The biggest political show in Washington right now is Showdown! The Debt Ceiling Standoff. As promised, Republicans who now control the House of Representatives have refused to raise the federal borrowing limit, which the Treasury Dept. hit on January 19. For the next four months or so, the Treasury will move money around in order to pay Uncle Sam’s bills. By late spring, that will stop working and Congress will either raise the borrowing limit or force the government to default.

But the economic story, for the time being, is a tangible slowdown in activity, which is exactly what the Federal Reserve is trying to accomplish through aggressive interest rate hikes. Signs of a slowdown are now popping up all over. Retail sales in December turned out to be surprisingly weak, falling by 1.1%. “Consumers starting to buckle under higher rates,” Capital Economics declared.

Industrial production also dropped by more than expected in December. Manufacturing output has now fallen to recessionary levels. Permits to build new houses also fell, suggesting a weak start in housing construction in 2023.

Awesome!

A slowing economy isn’t normally cause for celebration. But these days, it might be. The Fed wants to depress demand so that fewer people buying stuff helps lower inflation. All this slowdown data tells us it’s starting to happen. As an exclamation point to the week’s data, wholesale prices fell 0.5% from November to December, once again coming in below forecasts.