... the flexibility of our market-driven economy has allowed us, thus far, to weather reasonably well the steep rise in spot and futures prices for crude oil and natural gas that we have experienced over the past two years,

Manufacturing capacity is not a rigid level against which one bounces. When you are dealing with a world economy, with a flexibility to employ production facilities other than one's own, then the concept of capacity is vaguer.

Technology and the Economy.

There have been signs recently that some of the forces that have been restraining the economy over the past year are starting to diminish and that activity is beginning to firm,

The more flexible an economy, the greater its ability to self-correct in response to inevitable, often unanticipated, disturbances and thus to contain the size and consequences of cyclical imbalances.

It is much too soon to conclude that these concerns are behind us, ... We cannot yet be sure that the slower expansion of domestic final demand, at a pace more in line with potential supply, will persist.