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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: kdavy who wrote (54797)	10/29/2001 9:19:24 PM
From: StanX Long	Respond to of 70976

U.S. Q3 GDP seen as weakest since last recession By Marjorie Olster NEW YORK, Oct 29 (Reuters) - The U.S. economy in the third quarter probably put in its worst performance since the country's last recession a decade ago, analysts predict. Economists polled by Reuters forecast gross domestic product shrank 1.0 percent on an annual basis in the July-September quarter, which would be the weakest showing since the first quarter of 1991 and the first contraction since early 1993. The government's advance estimate of GDP is due out Wednesday at 8:30 a.m. EST(1330 GMT). Most Wall Street economists expect the contraction to last at least to the end of the year and if it does, the third quarter would mark the start of the first U.S. recession in 10 years. The economy may well have slipped into a recession even without the Sept. 11 attacks on New York and Washington that killed about 4,800 people. But the attacks are likely to make the downturn that was already in progress deeper and longer. "Most of the damage stemming from the World Trade Center and Pentagon attacks will probably show up in the fourth quarter in terms of a reduction in spending," said Joseph Abate, senior economist at Lehman Brothers. "But there is some uncertainty in how it will hit corporate profits in the third quarter." The economy grew a meager 0.3 percent in the second quarter and now looks set to grow about 1.0 percent for the entire year, down significantly from 4.1 percent last year. Consumer spending last quarter probably rose at less than half of its 2.5 percent annual rate in the second quarter, economists predicted. Business investment, which fell at a 14.6 percent annual rate in the second quarter, was probably as weak or weaker in the third. Exports, down 11.9 percent in the second quarter, probably slid further in the third. The pace of inventory reduction is not expected to shift much from the $38.3 billion a year decline measured in the second quarter. The attacks have also hurt consumer confidence, which was already waning before Sept. 11, and darkened the corporate profit outlook, leading to large numbers of layoffs. Abate said the full impact of falling corporate profits on GDP will not be known until later government estimates of growth. The number is not likely to affect expectations of further Federal Reserve interest rate cuts. The Fed has already cut the benchmark lending rate nine times this year by a total of 4.0 percentage points and economists expect a 10th cut of at least a quarter point at the next central bank meeting on Nov. 6. UBS Warburg economists said if the country has now slipped into a recession, it will probably be the tamest one since World War Two because more efficient inventory management has translated into milder cyclical upturns and downturns. The average postwar recession saw an overall decline of 2.3 percent in GDP, while this time around a dip of only about 1.0 percent is expected. "Although most upcoming economic data will look weak for the next few months, we still believe that this recession will go down in history as one of the mildest in the postwar era," UBS said in a research note. UBS predicted the economy would contract for three straight quarters, returning to growth in the second quarter of 2002. That is consistent with the Wall Street consensus for a rebound to start around the middle of next year. "I don't think Q3 GDP will mean a lot," said Lehman Brothers' Abate. "Q4 will be the trough and will tell us how deep the decline is." ((--U.S. Financial Markets Desk, 646-223-6314)) REUTERS * end of story *