Cautionary behavior to prevent the spread of the Mexican swine flu has already set off net cuts in spending which will increase within days to at least a minor bump in the road even if the new flu does not reach pandemic stage. What we can expect is similar to what is now happening in Mexico City and what happened in Toronto in 2003 during the SARS outbreak. There is a substantial risk that temporary shut-downs of much of the public sector and consumer avoidance of public transit and crowded places could cut routine spending enough to spill over into the capital goods market, including construction, within a few weeks. If this happens it will take at least several months to reverse.

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