November 5, 2001,
Consumers see recession, but plan to keep spending
More than half of all Americans now believe that the terrorist attacks of Sept. 11 will tip the U.S. economy into a full-blown recession, but far less think a recession will have any impact on their personal finances, and plan no cutbacks in spending, according to a survey conducted by The Conference Board, a New York-based private research group.
But in good news for retailers and home furnishings producers, the vast majority said a recession won't have any impact on their plans to buy homes, furniture, cars or other consumers goods, even in the current environment of escalating job layoffs.
About 46 percent of consumers polled said a recession will have a direct impact on their household finances, down from 51 percent the month before.
And a whopping 90 percent of Americans said they have no plans to postpone purchases of homes, cars, furniture or other big-ticket items, virtually unchanged from the month before. About 82 percent said they have no plans to put off financial investments, a small improvement over the 80 percent recorded in September.
"While the purchasing intentions of consumers have not changed and remain quite upbeat, it remains to be seen whether these current attitudes translate into actual purchases," said Lynn Franco, director of The Conference Board's Consumer Research Center.
The Conference Board survey also showed that Americans are losing their fear of air travel in the wake of the terrorist attacks. About 79 percent said they have no plans to curtail their air travel plans, a hefty improvement over the 70 percent recorded in the September canvass.
3Q GDP drop worst number since 1991
The American economy edged closer to a recession during the third quarter of the year, sinking at its fastest pace in more than a decade after terrorist attacks in September hammered an already sputtering economy.
The U.S. Commerce Department reported that the nation's Gross Domestic Product (GDP), a key gauge of the country's economic health, fell at an annual rate of 0.4 percent during the July-September period. Since the classic definition of a recession is two consecutive quarters of negative growth, the nation may be well on the way now to a recession that's been widely anticipated. While the domestic manufacturing sector has long been in a recession, consumer spending and high productivity rates have kept other sectors and the broad economy afloat.
The third quarter GDP number was the worst since the nation's economy contracted by 2 percent during the first quarter of 1991, signaling the nation's last recession a decade ago. Even so, the 0.4 percent decline was far better than a drop of 1 percent that most economists had been expecting.
The third-quarter drop wiped out a slender 0.3 percent increase recorded during the second quarter.
During the third quarter, consumer spending, which has driven a decade-long economic expansion, hit the wall, ticking up just 1.2 percent. At the same time, business spending on new plants and equipment plummeted by 11.9 percent. Capital spending among the nation's largest companies has now fallen for three consecutive quarters.
In separate activity, the Chicago purchasing managers index, a gauge of factory activity, dipped to a reading of 46.2 in October, down from 46.6 percent in September.