July 17, 2003

According to the Fed the U.S. Industrial Production Index increased by 0.1% last month. In fact it was the first back-to-back increase in the index in eleven months. The question facing investors and economists is whether the two consecutive months of gains is a head fake or the beginning of a steady increase in the Industrial Production Index. Our original forecast for 2003 was for the quarterly rate of increase to accelerate to the 1.5% range. The weakness of the gains in the index during the last two months led us to revise downward the magnitude of the recovery in the index. Nevertheless, the fact that the index has increased for two consecutive months reinforces our belief that the recovery is on its way and that the gains in the index should accelerate in the coming months.

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