The sharp slowing in domestic demand has dramatically reduced imports. Weakening economic activity in our major trading partners has significantly reduced the foreign demand for American-made products.

With still strong domestic demand and improving international demand, the factory sector is continuing to recover from the sluggishness that resulted from the Asian economic crisis,

These data suggest that a bottoming in economic activity is taking place, but that a bit more inventory adjustment is needed to insure a re-acceleration in growth.

The deterioration in economic activity would argue for a more aggressive move, but the Fed has rarely moved by more than (half a point) during Greenspan's tenure,

Though domestic demand waned and imports slackened in the first half, due largely to macro-economic controls, it is totally wrong to consider the Chinese Government influenced foreign trade with administrative instruments.

We still expect economic activity to slow over the next several quarters as consumer spending slows further and housing declines more because of higher interest rates and energy costs. The absence of inflation will be welcomed at the Federal Reserve.