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To: T L Comiskey who wrote (49721)	11/13/1999 10:48:00 AM
From: T L Comiskey	Respond to of 152472

OT..... <Y2K>....... REUTERS L O N D O N, Nov. 10 ?After dire warnings of the damage crashing computers could do to global business, the millennium now looks set to end not with an economic bang but a whimper. To be sure, the looming Year-2000 date change is causing important shifts in economic activity as firms and consumers stockpile goods and information technology purchases are postponed in case of possible disruption. But economists say both these trends appear so far to be relatively modest and should in any case be unwound in the first quarter of next year, producing a ?double bump? the net effect of which would be broadly neutral for world output. Economists say Disruptions Modest ?The net of this in GDP terms is about zero,? said Neal Soss, chief economist at Credit Suisse First Boston in New York. The millennium bug, or Year 2000 (Y2K) problem, could lead older computers that have not been reprogrammed to read the year 2000 as 1900, causing them to produce corrupt data or shut down, halting myriad industrial processes and distribution chains. But preparations in most industrial countries have been so exhaustive that officials are confident of avoiding chaos?as long as nobody panics. ?If we avoid fear-induced, significant economic responses in the months ahead, the Century Date Change will hopefully replicate the saga of ?the dog that did not bark,?? Federal Reserve Chairman Alan Greenspan said on October 15. ?The Dog That Did Not Bark? The dog might not bark, but he is stirring. In Japan, the government has advised everybody to stockpile several days? worth of food and water as a precaution. Power producers across Asia appear to be building up an extra week?s supply of coal, which provides about a third of the region?s electricity, according to Australian coal suppliers. In the United States, despite Greenspan?s plea not to panic, one sign of pre-millennium caution is that people on regular medication are renewing their prescriptions early. ?It?s not a bad idea to have an extra stock of those pills handy on December 31,? Soss said. Little World Inventory Building By and large, however, U.S. and European economists are surprised how little inventory building there has been so far. The International Energy Agency said in its latest monthly oil market report that there was scant evidence in heating oil futures markets of any concern about supply disruptions. Bernhard Speyer at Deutsche Bank in Frankfurt said it was puzzling that freight companies were not reporting much of an increase in firm bookings and that inventory data were not reflecting Y2K stockpiling. ?It makes you wonder what is going on,? he said. Speyer speculated that firms will eventually get round to ordering more spare parts and supplies. But he also said the spread of ?just-in-time? supply chains, which deliver components when they are needed during the manufacturing process and not before, meant some companies could not build big stockpiles. Michael Niemira, an economist with Bank of Tokyo-Mitsubishi (BOTM) in New York, estimates that inventory-building will boost fourth-quarter U.S. growth by no more than one third of a percentage point at an annualised rate. BOTM conducts trade surveys of transport firms and New York-area purchasing managers, and Niemira said the message from them was broadly the same: about a third of those polled expect to increase their inventories, but many of them by very little. ?There?s a modest increase in bookings, but it?s almost indistinguishable from what else is going on in the economy,? Niemira said. ?I suspect there?ll be more (statistical) noise from Y2K than anything else. The economic fundamentals will be far more important and will wash out any other concerns.? In Britain, the Bank of England expects Y2K to boost economic growth by around 0.1 to 0.2 percentage point of gross domestic product (GDP) this year and subtract a similar amount in 2000. ?We see the effect of the millennium as being quite pervasive...but mostly one that just shifts output and consumption from one quarter to another rather than providing a major one-off boost,? Bank of England Monetary Policy Committee member DeAnne Julius told Reuters recently. Biggest Impact: Buyers Get Cold Feet Many economists suspect the biggest economic impact from Y2K will come not via inventories but via fixed direct investment as IT managers freeze new spending to concentrate on ironing out any last-minute wrinkles in their systems. Computer giant International Business Machines Corp and business information provider Reuters Group Plc are among firms whose business has been hit by a Y2K slowdown. ?There are increasing indications that companies may be holding back on capital expenditure this year?on software or on hardware?and delaying it into next year. More and more corporates that we talk to give us that sense,? said Martin Brookes, an economist at Goldman Sachs in London. As a result, there could be a pick-up in capital expenditure in some parts of the economy to help offset a drawdown in inventories, Brookes said. Switchover Like European Union Overall, he said the century date change was shaping up like the switchover in Europe last January 1 to economic and monetary union. The potential for chaos in payments systems, with the risk of knock-on effects on the real economy, was huge. But in the end, the hiccups were minor. ?My suspicion is that it will be a bit like EMU, which was thought of a big threat to various markets. But it was incredibly smooth and I think that this will be as well,? Brookes said.