By Evelina M. Tainer, Chief Economist, Econoday
February 28, 2003

Economic reports were abundant this week, allowing market participants to pay at least some attention to economic conditions despite the backdrop of war drums. Indicators suggested that economic conditions were stable although consumer confidence is shattering. Monthly changes in consumer attitudes don't necessarily determine monthly retail sales, but when fear of job security shakes confidence then spending can take a hit. Consumers are also being hit with dramatic jumps in gasoline and natural gas prices. When the pocketbook gets thinner, so does spending on other goods and services.

Fed Chairman Alan Greenspan testified before Congress twice this past week but did not comment on fiscal or monetary policy. Greenspan, who previously spoke at length on the damage of high budget deficits, has taken quite a bit of flack from Republican leaders in the House and Senate for not fully supporting the President's fiscal stimulus package. The President's economic team, however, doesn't seem quite as bothered by Greenspan's remarks, stating their "full confidence" in the Fed chairman.

The road to perdition, that is the road to war, remains a major backdrop to the economy and financial markets. France, Germany and Russia are the major proponents of a diplomatic resolution. The U.S. team continues to search for allies at the UN Security Council. In the meantime, North Korea's saber-rattling is getting louder as it launched a missile in the direction of Japan despite an ongoing gathering of key global officials. Is it any wonder that financial market players are confused about the direction of the economy?