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Economy in Brief

Small Business Optimism Slipped
by Tom Moeller June 8, 2004

The Small Business Optimism Index published by the National Federation of Independent Business (NFIB) slipped 0.9% last month following a 2.8% jump in April.

The decline reflected fewer firms expecting the economy to improve as well as a slight decline in the percent of firms planning to raise employment and capital expenditures.

Nevertheless, the percentage of firms raising average selling prices rose and the percent reporting higher earnings this quarter improved.

During the last ten years there has been a 50% correlation between the level of the NFIB index and the y/y change in real GDP.

About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

Nat'l Federation of Independent Business May April Y/Y 2003 2002 2001
Small Business Optimism Index (1986=100) 104.5 105.4 4.4% 101.3 101.2 98.4
Chain Store Sales Inched Higher
by Tom Moeller June 8, 2004

Chain store sales inched 0.2% higher last week following three successive down periods, according to the International Council of Shopping Centers (ICSC)-UBS.

Sales in early June started 0.7% below the May average.

During the last ten years there has been a 59% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.

The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

ICSC-UBS (SA, 1977=100) 06/05/04 05/29/04 Y/Y 2003 2002 2001
Total Weekly Retail Chain Store Sales 438.5 437.7 5.5% 2.9% 3.6% 2.1%
The Future Course of Interest Rates
by Tom Moeller June 9, 2004

"Economic developments going forward will determine the level and term structure of interest rates. Federal funds futures prices already reflect expectations of a substantial firming of policy by the Federal Open Market Committee (FOMC). Unlike 1994, there has been an appreciable increase of market rates in anticipation of policy tightening, though history cautions that investors' anticipations of the cumulative magnitude of policy actions and their timing under such circumstances are far from perfect." - Alan Greenspan

The complete text of Chairman Greenspan's June 8th comments on economic developments can be found here.

"Great Expectations: The Role of Beliefs in Economics and Monetary Policy" from Federal Reserve Bank of Philadelphia President Santomero is available here.

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