IT HAS BEEN skillfully re-engineered, all the new parts are in place, and it is now on the launching pad. All it needs for a blazing lift-off is some cheaper fuel. Such is the state of the U.S. economy. The tax cut is about to put billions into the hands of consumers. Homeowners continue to augment their purchasing power by swapping higher-interest for lower-interest mortgages. Four of the twelve Federal Reserve districts report improving conditions, and none say their economies are deteriorating. The weaker dollar has given exporters a renewed lease of life. Profits and share prices are showing some strength. Despite some remaining signs of weakness, the general mood is far less gloomy than it has been.
But there may be a spanner in the works: oil prices remain stubbornly high. Lower prices of this key commodity would help put the economy back into high orbit, improving the jobs market and laying to rest fears of deflation. But prices seem headed in the opposite direction, with U.S. crude in the $32 range–well above what experts were predicting when the Iraqi war was won and Iraq’s oil fields were found intact.
