By DONALD RATAJCZAK For the Journal-Constitution

As the Federal Reserve is about to begin a two-day meeting on the economy that probably will culminate Wednesday with yet another reduction in their targeted overnight bank rates, I thought I would provide a brief summary of what I would be saying if I were there.

First, there already is a lot of economic stimulus being pumped into the economy. Previous tax cuts have not yet used up all their stimulus medicine. The latest tax reduction removes some timing problems that prevailed when child tax credits, marriage penalties and reduced marginal tax rates were scheduled for future reductions. Making them effective this year and changing the July withholding tables will provide significant stimulus.

Second, the dollar's weakness has removed some impediments to export growth. At present currency rates, American producers have a fair chance to gain sales abroad. Yet productive international producers still have incentives to increase their international sales. Relative to domestic costs, currencies outside China probably are the nearest to desired levels in several years.

Third, despite the dollar's more appropriate valuation, not enough stimulus and economic reform are occurring in many world markets. The recent shift toward expansive monetary policies in Europe is only a first step toward needed stimulus in that part of the world.

Japan needs more bank reform, possibly allowing international mergers of its major banks to inject much-needed lending capacity into its economy. Pension reforms and the removal of inflation-indexed devices that no longer are needed must be accelerated in some of the Latin American economies.

In short, the global recovery is not yet assured.

Fourth, near-term energy uncertainties still could derail expansion. Iraqi oil has been slower to reach world markets than anyone expected. Fortunately, a cool spring has allowed North America to partially rebuild inventories, but Europe has not been so fortunate. The longer-term outlook remains favorable for energy, but weather-induced price spikes are possible through next year.

Fifth, despite assertions that short-term rates could fall to zero, such a low rate would create serious problems for liquid assets, such as interest-bearing checking accounts, short-term certificates of deposit and money market rates. The ability to market and administer such instruments might require fees, with unintended consequences on liquidity holdings.

A quarter-point reduction in overnight rates would not create problems. Indeed, such a reduction is so widely anticipated that failure to make such a move would unsettle financial markets. A half-point reduction may be absorbed without problems, but anything larger would create distortions. Therefore, the effective remaining ammunition in rate reductions is half a point.

To use up all this ammunition before the global and energy uncertainties are resolved would leave the Fed with few traditional methods to deal with further weakness.

Is the danger so great that all that available ammunition should be used at this time? I think not.

While manufacturing clearly is suffering from continued declines in unit costs from abroad, especially China, economywide deflation has not occurred. In the past year, consumer prices have increased 2.1 percent. Excluding the direct impact of food and energy, the increase has been 1.6 percent.

To be sure, consumer prices are unchanged in the past three months, but that is because of falling energy prices. A concurrent dip to 1 percent in the core inflation rate also should be viewed without serious concern. Falling energy prices indirectly affect transportation service, lodging service and rental costs. In these areas, energy is not effectively removed from the core inflation rate. Thus, falling energy prices push down the core while rising energy prices hold it up.

If these indirect effects of energy are removed, the core inflation rate has been relatively stable at slightly more than 1.25 percent in the past year. This is desirable price stability, not undesirable deflation.

Thus, hold that extra quarter percent in case global and energy uncertainties turn into more serious issues. Believe in economic theory.

The previous monetary expansion, current tax cuts and a more appropriately aligned dollar should begin to stimulate this economy. Uncertainty is the reason it has not done so thus far.

As those uncertainties diminish, and they are doing just that, the strength of the stimulus medicine will begin to take over.

Nothing is certain. A new terrorist attack would be damaging. Further oil disruptions in Nigeria, Venezuela, Iraq or elsewhere could be disruptive. So, to the Fed: Keep some ammunition and only cut by the quarter-point that already has been virtually promised to the marketplace.

Donald Ratajczak is a regents professor of economics emeritus at Georgia State University.

Canada, the United Kingdom, Venezuela and Germany were the top four countries of origin for international travel to Florida in 2001.

06/14/03 By LAURA LAYDEN, lllayden@naplesnews.com

Vacation may not be all they ever wanted.

But it's what many Americans want this summer, and that's helping to boost the local tourism industry here at a time when business is at its slowest.

Since the start of the slow season in May, some local hoteliers say they have seen more tourists coming here than they expected.

The Edgewater Beach Hotel in Naples had one of its best Mays ever this year.

May was also good for the Marriott's Marco Island Resort.

"I think it's just that people are tired of not taking a vacation and they are just saying, 'You know what? I need to get away,' " said Laurie Cardenuto, the Marriott's director of marketing.

This year, hoteliers and other industry watchers are expecting a much better season than last year's.

Last summer — the first once since the Sept. 11, 2001, terrorist attacks on the United States — was one of the slowest local hoteliers have seen in years. The threat of more terrorist attacks kept many people closer to home. A sluggish national economy and rainy weather here only dampened the picture.

Now the U.S. economy is stronger and that's one of the reasons Americans are expected to travel more this summer.

Local hoteliers already have noticed more people driving here from other parts of the state, such as Orlando, Tampa, West Palm Beach and Miami. Some are also seeing more bookings from European travelers, a trend they link to the strengthening of the euro against the dollar.

The euro hit a record high of $1.19 on May 31. And though its value has dropped since then, it could grow in coming months, encouraging more Europeans to come to Southwest Florida.

Europeans typically travel between the months of June and August. So there is plenty of opportunity for more to come here this summer, said Jack Wert, executive director of the Greater Naples, Marco Island and Everglades Convention and Visitors Bureau.

"We should see an upward trend in some international visitors, with the improvement in the euro and the weakening of the dollar," he said. "That makes us a better bargain."

At the current rate of about $1.18 for their currency, Europeans would pay about $168 a night for the same hotel that in Europe would cost $200. Likewise, a $1.50 cup of coffee would cost them $1.26 in the United States.

Scott Shoenberger, managing director for LaPlaya Beach & Golf Resort in North Naples, said with the war in Iraq considered over, he's optimistic that more foreigners will travel here in June, July and August. He's especially bullish on the European market because of the increase in the euro's value.

At one time, Europeans accounted for 13 percent of the hotel's business in the off-season, Shoenberger said. That dropped to about 6 percent last year in the aftermath of the Sept. 11 terrorist attacks, but there are hopes it will reach 10 percent this year, he said.

"It should be a relatively good off-season for the Naples market from the European standpoint," he said.

In May, the hotel's business was up 52 percent over the same month last year. Shoenberger said it was in part due to more European visitors.

Even in season when room rates were running about $400 a night, about double what they are now, more Europeans could be spotted at the LaPlaya. The hotel recently got a $54 million facelift and that could be part of the reason for the increased interest from Europeans and other foreigners, Shoenberger said.

"I think it helps that we are new," he said. "We are the new kid on the block."

Shoenberger and other hoteliers also have noticed more visitors coming from the United Kingdom this year, and, if that trend continues over the coming months, it will give another much-needed boost to the tourism industry this summer.

Suya Davenport, director of leisure sales for The Registry Resort and Edgewater Beach Hotel in Naples, said her hotels have been seeing more visitors from the United Kingdom and it's one of the reasons the Edgewater hotel had one of its best Mays, she said.

The LaPlaya also has seen an increase in visitors from the United Kingdom.

"In the case of the United Kingdom, I think that some of the international problems (with terrorism) have worked in our favor," Shoenberger said. "The English people feel safer coming to the United States than they would going to a resort destination in Europe."

Any increased interest from foreigners comes as welcome news to local hoteliers.

For the past two years, European travel to Southwest Florida has been off because European currency has been so weak and German visitors have been scarce because of economic problems in that country. And then, of course, there was Sept. 11.

"The dropoff in foreign travel was seen long before 9-11," said Walter Klages, an economist who heads Research Data Services in Tampa and tracks visitor numbers in Lee and Collier counties. "It simply accelerated the problem because it created the perception of a personal risk in travel no matter where you went."

When foreign travel to the United States is down, it's felt across Florida because it has become such a large part of the state's tourism market.

In 2001, Florida surpassed New York in foreign tourists, attracting more than 7 million overseas visitors. That made it the No. 1 state for foreign travel.

Canada, the United Kingdom, Venezuela and Germany were the top four countries of origin for international travel to Florida in 2001.

While an upturn in foreign travel may boost tourism here this summer, it's the travel patterns of Americans that should have an even bigger impact.

The travel industry estimates that Americans will take roughly 275 million leisure trips this summer, about 2.5 percent more than last year. While many have yet to make up their minds where they want to travel, they are expected to take more driving vacations and that should benefit this region.

It's the drive market that local hoteliers target anyway this time of year, primarily Floridians who live within five or six hours of Southwest Florida.

Shoenberger estimates that more than 70 percent of the tourism business in Florida is generated by Floridians in the summer.

Floridians helped boost business for local hotels Memorial Day weekend, resulting in strong occupancies. And that trend is expected to continue throughout the off-season.

Robert Colantonio, general manager of the Hampton Inn in Bonita Springs, said he's seen a lot of Florida residents checking in over the past two months, coming from such places as Tampa, Orlando and Miami.

In May, his hotel's revenues were up 15 percent more than during the same month last year.

"In our case I think it's a result of the marketing we've done for this hotel, specifically," Colantonio said. "We have some packages and other things that we have offered to Florida residents and to local businesses. That is where our increase has come from."

Colantonio is not as optimistic as some other local hoteliers about foreign travel this summer. Last year, the Hampton Inn saw very little business from foreigners and Colantonio doesn't expect that to change this year.

He thinks European and British travelers will be more likely to stay at more upscale hotels, such as The Registry Resort or The Ritz-Carlton, Naples.

"Certainly properties on the beach are the first choice," he said. "We are further back from the beach. If they can get a good rate at the beach, why stay two miles away?"

Even without foreign travelers, Colantonio predicts this off-season will be much better than last for his hotel.

There are many signs in the local industry pointing to the start of a recovery from Sept. 11.

In April, tax collections on hotels and other lodgings were up 16 percent over the same month last year, said D.T. Minich, executive director of the Lee Island Coast Visitor and Convention Bureau. He said May was a strong month for many Lee County hotels in part because there were a lot of weddings. Weddings are something his bureau has been working hard to attract.

Despite the positive outlook for the off-season this year, the Lee Island Coast Visitor and Convention Bureau plans to tap emergency funds and will spend more money on marketing than usual. That's because there is increased competition from other markets.

"The Keys are spending an additional $500,000 to attract Floridians," Minich said. "They are one of our biggest competitors. I would not be spending this money otherwise. It's like we have been backed into a corner."

While there are a lot of bright spots in the local tourism industry right now, there are still a lot of concerns about the future. And most still don't expect this year to be as good as 2000 — before the terrorist attacks on the World Trade Center and Pentagon.

"No, we're not quite back to the peak levels of 2000," Klages said. "But we are certainly doing better than we did last year."

He doesn't expect a full recovery until next year.

Breaking News June 13, 2003 By Elizabeth Price <a href=www.smartmoney.com>Dow Jones Newswires

WASHINGTON -- The April U.S. trade deficit narrowed just slightly from a record high in March, as a jump in the volume of oil imports offset some of the effect of lower prices on the nation's energy bill.

The deficit in international trade in goods and services narrowed to $42.03 billion in April from a revised deficit of $42.87 billion in March, the Commerce Department said Friday. The March shortfall had been previously reported at $43.46 billion. However, Commerce issued substantial revisions to trade data from 1992 to 2003, stemming from its annual recalculation of seasonal adjustment factors.

Analysts had expected the trade gap to narrow in April. A Dow Jones-CNBC survey of economists had predicted the deficit would narrow to $41.8 billion for the month. But sluggish economic growth overseas depressed exports, leaving the deficit a bit higher than predicted.

April imports fell 2.1% to $123.03 billion, reflecting a $2.36 billion drop in imports of industrial supplies like energy, iron and other metals. Americans bought fewer foreign-made autos and parts, lowering imports by $400 million, and cut imports of consumer goods like toys, clothes and pharmaceuticals by $179 million. Imports of foods, feeds, and beverages rose $60 million to a record $4.69 billion.

The U.S. crude oil tab totaled $8.19 billion in April, down from $9.10 billion in March. This reflected imports of 314.66 million barrels for the month--the second-highest on record, Commerce said. The rise in volume in part offset a $4.25 drop in the average price of a barrel to $26.02.

Exports were off 2.2% to $81.00 billion. The largest decline, $616 million, came from capital goods like computers and industrial engines. Consumer goods exports fell $156 million, while U.S. sales of industrial supplies fell $153 million.

The report showed that deficits with major U.S. trading partners were mixed in April. The trade deficit with Western Europe decreased to $8.44 billion from $7.79 billion in March.

Deficits with NAFTA partners Mexico and Canada narrowed. The deficit with Mexico narrowed to $3.34 billion from $3.92 billion the previous month. The deficit with Canada dropped to $3.81 billion from $5.15 billion.

The deficit with China widened to $9.45 billion from $7.67 billion, and the deficit with Japan grew to $5.97 billion from $5.83 billion.

The April deficit with OPEC countries, like Saudi Arabia and Venezuela reached a record level of $5.03 billion.

-Elizabeth Price; Dow Jones Newswires; 202 862-9295; elizabeth.price@dowjones.com.

(END) Dow Jones Newswires

06-13-03 0847ET

<a href=reuters.com>Reuters Wed June 11, 2003 01:32 PM ET (The following statement was released by the rating agency)

$350 Million of Debt Affected

NEW YORK, June 11 - Moody's Investors Service downgraded the rating for the 8.85% senior bonds of Merey Sweeny L.P. (MSLP) and Sweeny Funding Corp. to Baa3 from Baa2. The rating outlook is stable. The rating downgrade reflects the rising financial leverage exhibited by the partnership and the increased political risk associated with its 50% indirect owner, Petroleos de Venezuela (PDVSA).

MSLP is a joint venture owned 50% by PDVSA, which is rated Caa1 for its foreign currency obligations, and 50% by ConocoPhillips (COP), rated A3 senior unsecured. A high level of pre-completion distributions to the shareholders and reduced processing fees have reduced MSLP's book equity in 2001 and 2002. Distributions are allowed prior to completion because of sponsor joint-and several guarantee of debt service. The project paid substantial distributions in 2001 and 2002 and is expected to resume at a high earnings payout level post-completion, subject to a minimum debt service coverage test. A severe squeeze on MSLP's processing fees and earnings throughout most of 2002 has also affected the project's equity cushion. The processing fee is tied to a formula that reflects price differentials between West Texas Intermediate and Mayan crude. The light/heavy differentials are highly volatile and shrank in 2002 when OPEC production cuts were implemented.

Despite a benefit from widening light/heavy crude differentials in 2003, MSLP has also been affected by the national strike in Venezuela, which disrupted crude exports to the U.S., including the heavy crude supplied by PDVSA under a long-term contract with COP. The refinery was able to run alternate crudes at a slight disadvantage during and following the strike, and MSLP's utilization and Venezuelan crude deliveries to COP have resumed and are expected to be normal in June 2003. However, the supply disruption highlights MSLP's dependence on Venezuelan crude and potential future supply risk to the project. In addition, PDVSA has certain financial obligations to the partnership, including potential cash calls to meet operating cash flow shortfalls, which have a higher level of risk as reflected in PDVSA's current Caa1 cross border long-term currency rating.

Despite the impact of PDVSA's political risk on the project rating, MSLP's long term debt continues to be rated Baa3 with a stable outlook, incorporating the strategic importance and integration of the project to COP and numerous mechanisms in place that tie the investment strongly to COP. Merey Sweeny is economically and physically integrated with the Sweeny refinery, and other linkages include COP's call right to buy out PDVSA's stake at a discount if PDVSA defaults, and its several pro-rata cash call as needed. The Baa3 rating and stable outlook reflect MSLP's expected financial completion in 2003, which is still subject to certain environmental permits, at which time the sponsors' joint and several guarantees of MSLP's debt service will be extinguished.

MSLP is a 50/50 joint-venture owned indirectly by ConocoPhillips, a major integrated oil company headquartered in Houston, Texas, and by Petroleos de Venezuela, the state oil company of Venezuela.

June 6, 2003, 11:00PM Dow Jones News Service

NEW YORK -- U.S. crude oil futures ended at an 11-week high Friday, as traders covered short positions ahead of a meeting of three key oil ministers.

The oil ministers of Saudi Arabia, Venezuela and non-OPEC Mexico met in Madrid on Friday to discuss market conditions ahead of a meeting of OPEC ministers in Doha, Qatar, on Wednesday.

In a statement released after the market closed, the three ministers -- Ali al-Naimi of Saudi Arabia, Rafael Ramirez of Venezuela and Ernesto Martens of Mexico -- pledged to watch the markets closely and to ensure "normal" crude supplies.

While asserting that market fundamentals are in balance, the three officials vowed to ensure fair oil prices.

At the New York Mercantile Exchange, light, sweet crude for July delivery rose 54 cents to close at $31.28 a barrel, the highest settlement for a front-month contract since March 18.

July heating oil gained .95 cent to close at 78.18 cents a gallon. July gasoline gained .83 cent to close at 89.35 cents a gallon.

July natural gas futures fell 1.1 cent to $6.51 per thousand cubic feet.

At London's International Petroleum Exchange, July Brent ended with a gain of 34 cents at $27.78 a barrel.

Some OPEC officials indicated recently that the group may cut output. But with oil prices up more than 22 percent over the past four weeks and Iraqi exports suspended for a third month, the producer group is now widely expected to keep output quotas unchanged.