1. Update July 26, 2001 Yield curve story remains same. Based on historical analysis, pickup at end of 3rd quarter. Slow recovery likely. Volatility of the business cycle has likely decreased with increased U.S. role in world trade (economic diversification). Note1: Some updates through July 24, 2001 based on a single observation. Most other data, quarterly averages. Note2: Incorporates “final” first quarter 2001 GDP which was released on June 29, 2001. Advanced 2nd quarter is due July 27 (along with a revision of past two years’ data). Market expectation 0.5% annual rate.

2. Exhibit 0

3. Yield Curve Inverts Before Last Five Recessions (5-year Treasury bond - 3-month Treasury bill) % Real annual GDP growth Yield curve Recession Correct 2 Recessions Correct Recession Correct Recession projected over by end 3rd Quarter Recession Correct Data though July 2001 Exhibit 1 Annual GDP growth or Yield Curve Orange denotes consensus for advanced Q2 GDP

4. Recent Annualized 1-Quarter Growth Data (10-year and 5-year Yield Curves) % Real one-quarter GDP growth Data though 07/23/01 Exhibit 2 Annualized 1-quarter GDP growth or Yield Curve Both curves invert 2000Q3 10-year 5-year Orange denotes consensus for advanced Q2 GDP

5. High Yield at recession levels...but have they peaked? (ML High Yield Master Index minus 10-year Treasury) % Real annual GDP growth High Yield Exhibit 3 4-quarter GDP growth or Yield Spread Data though July 2001

6. Oil Prices associated with 4/5 last recessions....but oil might be off peak Oil Price GDP West Texas Recession 2 Recessions Recession Exhibit 4 Data though July 2001 4-quarter GDP growth

7. 3-and 6-month moving averages of Industrial Production growth (annual rates) MA6 MA3 Recession 2 Recessions Recession Exhibit 5 Data though July 2001 Growth Nine straight monthly declines In the ball park of 1990 -- but no where near as severe as other past episodes

8. Consumer Sentiment turns corner, increases in May, June and July Michigan Index GDP Michigan Consumer Sentiment Recession 2 Recessions Recession Exhibit 6 Data though July 2001 4-quarter GDP growth