- The Washington Times - Thursday, October 25, 2001

No region of the country has escaped the economic fallout from the terrorist attacks, the Federal Reserve said yesterday.
Analysts said the Fed's new assessment of business conditions throughout the country increased the likelihood that the central bank will cut interest rates for a tenth time this year when its policy-makers meet on Nov. 6.
Releasing its latest survey, compiled from reports from its 12 regional banks, the Fed said that the Sept. 11 attacks had depressed consumer spending, forced cancellation of orders to manufacturing companies and caused widespread layoffs across a variety of industries.
"Layoffs and plants closings have been reported in many industries from financial services on the East Coast to media and advertising on the West Coast to auto parts in the central states," the report stated.
Most economists said the new report made a tenth rate cut all but inevitable. Many predicted the reduction will be the larger half-point that the central bank has used for most of this year.
The Fed has cut rates by 4 percentage points since Jan. 3, pushing its key federal funds rate to 2.5 percent, the lowest level in nearly 40 years.
"I think the Fed will cut by a half-point because of the mushrooming and spreading weakness in the economy and also because anything less would disappoint the markets," said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis.
The Fed survey, known as the beige book for the color of its cover, depicted an economy that came to a virtual standstill in the days immediately after Sept. 11, as air travel was temporarily suspended and Americans stayed home to watch television news reports.
In fact, the survey said, in the week after the attacks spending dropped sharply for all items "except those that were likely purchased in preparation for possible additional attacks."
The Fed found increased spending for groceries, security devices and bottled water. Purchases of insurance also rose.
Since the initial shock, consumers have returned to the stores, but spending was below the level of early September, causing many retailers to lower their expectations for upcoming holiday sales.
The Fed survey found that the temporary suspension of all commercial flights disrupted delivery of fresh vegetables from the West Coast to the East Coast and caused problems for manufacturers trying to get parts from suppliers.
However, the Fed said these disruptions proved temporary as air cargo was rerouted to trucks. All Fed districts except Boston and Kansas City, Mo., reported sharp declines in hotel, airline and tourism industries although some canceled conventions have now been rescheduled.
"Business activity recovered quickly from some aspects of the shock, but longer-run aspects are more difficult to assess," the report said.
In terms of the impact on employment, the Fed noted large layoffs in the aircraft and aircraft parts industries as orders for new planes have been cut sharply. It also noted considerable job losses in many other industries.
The Fed said seven of its districts Boston, Dallas, Kansas City, Chicago, Philadelphia, San Francisco and St. Louis had reported sizable manufacturing layoffs.
The Dallas, Richmond and Philadelphia districts reported declines in employment at retail establishments, the Fed said. All parts of the country reported job losses at hotels, tourism and the airlines.

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide