have remained quite tight, but, to date, this has failed to ignite the inflationary pressures that many had feared.
To be sure, there is decided softness in a number of manufacturing industries as weakness in many foreign economies has reduced demand for US exports and intensified competition from imports. Moreover, underutilized production capacity and pressure on domestic profit margins, especially among manufacturers, are likely to rein in the rapid growth of new capital investment.