These inventory and production developments may reflect in part a slowing in the growth of business capital spending that has become evident in recent data on orders and shipments of equipment other than high-tech and transportation equipment.
In my view, however, what we are seeing in the recent information on factory output and capital spending is not the leading edge of general economic weakness but instead an adjustment to a sustained pace of expansion that, necessarily, is less rapid than that from mid-2003 to mid-2006.