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New numbers point to sickly economy
Compiled from Times wires
© St. Petersburg Times, A series of economic reports issued Friday offered a fairly grim picture of the U.S. economy's health and provided the clearest evidence yet that consumer confidence -- a crucial factor in any future rebound -- has plunged in the weeks since the recent terrorist attacks. Gross domestic product, the output of goods and services produced in the United States, grew at an anemic annual rate of just 0.3 percent in the April-June quarter, the Commerce Department reported Friday. It was the weakest performance in more than eight years. Also, the University of Michigan's closely watched index of consumer sentiment dropped to a slightly better-than-expected 81.8 in September from 91.5 in August, for example, but the data collected in the post-attack period accounted for most of the decline. That sudden lurch is "consistent with the reports that consumers have been pulling back on their spending after the terrorist attacks," said Gary Thayer, chief economist at A.G. Edwards & Sons. Because consumer spending accounts for two-thirds of gross domestic product, analysts are combing through such data for clues about how the attacks will affect Americans' spending habits. And because the biggest factor pushing down the September figure was a drop in consumers' outlook toward the future, "We're probably going to see a dropoff in the months ahead," predicted Gary Schlossberg, senior economist at Wells Capital Management in San Francisco. With Federal Reserve policymakers widely expected to reduce interest rates for the ninth time this year when they meet Tuesday, experts studied Friday's batch of data for some unexpected bit of upbeat news that might impede Fed chairman Alan Greenspan from implementing the half-point rate cut most experts are anticipating. They didn't find any. Having urged Congress this week to move cautiously in enacting economic stimulus programs, "Greenspan will have to act to boost confidence," pointed out Wells Fargo Bank chief economist Sung Won Sohn. Given the shocks the economy has been asked to absorb, he said, the Fed "will remain accommodative in the foreseeable future." The latest reading on GDP followed a 1.3 percent growth rate in the first quarter and illustrated the continued dramatic weakening of the economy this year. The new second quarter figure was slightly higher than a 0.2 percent estimate of second-quarter growth made a month ago, an improvement the government said came from a slightly better-than-anticipated trade performance. Many analysts are predicting it will be the last quarter of economic growth this year. The Blue Chip Economic Indicators consensus expects the GDP to shrink by 0.5 percent in the July-September quarter and decline by 0.7 percent in the final three months of the year before returning to growth early next year. A recession is commonly defined as two consecutive quarters of declining GDP. Many economists are looking toward a rebound in the first half of next year, but that will depend on the severity of the economic fallout from the attacks on the World Trade Center and Pentagon, how the war against terrorism unfolds and how investors and consumers respond. A bright spot in the economy: low inflation, which is good for consumers and gives the Fed leeway to cut interest rates as needed. A price gauge tied to the GDP rose at an annual rate of just 1.3 percent in the second quarter, the smallest increase since early 1999. This GDP price measure was up 3.2 percent in the first quarter. - Information from the Associated Press and Chicago Tribune was used in this report.
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From the Times Business report
From the AP
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