June 3, 2004

Productivity Growth Strong,
But Costs Rise

U.S. businesses increased their

productivity at a faster pace than first thought in the first quarter,
the government said on Thursday, but labor costs were also revised
upward, Reuters reported. Non-farm business productivity increased at a
revised 3.8 percent annual rate in the first quarter, the Labor
Department said, a bit faster than the 3.5 percent gain initially
reported and just above the 3.7 percent increase expected on Wall
Street. While revised upward, the gain in productivity was not enough to

offset a revised 4.6 percent gain in hourly compensation costs that led
to an upward revision in unit labor costs. Unit labor costs rose at a
revised 0.8 percent rate in the first quarter, compared to an initially
reported 0.5 percent advance. Strong productivity gains and declining
unit labor costs had played a large role in keeping U.S. inflation low,
the newswire reported.

Rate Increase Likely to

Be Gradual

Slack in the U.S. economy and
low inflation should allow the Federal Reserve to raise interest rates
at a gradual pace, Fed Chairman Alan Greenspan said in a letter released

yesterday, Reuters reported. 'The current backdrop of low inflation and
underutilized resources suggests that the transition to a more neutral
policy stance can be undertaken at a pace that is likely to be
measured,' Greenspan said in a May 14 letter to Sen. Paul Sarbanes
(D-Md.). Greenspan noted that the Fed's policy-setting panel had also
indicated that the central bank could likely pursue a 'measured' pace of

rate hikes in a statement after its last meeting on May 4, the newswire
reported.

CEO Survey Shows
Continued Strengthening of Business Conditions



U.S. corporate leaders are increasingly optimistic on the prospects for
the economy, with many saying they expect sales to grow and that they
plan to add workers and increase capital spending over the next six
months. According to the Business Roundtable's June 2004 CEO Economic
Outlook Survey, 88 percent of chief executive officers expect to
increase sales during the next six months, while 44 percent said they
plan to increase capital spending, as opposed to 7 percent who will rein

it in. Thirty-eight percent say they will do more hiring, as opposed to
19 percent who expect to shed workers. The total of 81 percent who say
their employment will increase or remain the same is up from 78 percent
in the most recent survey in March 2004.

Class Action Bill Fate
Unclear

Senate Minority Leader Tom
Daschle (D-S.D) cast doubt yesterday on whether the Senate will pass
legislation to restrict class action lawsuits, although the bill has the

support of 60 members, CongressDaily reported. 'It's unclear what

the fate of the class action bill is,' he said, arguing that the
delicate balancing act Senate Republicans have achieved to garner
support to move to the legislation may not survive either floor debate
or a House-Senate conference. 'I don't hold a great deal of [optimism]
for class action at the end of the day,' he said. Opponents of the bill
are urging lawmakers to support an amendment that would provide federal
judges with 'guidance' for handling consumer class action cases that
could be transferred from state court. John Beisner, an attorney with
O'Melveny & Myers who is working with the U.S. Chamber of Commerce
in support of the bill, said the amendment would 'take away the rights
of states to make their own laws on consumer protection issues,' the
newswire reported.

Enron Bankruptcy
Marathon Heads Into Homestretch

Starting today, representatives of Enron and creditors

will be in a Manhattan federal bankruptcy court for about a week of
hearings, asking Judge Arthur Gonzalez to sign off on Enron's plan of
reorganization, Reuters reported. Last week Enron took a major step
forward when 104 of 111 creditor classes that voted agreed to its
reorganization plan, apparently paving the way for a speedy approval.
'We anticipate the plan will be confirmed,' said Jonathan Airey, a
bankruptcy lawyer from Vorys, Sater, Seymour & Pease LLP
representing 95 independent natural gas producers. 'Our producer group
has supported and voted for the plan,' he said, the newswire reported.
Enron expects to pay about 17 to 20 cents on the dollar on about $66
billion of debts claimed by 24,000 creditors. Creditors would get cash
and stock in three companies formed with Enron assets: CrossCountry
Energy, Prisma Energy International Services and Portland General
Electric, according to the newswire.

U.K. Credit Card Charge-offs
Rising

Fitch Ratings says charge-offs on U.K. credit
card securitisations are seen rising further in the next six months,
according to the second 2004 edition of Credit Card Movers &
Shakers U.K., Reuters reported. The report presents a set of
indices tracking the performance of U.K. credit card securitizations. It

has just introduced the Fitch Charge-off Trend Indicator (Fitch
indicator), which reveals the agency's expectations of charge-off level
over the next six months. A copy of the report is available on the
agency's web site at www.fitchratings.com.



Airlines Take Their  Problems to Congress

Top airline executives are again seeking

government assistance, saying they need help defraying airport-security
and war-insurance costs, as well as rising oil prices, the
face='Times New Roman'>Wall Street Journal reported. Six airline
chief executives will testify today on Capitol Hill about the state of
the airline industry and what lawmakers should do to ease the situation.

Also to be discussed is whether one of those airlines, United Airlines,
should be given a federal loan guarantee.

WorldCom Ex-CEO Ebbers Requests New Date for
Trial

A lawyer for former WorldCom Inc. CEO
Bernard Ebbers asked a federal judge to postpone Ebbers's Nov. 9 trial,
citing scheduling conflicts and hundreds of boxes of evidence that need
to be reviewed. At a proceeding on Wednesday, Ebbers's attorney,
Reid Weingarten, asked U.S. District Judge Barbara S. Jones to delay the

fraud trial until early next year. Prosecutors opposed the request,
citing pending civil and criminal cases related to WorldCom's accounting

scandal that hinge in part on the outcome of Ebbers's trial, the online
Wall Street Journal
repoerted.

Pegasus Satellite TV
Files for Chapter 11

Pegasus Communications Corp.'s
satellite television subsidiary filed for chapter 11 bankruptcy
protection on Wednesday, shortly after DirecTV ended a deal that allowed

it to distribute DirecTV service in rural areas, Reuters reported.
Pegasus said the filing by Pegasus Satellite Television would allow it
to continue to serve its 1.1 million subscribers while the
company fights what it calls the 'unlawful' termination of its
contract.

Toys R Us CEO Looks To
Turn Around Ailing Stores

CEO John Eyler said on Wednesday his biggest challenge

was turning around the retailer's beleaguered toy stores, under assault
by discounter Wal-Mart Stores Inc. 'The biggest challenge has been to
turn around U.S. toy stores,' said Chairman and CEO John Eyler, as he
addressed roughly 40 shareholders, directors, executives and others at
the retailer's annual shareholders' meeting. Toys R Us is in the midst
of a company overhaul. Analysts expect it to prune its U.S. toy stores
base and close weaker locations, focusing on Babies R Us and
international stores. It has already shut freestanding Imaginarium and
Kids R Us stores.

U.S. Customers Happiest in 10
Years 



Customer satisfaction with products and services is at a 10-year high,
concludes a quarterly survey being released today, the Washington
Post reported. The survey by the University of Michigan Business
School, part of its annual study of how more than 80,000 customers rank
their experiences with about 200 companies, rates the package delivery
service business highest in satisfaction. According to the national
survey, customer satisfaction for the first three months of 2004 was at
the highest level since 1994, at 74.4 on a 100-point scale. That's up
from 74 from the last quarter of 2003. Survey Director Claes Fornell
called the findings 'remarkable since we hear so many complaints about
the level of customer service.'

Fraud Trial Of Adelphia
Founder Enters Final Phase

Lawyers for Adelphia
Communications founder John Rigas and his son Michael wrapped up their
case on Wednesday, while another former company executive testified in
his own defense as the fraud trial neared a close, Reuters reported.
Closing arguments are expected to begin next week in a case that charges

members of the Rigas family with stealing millions in Adelphia funds to
buy stock and pay for personal expenses such as a golf course and a
professional hockey team. Adelphia filed for chapter 11 bankruptcy
protection in June 2002 and put itself up for sale in April 2004, the
newswire reported.