its 4.7 percent second quarter growth pace, the Bank of Butterfield has told investors.

In the latest edition of Financial Viewpoint, the bank said the extent of the slowdown and the implications for labour markets and inflation remain unclear.

Third quarter economic reports are not consistent with each other, with some suggesting a significant weakness, especially in terms of retail sales and exports, while others, including industrial production, employment and housing starts, indicate continued strength.

A quarter of a million US jobs a month have been filled for six consecutive months and personal incomes are growing at more than three percent while household wealth "is nearly 40 percent above year-ago levels''. Consumer confidence is high.

Unemployment is expected to show a fall from 5.6 percent at the end of 1995 to an average of about 5.2 percent in the third quarter.

The publication expressed surprise that the Federal Reserve Board produced no policy shift at the recent Federal Open Market Committee (FOMC), a policy committee that sets short term monetary policy objectives for the Fed.

It said that while equity prices trended higher during August, each release of strong economic data pushed bond yields higher and stock prices lower. But the subsequent rallies have not been broadly based and earnings are slowing, given rising unit labour costs and low pricing power.

In Canada, the analysts noted The Bank of Canada has lowered the funding rate by 200 basis points in eight moves in 1996, a trend unlikely to continue.

Unemployment rebounded in August and the inflation rate is near the bottom of the bank's one to three percent inflation target range. The momentum in the housing and auto sectors has faded.

Financial Viewpoint, published by the bank subsidiary, Butterfield Asset Management Ltd. (BAM), also reports in other markets that: The German economy has gathered momentum over the summer and business confidence has improved; A further period of financial market instability is possible in France; In the UK, demand continues to build and manufacturing output may accelerate sharply in the coming months. The economy is poised to accelerate; and Japan's economic fundamentals continue to improve with consumption rising at a rate of 3.4 percent, housing starts up more than 20 percent and industrial production increasing.