Two major economic reports were released earlier today that confirm what I've been telling our readers over the past couple of months — economic growth in the U.S. will likely slow considerably over the coming months, and stock prices have likely reached their peak in the current business cycle.

The first report, from the Institute of Supply Management (ISM") — who produces the Purchasing Managers' Index — revealed that the manufacturing sector grew during August at the slowest pace in the past five months. Although this leading economic and stock market indicator rebounded during the first half of 2007, in response to extremely low inventories of manufacturing goods, it's been trending lower since May 2005.

The Purchasing Managers' Index tends to reach a high approximately one-and-a-half years in advance of economic recessions and approximately a year in advance of stop market tops. Hence, the significant slowdown in manufacturers' purchases of raw materials and industrial supplies suggests an economic recession may be just around the corner and that stock prices will trend lower over the coming months.

Shortly after the ISM report was released, the U.S. Department of Commerce reported that construction spending fell 0.4 percent during July, versus the previous month, and 2.0 percent versus the same period a year ago; residential construction declined at a year-over-year rate of 15.6 percent.

Meanwhile, sales on big-ticket consumer durables, such as automobiles, home appliances and consumer electronic equipment seem poised for further declines over the coming months. Auto sales have already declined during each of the past seven months — the longest streak of declines in 31 years. Just this morning, Ford announced that its sales fell 14 percent during August.

Several well-respected economists are now starting to agree with my forecasts of an impending economic recession. For example, Lawrence Summers, a former Secretary of the U.S. Treasury, and Martin Feldstein, the president of the National Bureau of Economic Research, said that the chances of a recession have increased significantly.

So, I repeat what I've said in several of my recent commentaries - you can listen to the Wall Street "experts" and buy stocks now at supposedly "cheap" prices, or you can ignore these "experts" and focus on the facts. And the facts clearly indicate that the U.S. economy will continue to slow and that stock prices have probably reached their peak in the current business cycle.

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