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A report from the Commerce Department shows before the tightening of credit, the US economy had been much strong in July.

Sales of new homes in July rose by 2.8 percent, that came after a 4 percent decline in June. Even with the surprise strength, sales are still down 10.2 percent from last year.

Factory orders were also very strong, as they increased by 5.9 percent, the largest growth in almost a year. That was extraordinary as there was only an expected 1 percent growth in orders by analysts.

Much of the strength in manufacturing stems from airplanes, automobiles, machinery, metal products and communications equipment. At the same time there was weakness in electronics and computers.

For the most part what all this means is things in the economy were pretty strong before the reality of the credit crunch.

The one consolation in all this is the concerns that businesses were slowing down their spending before the credit problems wasn't true, although that could be a problem in the months ahead.

"The recent squeeze on business credit could damp investment plans in the months ahead. That said, the data will help allay fears that business spending was slowing even before credit got tighter," said Sal Guatieri, economist at BMO Capital Markets Economics.

If that happens, there will be increasing pressure on the FED to lower interest rates which have stood at 5.25 percent for over a year. FED chairman Bernanke is hoping he won't have to do that at the next funds rate meeting scheduled for September 18, as he's set an anti-inflation tone for his tenure that he is battling to keep in place.