- The Washington Times - Saturday, September 29, 2001

The U.S. economy managed to eke out a tiny 0.3 percent growth rate in the April-June quarter, dangerously close to a recession even before the Sept. 11 terrorist attacks.
Many economists believe the attacks and their toll on consumer confidence will spell the end of the nation's longest economic expansion and push it into its first recession since 1990-91.
The Commerce Department reported yesterday that the gross domestic product the nation's total output of goods and services was growing at a barely discernible rate of 0.3 percent in spring, its weakest performance in more than eight years.
"The president remains concerned about the status of the economy," White House spokesman Ari Fleischer said, commenting on the GDP report. Mr. Fleischer said that President Bush was focused on reaching an agreement with Congress on a stimulus program for the economy that many expect to be revealed next week.
GDP growth had been a weak 1.3 percent in the first quarter and has been hovering in that range since the summer of 2000, when the economy suffered an abrupt slowdown that has already cost more than 1 million manufacturing jobs.
The second-quarter figure was only slightly higher than a 0.2 percent estimate of growth made a month ago, an improvement the government said came from a slightly better trade performance.
Inflation, as measured by a price gauge tied to the GDP, rose at an annual rate of just 1.3 percent in the second quarter, its smallest increase since early 1999. This GDP price measure was up 3.2 percent in the first quarter.
If the country does enter a recession, many economists believe it will be a brief one because the Federal Reserve, which has already cut interest rates eight times, will have room to cut rates further as inflation is not a threat.
The Fed is expected to cut rates again Tuesday when central bank policy-makers gather in Washington for a regularly scheduled meeting. The Fed cut rates between meetings on Sept. 17, a half-point reduction that failed to stem a steep drop in stock prices in the week that the market reopened following the terrorist attacks.
The government said yesterday that corporate profits after taxes fell in the second quarter at an annual rate of 1.7 percent, following declines of 7.8 percent in the first quarter and 3.5 percent in the fourth quarter. It was the longest stretch of profit declines since 1997 and 1998, when the country was being buffeted by the Asian currency crisis.
The small amount of growth in the April-June quarter came from a 2.5 percent rise in consumer spending. Consumers, who account for two-thirds of total economic activity, have kept the GDP in positive territory over the past year even as U.S. companies, particularly in the high-tech sector, were being bludgeoned by falling profits and plunging stock prices.
Since the attacks, a number of economic statistics have pointed to growing weakness. Consumer confidence for September took its biggest nose dive since October 1990; that was when the country was preparing to go to war against Iraq over its invasion of Kuwait.
Two major economic forecasting groups the Blue Chip Economic Indicators and the National Association for Business Economics said in special surveys taken after Sept. 11 that an overwhelming number of its economists now believe the country is in a recession.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide