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To: Jim Willie CB who wrote (4487)	5/21/2003 10:10:09 AM
From: 4figureau	Read Replies (1) \| Respond to of 5423

Greenspan: Economic Signals Still Mixed Fed Chairman Underscores Deflation Threats By MARTIN CRUTSINGER AP Economics Writer Wednesday, May 21, 2003; 9:40 AM Federal Reserve Chairman Alan Greenspan told a congressional panel Wednesday that the economy is still sending mixed signals with some hopeful signs of stronger growth balanced against more disappointing results. "The economy continues to be buffeted by strong cross currents," Greenspan said in testimony before the congressional Joint Economic Committee. In his remarks, Greenspan continued to signal that, if necessary, the Fed was prepared to cut interest rates further to bolster economic growth. He noted, as the Fed had at its meeting earlier this month, that at the present time "the probability of an unwelcome substantial fall in inflation over the next few quarters, though minor, exceeds that of a pickup in inflation." That language tracked what Fed policy-makers said after their May 6 meeting when the central bank, in an historic shift, signaled that for the first time in more than a half century, they were more worried about the possibility of deflation - a prolonged period of falling prices - than in inflation. The country's last bout of deflation occurred during the Great Depression of the 1930s. Greenspan told the committee that in the weeks since the Iraq war ended, the economy had not established any firm pattern. "We do not yet have sufficient information on economic activity following the end of hostilities to make a firm judgment about the current underlying strength of the real economy," Greenspan said. He said that while declines in energy prices immediately after the war were encouraging, with West Texas intermediate crude falling to below $26 per barrel, some of that decline was recently reversed with the price of crude oil rising to near $30 a barrel. That's because of indications of delays in restoring Iraqi crude production and various other geopolitical risks creeping back into market expectations. He called this a "worrisome trend if continued" but noted that even at $30 per barrel, oil prices are still about $10 below the peak hit in February. Many economists believe that the Fed's new worries about the possibility of deflation have increased the odds that the central bank will cut interest rates when policy-makers next meet June 24-25. Analysts believe the debate at that meeting may not be over whether to cut rates but how large of a rate cut to provide, either the normal quarter-point move or a larger half-point cut. The last Fed rate cut occurred Nov. 6, when the Fed, worried about a developing "soft spot" in the economic recovery, cut rates by a half point. That reduced the target for the federal funds rate, the interest that banks charge on overnight loans, to a 41-year low of 1.25 percent. Since then, Greenspan and other Fed officials have sought to reassure financial markets that they are not in danger of running out of tools to bolster economic growth even with interest rates at such low levels. They have suggested that if necessary, the Fed will not hesitate to take a number of other steps, such as buying longer-term U.S. Treasury securities to influence interest rates. washingtonpost.com

To: Jim Willie CB who wrote (4487)	5/21/2003 10:17:13 AM
From: 4figureau	Respond to of 5423

U.S. deficit running at triple ’02 pace Federal deficit was $201.6 billion in first seven months of ’03 ASSOCIATED PRESS WASHINGTON, May 20 — The government ran up a deficit of $201.6 billion in the first seven months of the 2003 budget year, more than three times the total for the corresponding period a year earlier. THE LATEST FIGURES, released Tuesday by the Treasury Department, underscored the government’s worsening fiscal situation. Record deficits are forecast this year and next. The total deficit so far this fiscal year, from October through April, compares with a shortfall of $64.8 billion a year earlier. Revenues were down by 5.4 percent to $1.06 trillion for the seven months of the 2003 budget year in comparison to that period a year earlier. A big part of the drop stemmed from lowered tax payments flowing into the Treasury, a byproduct of tax cuts and the weak economy. Individual income tax payments totaled $493.8 billion, representing a decline of almost 8 percent from the previous year. Corporate tax payments plunged by 28.7 percent to $62.8 billion. Federal spending for the seven months totaled $1.26 trillion, a 6.5 percent increase from the corresponding period in fiscal 2002. The biggest spending categories so far this budget year are: Social Security (the U.S. public pension system), $291.7 billion; programs of the Health and Human Services Department, including Medicare and Medicaid, $290.8 billion; military, $216.5 billion; and interest on the public debt, $174.7 billion. For the 2002 budget year, which ended Sept. 30, the government ran up a deficit of $157.8 billion, ending four consecutive years of surpluses. The Congressional Budget Office is predicting this year’s deficit to exceed $300 billion, which would mark an all-time high. The CBO’s estimate doesn’t take into account a fresh round of tax cuts being worked on by Congress and advocated by President Bush. BY THE NUMBERS Key economic indicators • Consumer Confidence April 81.0 61.4 • Retail sales April* -0.1% 2.3% • GDP Q1 2003* 1.6% 1.4% • ISM Index April 45.4 46.2 • Factory Orders March* 2.0% -1.0% • Unemployment Rate April 6.0% 5.8% • Employment situation April* -48,000 -124,000 • Consumer Price Index (core) April 1.5% 1.7% • Housing starts April 1,630,000 1,748,000 • Home sales March* 6,542,000 6,803,000 back to list \| next CONSUMER CONFIDENCE Recent figures April 81.0 March 61.4 Feb 64.8 Jan 03 78.8 Dec 80.7 Nov 84.9 Oct 79.6 Sept 93.7 Aug 94.5 July 97.4 June 106.3 May 110.3 What is it? Consumer confidence is considered important because consumer spending accounts for more than two-thirds of U.S. economic activity. The monthly Conference Board survey is one of the two most closely watched indicators of sentiment. Based on a mail-in survey sent to about 5,000 households. Results are converted to an index and expressed in comparison to the 1985 average of 100. Source: The Conference Board back to list \| next RETAIL SALES Recent figures April* -0.1% March 2.3% Feb -1.3% Jan 03 2.0% Dec 1.5% Nov -2.6% Oct 6.2% Sep -1.5% Aug 0.3% July 0.1% June -0.3% May 0.8% What is it? A broad measure of consumer spending trends. Includes sales of motor vehicles, clothing, food at both grocery stores and restaurants, electronics, building materials drugs and other items. Expressed as a percent change from previous month, adjusted for seasonal variations but not price changes. Source: Census Bureau back to list \| next GDP Recent figures Q1 2003* 1.6% Q4 1.4% Q3 4.0% Q2 1.3% Q1 2002 5.0% Q4 2.7% Q3 -0.3% Q2 -1.6% Q1 2001 -0.6% Q4 1.1% Q3 0.6% Q2 2000 4.8% What is it? The gross domestic product is the broadest measure of the economy, comprising the value of all goods and services produced in the United States. It is reported quarterly with frequent revisions. Generally expressed as a percentage change from the previous quarter in “real” or inflation-adjusted terms. Economists presume real GDP is capable of growing at an annual rate of about 3.5 percent over the long term. When GDP declines over a sustained period of time the economy is considered to be in recession. Source: Bureau of Economic Analysis. back to list \| next ISM INDEX Recent figures April 45.4 March 46.2 Feb 50.5 Jan 03 53.9 Dec 55.2 Nov 50.5 Oct 49.7 Sep 50.7 Aug 50.3 July 50.7 June 55.2 May 54.7 What is it? The first major indicator reported each month, considered a reliable assessment of how the manufacturing sector is performing. Based on a survey of executives done by the Institute for Supply Management, formerly known as the National Association of Purchasing Management. Responses are compiled and reported as an index number. A reading above 50 percent indicates the manufacturing sector is expanding, while a reading below 50 indicates it is shrinking. Source: Institute for Supply Management back to list \| next FACTORY ORDERS Recent figures March* 2.0% Feb -1.0% Jan 03 1.7% Dec 0.3% Nov -0.8% Oct 1.4% Sep -2.4% Aug -0.4% July 4.4% June -2.5% May 0.6% April 0.7% What is it? Data on new orders for manufactured goods, adjusted for seasonal variation, offer a good indicator of the manufacturing sector's health, closely watched because it is the most volatile part of the economy. Expressed as percent change from previous month. Source: Census Bureau. back to list \| next UNEMPLOYMENT RATE Recent figures April 6.0% March 5.8% Feb 5.8% Jan 03 5.7% Dec 6.0% Nov 5.9% Oct 5.8% Sep 5.7% Aug 5.8% July 5.8% June 5.8% May 5.8% What is it? One of the best known and most politically powerful economic indicators, the rate is calculated from a monthly survey among a sample of about 60,000 households. The rate is adjusted for seasonal variations, but unlike most economic statistics it is never revised. Source: Bureau of Labor Statistics. back to list \| next EMPLOYMENT SITUATION Recent figures April* -48,000 March -124,000 Feb -357,000 Jan 03 203,000 Dec -147,000 Nov -81,000 Oct 69,000 Sep -84,000 Aug 123,000 July 54,000 June 34,000 May 22,000 What is it? Represents the month-to-month change in jobs on payrolls of the nation’s business, government and non-profit establishments. Generally considered a more accurate indicator of labor market health than the unemployment rate. Analysts estimate the economy should add about 150,000 jobs monthly to keep up with the nation’s growing work force. Based on a sample of 300,000 establishments employing nearly a third of the nation’s workers, the figure is adjusted for seasonal variations and frequently revised. Source: Bureau of Labor Statistics. back to list \| next CONSUMER PRICE INDEX (CORE) Recent figures April 1.5% March 1.7% Feb 1.7% Jan 03 1.9% Dec 1.9% Nov 2.0% Oct 2.2% Sep 2.2% Aug 2.4% July 2.2% June 2.3% May 2.5% What is it? The most widely known and used measure of inflation, the CPI is based on the price of a “basket” of goods including food, beverages, fuel, medical care and clothing. Value refers to year-over-year change in "core" prices, excluding volatile food and energy categories. Source: Bureau of Labor Statistics. back to list \| next HOUSING STARTS (seasonally adjusted annual rate) Recent figures April 1,630,000 March 1,748,000 Feb 1,640,000 Jan 03 1,828,000 Dec 1,815,000 Nov 1,760,000 Oct 1,653,000 Sep 1,810,000 Aug 1,630,000 July 1,666,000 June 1,709,000 May 1,752,000 What is it? A good indicator to assess demand for housing and construction industry health. Represents the number of new residential buildings, including single-family and multifamily homes, where construction was started. Expressed as a seasonally adjusted annual rate. Construction was started on 1.7 million new residential structures in 2002, the highest level since 1986. Source: Census Bureau. back to list \| next HOME SALES (seasonally adjusted annual rate) Recent figures March* 6,542,000 Feb 6,803,000 Jan 03 7,029,000 Dec 6,973,000 Nov 6,662,000 Oct 6,771,000 Sep 6,496,000 Aug 6,407,000 July 6,358,000 June 6,117,000 May 6,644,000 April 6,592,000 What is it? One of the bright spots of the economy in recent years, driven at least in part by historically low mortgage rates. Figure represents the sum of new and existing single-family home sales, expressed as a seasonally adjusted annual rate. In 2002, a record 6.5 million homes were sold. Sources: National Association of Realtors, Census Bureau * preliminary figures Printable version Republican leaders and tax writers appeared to be leaning toward a bill that cuts taxes $350 billion over the coming decade and spends roughly an additional $50 billion on state aid and child tax credits. The Bush administration has blamed the return of deficits on lingering effects of the 2001 recession and the costs of fighting terrorism at home and abroad. Democrats say a major cause of the red ink has been Bush’s 10-year $1.35 trillion tax cut and what they contend are bad economic policies. In April, the government produced a surplus of $51 billion, based on revenues of $231.2 billion and outlays of $180.1 billion. The surplus for April, however, was smaller than the bounty of $67.2 billion recorded for the corresponding month last year. msnbc.com

To: Jim Willie CB who wrote (4487)	5/21/2003 10:21:12 AM
From: 4figureau	Read Replies (1) \| Respond to of 5423

Japan could face financial crisis 'at any time': Fukui Wed May 21, 7:12 AM ET TOKYO (AFP) - Bank of Japan governor Toshihiko Fukui said the country could suffer a financial crisis "at any time" unless its near crippled financial sector is fixed, with the banks becoming more and more vulnerable to shocks. The warning came after the BoJ downgraded its assessment of the economy for the first time in six months on fears about the impact of SARS (news - web sites), a weak dollar and risks at home after the government decided to bail out a major bank. "If appropriate solutions to the problems of financial institutions are not carried out, we have to say Japan faces a situation where a so-called financial crisis could be triggered at any time," Fukui said Wednesday. "Financial institutions are making efforts to overcome the bad-loan issue and at the same time are seeking to create more highly profitable systems to strengthen their health," the governor told a parliamentary committee. "Against this background, we have to say that financial institutions still have difficult hurdles to overcome," Fukui noted, adding this meant their fundamentals remained weak. The government has instructed banks to halve the ratio of bad loans on their books -- cited as a root cause of Japan's economic slump -- by March 2005. Lenders must also evaluate their assets using stricter standards, which have eroded their capital base. Japan's fifth largest bank, Resona Holding Inc., on Saturday was forced to ask for government help after admitting its capital adequacy ratio had fallen below the required level of four percent. Fukui told lawmakers the banks were not yet in crisis but their resistance to shocks was declining. "Therefore, if their problems cannot be solved in an appropriate way, difficulties at a single bank, for example, may spread to other financial institutions, triggering major fears," he cautioned. Analysts, however, felt the authorities would prevent any crisis as demonstrated by their decision to inject funds into troubled Resona. "We are likely to see the government and the Bank of Japan continuing to take action," said Paul Sheard, chief economist in Asia for Lehman Brothers. Economic and Financial Affairs Minister Heizo Takenaka admitted Tokyo may end up spending 2.3 trillion yen (19.7 billion dollars) to bail out Resona Bank, the holding group's core banking unit. Although an imminent financial crisis was unlikely, Japan's economy remained riddled with problems, analysts said. An economic recovery "has come to a standstill and over the next quarter or so things will start to turn down," Sheard predicted. "The weakness in the economy, serious deflation and at the same time weakness in the financial system ... is a slightly disturbing cocktail." Deflation was one of the triggers prompting the BoJ to downgrade its monthly economic assessment for May. The announcement came a day after the central bank eased monetary policy in a bid to support the economy and steady financial markets hit by fears about the spread of the deadly SARS virus and planned rescue of Resona. "Financial institutions cannot be revived unless the economy itself recovers," said Hisashi Yamada, senior economist at Japan Research Institute. Lawmakers are calling on the bank to adopt more radical measures, such as an inflation target, to reverse deflation and boost economic growth. Therefore Tuesday's decision by the BoJ to raise liquidity in the financial system was largely ignored by the markets, while analysts described the move as more of the same and ineffective. story.news.yahoo.com

To: Jim Willie CB who wrote (4487)	5/21/2003 10:27:44 AM
From: 4figureau	Read Replies (1) \| Respond to of 5423

Asian Nations Gain Indirectly From Dollar's Declining Value By KEITH BRADSHER HONG KONG, May 20 — The most unlikely winners from the dollar's slide in value are some of the countries compiling the biggest trade surpluses with the United States, especially China. China and most Southeast Asian nations have linked their currencies to the dollar in one way or another, so its slide has pulled down the value of their currencies as well. This has made their exports more competitive in Europe, where the dollar has fallen more than 20 percent against the euro over the last year, and even in Japan, where the dollar has dropped 10 percent against the yen in the same period despite the Japanese government's repeated interventions in currency markets. At the same time, companies in China and Southeast Asia have lost none of their competitiveness in their main export market, the United States. "Everything we buy or sell, materials and finished products, is all denominated in dollars," said Bruce Grill, a middleman here who helps American stores buy shoes from Chinese factories. When it comes to the dollar's decline, he said, "We're not affected by it." The biggest beneficiaries are Asian exporters to Europe like Trimex Holdings, a Hong Kong company that buys power tools from factories in China and exports them to hardware stores in the European Union. Trimex has continued to charge the same prices in euros to many of its European customers and has converted the proceeds into more and more dollars as the dollar declined. But the cost of buying the tools from China, transacted in dollars, has barely increased. "It is a very good thing for our gross profit margins," said Thomas van Duinen, Trimex's general manager of Asian operations. European retailers are also profiting. El Corte Inglés, a chain of high-quality Spanish department stores, buys electronics, garments, food and beverages from China and has been able to persuade many of its suppliers over the last year to accept payment in euros, said Alejo Rodríguez, the general manager of its Hong Kong purchasing office. The switch to negotiating contracts in euros should provide some protection for El Corte Inglés if the dollar rebounds. At the same time, the chain has been negotiating new contracts at lower and lower prices in euros because Chinese factories are still incurring costs either in dollars, for oil and oil-based materials like plastic, or in Chinese yuan, for labor and many other costs. "That the euro is stronger makes life easier for us," although it hurts exporters back in Spain, Mr. Rodríguez said. "It's easier to negotiate; it's easier to get better prices." Some currencies in Southeast Asia, like the Hong Kong dollar and the Malaysian ringgit, are officially pegged to the dollar, rising and falling in lock step with it. China's central bank informally but effectively ties the yuan's value to the dollar. Other currencies in the region — like the Singapore dollar, the Thai baht, the Indonesian rupiah and the Taiwan dollar — are loosely pegged to the dollar and have crept up slightly against it in recent months, but have fallen against other currencies because of the dollar's decline. The dollar slipped some more today after dropping notably on Monday in response to weekend remarks by Treasury Secretary John W. Snow that suggested weakening support from the Bush administration for a strong-dollar policy. Late this afternoon in New York, the euro settled at $1.1738, up from $1.1643 late Monday. The dollar dropped to 116.71 yen from 117.40 yen on Monday despite remarks from Finance Minister Masajuro Shiokawa that Japan might again intervene in the markets and sell more yen. To limit or prevent their currencies' rise against the dollar despite substantial trade surpluses, Asian governments have been buying dollars from exporters, paying with more of their domestic currency. They have accumulated hoards of foreign exchange reserves as a result, with the world's top five holders of such reserves all in Asia. nytimes.com