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To: LLCF who wrote (175262)	6/25/2002 6:54:45 PM
From: Haim R. Branisteanu	Read Replies (2) \| Respond to of 436258

Recovery's Second Wind June 21, 2001 BIG PICTURE: Signs Of A Second Wind To Recovery By JOHN MCAULEY Of DOW JONES NEWSWIRES NEW YORK -- Signs are accumulating that the economic recovery may have gotten some renewed vitality in June after pausing in May. While these hopeful signs come from indicators that are less often in the financial market spotlight, they are generally leading indicators of other market-moving data. This is a crucial stage in the recovery. Some indicators - most notably retail sales - faltered in May and reawakened concerns that the economic recovery as a whole could be derailed and the feared "double dip" occur. Instead, the stutter in May might well be regarded as a "pause that refreshes, which is now over," observed Ted Wieseman, an economist at Morgan Stanley. Wieseman points to the May housing start report and the weekly chain store reports - released last Tuesday - for the first two weeks of June as "providing further confirmation that we may have passed the trough of the pause that refreshes." The weekly chain store reports are especially welcome because they specifically quell fears that the consumer sector, which has been the main engine of economic growth, was in jeopardy. The Bank of Tokyo-Mitsubishi chain store sales index increased 1.6% in the week ended June 8 and a further 0.7% in the following week. "At the tail end of May, sales got a lift from a return to hot weather after a bout of cool weather, that upturn continued into June and I expect year-over-year sales growth to be around 5% in June, compared to 3.5% in May," said Mile Niemira, senior economist at BTM. Such a rebound in consumer spending in June might even result in a change in the sentiment of economists who have lowered their second quarter growth forecasts. The strong 11.6% increase in housing starts reported for May suggests that this source of economic momentum has remained strong and suggests that other, housing-related spending, such as on furniture, will remain robust in the months ahead. There were other upbeat signs as well in the past week that point to stronger economic activity in June and into the third quarter... The Dow Jones-Bank of Tokyo-Mitsubishi weekly business barometer rose 1.3% in the week ended June 8, after a 1.0% decline in the previous week. A statistically smoothed version of the index, which adjusts for week-to-week volatility, was up 0.1% in each of the last two weeks. "This was the strongest performance for a week since Jan. 5, when it soared by 3.6% and heralded a rapid pickup in economic momentum and the end of the 2001 recession," said BTM's Niemira, who compiles the index. "Although it is hard to say if this latest reading will be a similar telling signal of a momentum change for the economy as it was in January, it certainly seems clear that an improvement in the economy is at hand." The Philadelphia Federal Reserve Bank's business outlook survey for June, reported Thursday, surged to a reading of 22.2 from 9.1 in May. This index is often used by economists as a proxy for the national purchasing managers index for manufacturing compiled by the Institute for Supply Management. "On an ISM-equivalent basis, this suggests a 61.1 reading versus 54.4 in May," observed Drew Matus, economist at Lehman Brothers. That would clearly be a significant indication of improvement in the manufacturing sector. There has also been an improvement in the initial jobless claims data, which slipped to 393,000 in the week ended June 15, the third straight week below 400,000. Moreover, the four-week moving average slipped below 400,000 (to 396,250) for the first time since mid march, when extended benefits began to distort the data. Finally, the Economic Cycle Research Institute's weekly leading index moved up in the second week in June and was 5.6% above its 52-week moving average in the week ended June 14. "We've seen a lot of the leading indicators strengthening over the last several weeks, pointing to stronger economic activity in the second half of the year," said Lakshman Achuthan, managing director at ECRI. "The Journal of Commerce commodity price index has been up strongly for eight weeks, suggesting a building industrial sector." And Lakshman sees hopeful signs for one of the most closely watched economic indicators. "Through May, the growth rate of our leading indicator of employment hit a five-year high." The widely-expected pickup in the second half of the year - which begins in a lit