By Evelina M. Tainer, Chief Economist, Econoday
10/19/01

Economic news was mixed this week but came in a variety of characters. Industrial production magnified the weakness in the manufacturing sector, but housing starts revealed continued resilience. The consumer price index popped up a bit, but this was tied to special factors that could be discounted. International trade figures showed improvement in the deficit, but weak imports and exports revealed overall sluggish activity here and abroad. Market players may have been encouraged by friendly earnings reports and decent economic figures, but daily news of anthrax spores caused a good chunk of the rebound of the past couple of weeks to disappear.

Fed chairman Alan Greenspan did address the Joint Economic Committee this past week. His tone was cautious but upbeat. He did recognize near-term issues, such as a short-term drop in productivity as well as demand, but said these would turn around in good time. He recognized the greater uncertainty for the stock market, but believes this risk is now incorporated in market prices. He also felt that the risk premium associated with terrorists would be less than the risk premium associated with the cold war. His remarks calmed markets briefly before more anthrax news sprang up.