This was another week when everybody but me sees an economic recovery in the works.

Certainly Thursday's report of a 0.1% decline in U.S. retail trade and food services sales for July was a disappointment. Dan Greenhaus explains why he found the number startling:

The cash for clunkers program was expected to have had quite an effect on retail sales. However motor vehicle and parts rose only 2.4%; expectations had looked for a gain more than double. Sales at auto and other motor vehicle dealers were up just 2.8%, a healthy gain to be certain but far less than many economists expected. The initial impression is that, perhaps, some of the cash for clunkers sales will find their way into the August data.

The auto numbers are indeed surprising, since we know directly from industry counts that the number of autos sold in the U.S. was up

In the currency market, the dollar fell against the euro. Late Thursday, the euro was trading at $1.4036 vs. $1.3882 on Wednesday. “The correlation between risk aversion and currencies has decreased over recent weeks. We continue to expect risk aversion to play an important role in driving currencies, but it will not be as dominant a factor as it has been over the past year,” said analysts at Calyon.

“Our expectations of improved risk appetite over the coming months point to further U.S. dollar weakness,” they added in a research note.

On the economic front, it’s still looking pretty gloomy out there.

While first-time claims for state unemployment benefits fell in the latest weekly data (after seasonal adjustment) continuing claims hit a record high, the Labor Department reported yesterday.

The number of initial claims in the week ending July 4th fell 52,000 to 565,000 – the lowest level since January. But this

The holiday-shortened week saw investors pondering the depth of the economic rabbit-hole. As investors vacillated, most financial markets were characterized by a roller-coaster ride. Friday’s worse-than-expected jobs data left no doubt that the economy was in recession.

The highlights of the week’s discussions were captured on video and are included in this video-o-rama compilation. Strutting their stuff was a star-studded cast including the likes of George Soros, Hugh Hendry, Dan Greenhaus, Paul Krugman, Bill Gross, Nassim Taleb, Jeff Immelt, Stephen Roach, Bob Prechter and Marc Faber.

As an aside, the weather in Europe - where I am spending two weeks with my family in Slovenia and Switzerland - has been characterized of late by endless thunderstorms. Strikingly, the economic mood is no less despondent than that of the holiday-makers trying to escape the ominous dark clouds. But wait, is that a forecast for better days ahead?

Elsewhere, the jail

In the currency market, the dollar arrested its freefall against the euro. Late Tuesday, the euro was trading at $1.3909 vs. $1.4051 on Friday. Analysts said that anxiety after North Korea’s nuclear test seemed to fuel a desire for the relative security of U.S. currency and bonds. In addition to its underground nuclear test Monday, North Korea also reportedly test-fired two short-range missiles yesterday, defying warnings from the international community.

But the day’s most influential submission was from the Conference Board, which reported that its consumer confidence index surged to 54.9 in May from an upwardly revised 40.8 in April. The gain was the fourth-largest in the 32-year history of the survey, and the index hit its highest level in eight months, contrary to economists’ expectations for a rise only to 43.

The confidence number overrode more hard economic data that remains dismal. The national Case-Shiller home price index, released

The National Association of Realtors said Wednesday that sales of existing homes fell to their lowest level in almost 12 years, as prices also fell and are now near their six-year lows.

The trade group said that sales of already existing houses fell a bigger-than-expected 5.3% in January, but buried within that report was one bit of data that may indicate the death-spiral in the U.S. housing market is nearing a bottom.

The indicator: The supply of housing declined again in January, continuing a trend that started during the summer.

“We’ll have to see if that trend continues. Inventory is already down sharply in the new home market, and if the existing home market can follow suit, it will eventually help stabilize housing,” Mike Larson, an analyst at Weiss Research Inc., told the Dow Jones News Service.

The U.S. housing market will play a key role