Vital Signs: Softer Forecasts for Fourth-Quarter Growth

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ISM SURVEY - Thursday, March 1, 10 a.m. EST

The Institute for Supply Management's February factory activity index is forecast to be 50%. That's the median estimate among economists queried by Action Economics. Officially, the 50% level is considered the inflection point between expanding and contracting factory activity, although a level closer to 48% has historically been associated with industrial production declining on a yearly basis. The January reading was 49.3%, the smallest result since April of 2003, and down from 51.4% in December.

The production, new orders, and, unfilled orders indexes all retreated in January. What's more, the inventories reading plunged to 39.9%, indicating a large scale inventory drawdown among manufacturers. The inventory related indexes will garner extra attention in the next couple reports. It appears the manufacturing sector is in the process of an inventory adjustment, as production kept running at a brisk pace while demand softened in the second half of last year. The inventory adjustment is bigger in autos and housing related areas. Once inventory levels are back to comfortable levels relative to demand, production should bounce back.

CONSTRUCTION SPENDING - Thursday, March 1, 10 a.m. EST

Construction outlays probably held steady in January. Spending dropped 0.4%, following a small 0.1% gain in November. However, construction spending plunged 0.8% in both October and September. From a year ago, total outlays are off 1.4%.

The weakness is centered squarely in the residential housing sector. Private residential construction outlays have fallen 1% or more in each of the past nine months. Compared to a year ago, residential spending is off 12.5%. Growth in non-residential construction picked up again.

In December, expenditures rose 0.9%, after a 1.4% jump in November. In the previous two months, spending fell by 1% and 0.5%, respectively. Government construction spending has also held up well, up 0.6% in December, after a 2.2% surge in November. The strength in government and private-nonresidential construction has offset a majority of the decline in housing. And during 2007, economists expect the drag from housing to dissipate.

MEETING OF NOTE - Friday, March 2, 7 a.m. EST

Federal Reserve Bank of St. Louis President William Poole speaks about energy prices in Santiago, Chile.

9:45 p.m. EST - Federal Reserve Board Chairman Ben Bernanke delivers the keynote address at an economic summit held by the Stanford Institute for Economic Policy Research in Palo Alto, Calif.

CONSUMER SENTIMENT INDEX - Friday, March 2, 10 a.m. EST

The University of Michigan and Reuters will report the final reading of consumer sentiment for February. The consensus view is that it will likely change very little from the preliminary result. In the preliminary February release, the index fell to 93.3, from 96.9 in January. But this was still slightly better than readings in December and November.

The initial February decline was distributed fairly evenly across the current economic conditions and consumer expectations indexes. Consumers felt less upbeat about their personal finances and the economic outlook for the year.

Mehring is economics writer for BusinessWeek .