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

WEEKLY UPDATE FOR: July 28, 2001 by Bob Bose

Prior Week in Review:

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

                        07/27/01     07/20/01     %Change 
  
 S&P 500                 1,205.82     1,210.85       -.42% 
 Dow Jones              10,416.67    10,576.65      -1.51% 
 NASD Comp               2,029.07     2,029.37       -.02% 
 Russell 2000              485.01       487.93       -.60% 
 SOX Index                 601.67       574.30      +4.77% 
 Value Line                385.60       387.38       -.46% 
 MS Growth                 539.67       546.30      -1.21% 
 MS Cyclical               561.43       571.18      -1.71% 
 T - Bill                    3.46%        3.44%      +2 BP 
 Long Bond                   5.54%        5.53%      +1 BP 
 Gold - Oz-Near Month     $270.20      $270.20        UNCH 
 Silver - Oz-Near Month     $4.22        $4.24       -$.02

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

Economy Bouncing Along The Bottom - Inflation Data Positive
FOMC Has Room To Lower Rates Further - And Likely Will
Recovery Late Second Half Still Best, And Good, Bet


*Existing Home Sales in June eased -.6% - Still Very
Strong at 5.33 million annualized rate

*Durable Goods Orders for June fell -2.0%

*Jobless Claims fell -51,000 to 366,000 - Four Week
Moving Average down -6,250 to 409,000

*Employment Cost Index rose +.9% in Second Quarter

*Gross Domestic Product for Second Quarter rose +.7%
First Quarter revised back upward to +1.3% - See Below

*June New Home Sales rose +1.7% to 922,000 - May
Revised downward - But Very Strong Report - See Below

*Univ. of Michigan July Consumer Sentiment eased from
Mid-month 93.7 to 92.4 - But unchanged versus June 92.6


Last week's reports firmed our belief that the economy
is "bouncing along the bottom", will not slip into a
recession, and that recovery will begin before year end.
Two important reports also eased our concern, somewhat, that
inflationary pressures will build as the economy recovers.
In other words, a pretty good week.

First, the big news was the Gross Domestic Product (GDP)
report. The obvious point is that there was growth, albeit
anemic. Clearly large revisions are possible, and even ones
where the sign would change. But for now, there hasn't
even been one quarter of negative GDP, let alone two, which
would comply with the official definition of a recession.

Somewhat below the surface data, inventories were cut back
sharply and consumption spending was +2.1% - down from +3.0%
in the first quarter, but not bad given the softening labor
market. And, Chairman Greenspan's favorite measure of
inflation was well behaved.

Specifically, the personal consumption expenditure index
rose +1.7%. Not only is this a non-inflationary number, but
it is a sharp slowdown from the first quarter's +3.2%. And,
further support that inflationary pressures will not build
near term was the small rise in the Employment Cost Index
(ECI) of +.9%. Again, a modest gain, and a deceleration from
the first quarter rate.

New Home Sales continued at a very high rate, and actually
increased +1.7% in June to 922,000. This is the seventh
consecutive month for which sales have exceeded 900,000, which
is a first, according to the Wall Street Journal, since this
series began in 1963. Clearly the housing sector remains robust.

And, the labor market even improved somewhat, but the volatility
of jobless claims is notorious. However, although no official
explanation was given, there were sharp drops in claims in many
of the "automotive" states. Maybe auto industry model changeover
shifts are still impacting the data, or perhaps the majority of
the layoffs are behind us in that sector. Too soon to know, but
any improvement in the claims data, at this point, is positive.

Overall, then, we liked last week's reports, and believe that the
economy is pretty much tracking an "Econ 101" scenario. Monetary
tightening produced the slowdown, but a prompt policy reversal
seems to be working to avoid a recession. The normal policy lag
would be six to nine months, so "support" should begin to "kick
in" right about now, and continue through year end. And fiscal
policy is also turning more supportive, with the leading economic
indicators having risen three months in a row, our view for a
late second half recovery is tracking well. And, we even got a
pleasant surprise from the inflation data.

So, no change in our outlook, but we are increasingly confident
of our views. So, stay tuned !


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

Tuesday: Personal Income/Personal Spending, Consumer Confidence, Chicago Purchasing Managers' Index

Wednesday: National Purchasing Managers' Index, Construction Spending

Thursday: Jobless Claims, Factory Orders

Friday: Labor Department Employment Report