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To: ms.smartest.person who wrote (869)	12/11/2001 5:58:29 PM
From: ms.smartest.person	Read Replies (1) \| Respond to of 5140

Economic Monitor Commentary by Dr. Scott Brown Can It Get Any Stranger? Rather than clearing up the outlook, recent economic figures have added more layers of confusion. Data have generally suggested that the economy remains relatively soft, but the pace of decline is much less severe than in October. In many ways, the U.S. economy appears to have recovered from the immediate effects of 9/11. However, as I?ve said many times before, the drop in corporate profit margins is contributing to a relatively rapid pace of deterioration in labor market conditions. The restraint on household incomes should limit consumer spending gains in the first quarter of 2002. Recession? Somebody Forgot To Tell The Consumer The tourism, air travel, and lodging industries, which were already softening prior to 9/11, have remained devastated, rebounding only slightly in October. A full recovery is unlikely to happen anytime soon. Here, the pattern of consumer spending appears to have changed more permanently than in other areas. On the other hand, motor vehicle sales surged to a record pace in October. November?s level, while down sharply, remained relatively strong. Motor vehicle sales appear likely to boost the consumer spending numbers for the fourth quarter, pushing overall GDP growth into positive territory (auto inventories will be correspondingly lower, but other inventories are unlikely to have been pared as severely as they were in the third quarter). Have strong 4Q motor vehicle sales ?stolen? from the first quarter?s sales? There?s little historical precedence for pulling spending from the future into the present (consumers are thought to be much more likely to postpone big-ticket purchases). Still, the 4Q pace of vehicle sales will be very difficult to maintain in 1Q02. Hope Springs Eternal The P/E ratio for the S&P 500 (using 12-month trailing earnings) is more than three times the long-term average. Investors are apparently encouraged by the economy?s prospects for next year. However, is the outlook that bright? Federal Reserve officials have suggested that the recovery is likely to be sluggish. The recent rise in stock prices appears to have been aided by Fed-induced liquidity (that?s right, another bubble). The decline in corporate profit margins, hastened by a cyclical slowdown in productivity growth, will not last forever, but a sharp rise in 2002 is likely only if the economy begins to fire consistently on all cylinders ? possible, I suppose, but not the most likely outcome. Push Comes To Shove . . ., Or Not Granted, there is plenty of monetary stimulus in the pipeline and further fiscal stimulus may be approved at some point. However, there is still a considerable amount of excess in train and the pace of economic growth is likely to remain somewhat subdued in 1H02. Still, that?s better than the major wipeout some expected immediately after the events of September 11. December 10, 2001 The opinions offered by Dr. Brown should be considered a part of your overall decision-making process. For more information about this report ? to discuss how this outlook may affect your personal situation and/or to learn how this insight may be incorporated into your investment strategy ? please contact your Financial Advisor or use the convenient Office Locator to find our office(s) nearest you today. All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates (RJA) at this date and are subject to change. Information has been obtained from sources considered reliable, but we do not guarantee that the foregoing report is accurate or complete. Other departments of RJA may have information which is not available to the Research Department about companies mentioned in this report. RJA or its affiliates may execute transactions in the securities mentioned in this report which may not be consistent with the report's conclusions. RJA may perform investment banking or other services for, or solicit investment banking business from, any company mentioned in this report. For institutional clients of the European Economic Area (EEA): This document (and any attachments or exhibits hereto) is intended only for EEA Institutional Clients or others to whom it may lawfully be submitted. Copyright © 2001 Raymond James Financial, Inc. All rights reserved. rjf.com