Exhibitionist's Corner

[Francois+Goelo]

***¶***Weekly Economic Indicators & Second Guessing Grenspan....

WEEKLY UPDATE FOR: July 14, 2001 by Bob Bose

Prior Week in Review:

Financial Market Highlights:
============================

                        07/13/01     07/06/01     %Change 
  
 S&P 500                 1,215.68     1,190.59      +2.11% 
 Dow Jones              10,539.06    10,252.68      +2.79% 
 NASD Comp               2,084.79     2,004.16      +4.02% 
 Russell 2000              490.71       483.26      +1.54% 
 SOX Index                 593.93       566.51      +4.84% 
 Value Line                390.43       385.27      +1.34% 
 MS Growth                 530.56       530.66       -.02% 
 MS Cyclical               563.74       536.67      +5.04% 
 T - Bill                    3.52%        3.52%       UNCH 
 Long Bond                   5.63%        5.75%     -12 BP 
 Gold - Oz-Near Month     $267.60      $266.60      +$1.00 
 Silver - Oz-Near Month     $4.31        $4.27       +$.04

Economic News:
==============

Nothing Too Surprising Last Week - Lots Of Noise In The Data
Job Outlook Not As Grim As Claims Data - No Price Pressures
Soft Landing And Second Half Recovery Still Best Bet


*May Consumer Credit rose $6.5 billion - +4.9% rate

*Wholesale Inventories rose +.2% in May - Sales fell -.1%

*Richmond FRB Shipments index unchanged in June at -20

*Jobless Claims rose +42,000 to 445,000 - Four Week
Moving Average rose +2,500 to 410,750 - See Below

*Producer Price Index fell -.4% in June - Core Index -
Excluding Volatile Food & Energy, rose +.1%

*June Retail Sales rose only +.2% - Ex Autos fell -.2%
May revised upward to +.4% from +.1%

*Univ. of Michigan Mid-July Sentiment 93.7 - Trend Intact


Although the stock market was very volatile last week,
reacting to second quarter preannouncements, the more
important concern should be forward looking. The rationale
is simply that the stock market is a discounting mechanism,
and what counts, or should count, is the outlook for later
this year and into 2002. And none of last week's reports
would cause us to alter our outlook for a soft landing
and an accelerating economic growth rate toward year end.

Last week's worst report was clearly Jobless Claims, but
there was a lot of noise in the data. For instance, the
auto industry was closing plants for their traditional
summer shutdown, and it is hard, if not impossible to adjust
for this specific event. However, the largest increase
was from the State of Michigan, so the jump in claims
clearly was impacted by the auto industry shutdown. We
just don't know the magnitude, but it would appear to
be meaningful.

The Retail Sales report also was a little "sloppy" -
at least on the surface. A gain of +.2% is hardly robust,
but the revision to May was quite large, and if the numbers
are smoothed, sales were "ok" - but not great.

Supporting that assertion was anecdotal evidence from many
retailers. Specifically, as reported by the Wall Street
Journal, the " ... Goldman Sachs Retail Sales Index of 39
stores, weighted by sales, rose 2.0% in June, beating a
1.4% forecast." For May the same index rose just .7%.
But, again, the devil is in the details.

As noted, the index is weighted by sales, with, surprise
surprise, Wal-Mart being the heavy hitter - and Wal-Mart
had a great June as comparable store sales rose +6.9%. In
general, department stores did not fare as well, so the
inference is that basic needs buying was maintained, but
that more discretionary purchases were soft. Overall,
the all important consumer sector appears alive, and well,
but just not kicking in high gear.

However, as regular readers know, we have long believed that
the tax rebate checks will be spent, and they will begin
arriving soon - depending upon social security number.
And, the last of the checks won't be mailed out until the
end of September. So, the spending impact should be spread
out for the remainder of the third quarter.

While I don't want to try to "spin" this too closely, the
timing does appear important as retailers generally gear
up for Christmas based upon their most recent sales
experience - in this case back-to-school and early fall.
So, the added impetus from the tax rebates could have a
secondary, and positive, impact.

In any case, the normal lagged response to monetary policy
should begin, which combined with fiscal stimulus, should be
sufficient to assure the soft landing, and the beginning
of recovery later this year. By early 2002, with any luck
at all, the growth rate should have recovered to just below
non-inflationary trendline rates - or approximately 3.0%.

That may not be enough to meet expectations of those making
big bets on cyclical names, but it should preserve a
favorable backdrop for financial asset prices. Stay tuned !



Current Weekly Calendar of Economic Data:
=========================================

Monday: Business Inventories

Tuesday: Industrial Production/Capacity Utilization

Wednesday: Consumer Price Index, Housing Starts/Permits

Thursday: Jobless Claims, Leading Indicators, International Trade