The minutes of the Federal Reserve meeting of November 3rd and 4th were released yesterday. The clear message of the minutes is that short-term rates are going to stay very low for a long time to come.? Below is the summary of the participants' view of the economy, and my translation/commentary/analysis of it interspersed.

"In the meeting participants' discussion of the economic situation and outlook, they agreed that the incoming data and information received from business contacts suggested that economic activity was picking up as anticipated, with output continuing to expand in the fourth quarter."

I agree that we will see positive economic growth in the fourth quarter -- perhaps not very robust growth, but it will be comfortably on the right side of zero.

"A number of factors were expected to support near-term growth: Business inventories were being brought into better alignment with sales, and the pace of inventory runoff was slowing; activity in the housing sector appeared to be turning up, and house prices seemed to be leveling out or beginning to rise by some measures; consumer spending appeared to be rising even apart from the effects of fiscal incentives to purchase autos; the outlook for growth abroad had improved since earlier in the year, auguring well for U.S. exports; and U.S. and global financial market conditions, while roughly unchanged over the intermeeting period, were substantially better than earlier in the year."

Changes in inventories were a substantial drag on growth in the fourth quarter of last year through the second quarter, but that started to turn around in the third quarter. In fact, except for the drawdown in inventories, economic growth would have been a positive 0.7% in the second quarter, rather than the negative 0.7% we saw.?In the third quarter, rebuilding of inventories added 0.87 points of the 2.80 total growth. In other words, if inventories had remained unchanged, growth would have been less than 2.0%.

As for consumer spending, the rebound has been muted outside of autos, although it is up rather than down. Over the long term I'm not sure that's such a good thing, but for the time being we need the consumer to wake up.

The U.S. is not going to be leading the world out of this downturn, China is. However, economic growth is not a zero-sum game, and if places like China are growing, that is good for the U.S. economy.?Even though the dollar has not changed relative to the Yuan, the falling dollar will still help our exports, since we are often competing against the Europeans and the Japanese when we sell into places like China.?A week dollar makes Boeing (BA) more competitive versus Airbus, and General Electric (GE) well positioned relative to Siemens (SI).

"Above-trend output growth in the third quarter was a welcome development. Moreover, the upturn in real GDP appeared to reflect stronger final demand and not just a slower pace of inventory decumulation.