It helps me keep my mind active, so I read between 15 and 30 magazines online daily, like this next article, Stan.
2 Reports Show War Is Slowing Spending
washingtonpost.com
By John M. Berry
Washington Post Staff Writer
Friday, April 4, 2003; Page E01
There were additional signs yesterday that consumer and business spending is being held down by concerns linked to the war in Iraq, and economists continued to cut their growth forecasts as a result.
As several other forecasters have done recently, Gail D. Fosler, chief economist of the Conference Board, a business research group, predicted yesterday that "war-related anxiety" would keep U.S. economic growth in the 2.5 to 3 percent range for the year, essentially the same as in 2002. Even that forecast assumes a significant acceleration in growth later this year, she said.
Two new reports provided more signs of economic weakness.
The Institute for Supply Management said its index of activity in the non-manufacturing portion of the economy tumbled to 47.9 last month from 53.9 in February. With 50 the dividing point between expansion and contraction, the new figure indicates that that part of the economy contracted for the first time since January 2002. Earlier this week, the institute's more closely watched index for manufacturing also showed a sharp swing from expansion to contraction.
In the other report, the Labor Department said initial claims for jobless benefits rose to 445,000 last week, a jump of 38,000 from the previous week. Claims had dropped by 20,000 the week before. The increase reinforced analysts' expectations that another report this morning will show that payroll employment fell again last month and that the unemployment rate rose one- or two-tenths of a percentage point from February's 5.8 percent level.
"The economic data are receiving less attention than usual, given the focus on the war," said Maury N. Harris, chief economist at UBS Warburg in New York. "After all, the outlook could change significantly depending on what happens in Iraq. For now, though, the economy is weakening."
Harris was more optimistic about today's payroll report than most analysts. He predicted that there will be little change after a large 308,000 decline in February, a number probably affected by bad weather and the call to active military duty of reservists and National Guard members. Many other analysts anticipate a drop of 50,000 to 100,000 in payroll jobs.
The UBS Warburg economist cautioned against assuming that the Institute of Supply Management's two reports necessarily point to a downward trend, "given the recently high but very possibly temporary level of geopolitical uncertainty and the potential for activity to rebound once the Iraqi crisis abates. Nonetheless, it is clear that the war is having a negative impact on most sectors of the economy."
Some respondents to the institute's index survey noted the link between a drop in business and the war.
"Impending war outbreak in Iraq and negative impact on economy in short term," said one. "Uneasiness on consumers' part, economy, stock market, war. People are uncertain and holding back," said another. "Current world affairs are definitely having an effect on purchases. Very cautious. Even though interest rates are low, capital purchases have still not rebounded," commented a third.
Importantly, retail trade was among the industries that reported the highest rates of contraction in the survey.
Economists say consumers hold the key to economic growth in the short run because their spending accounts for about two-thirds of all economic activity. Early signals about purchases last month have been mixed. Motor-vehicle sales improved moderately from February levels, but some reports have pointed to weaker sales at department and general merchandise stores.
The Commerce Department's advance report on March retail sales is due April 11. But analysts said that number could be depressed because Easter is late this year and thus the extra spending for spring apparel and other goods it induces will be delayed as well.
© 2003 The Washington Post Company |
