US economy under close watch as holiday season approaches
The state of the US economy has rarely been so widely discussed as people everywhere look for evidence of a global recession following the terrorist attacks of September 11. It is clear that immediately following the events of that day, certain sectors froze, such as the aviation industry, advertisers pulled campaigns with inappropriate messages, and analysts increased their predictions of a deep recession. Two months on however, the picture seems just as mixed as it was before September 11 – another quarter of negative growth in the US would mean a recession, but the depth and length of that recession is still very much open to question.
Crucial to the wellbeing of the US economy is consumer spending, which accounts for two-thirds of the economy. However, the growing number of surveys to measure consumer and business confidence seem to simply increase the confusion. The Conference Board, for example, says that its "expectations index" (which asks how confident consumers are about the future of the economy) has fallen from 78.1 to 70.8 – the worst for 8 years. A survey of the board of directors of The National Association of Manufacturers (NAM) taken at their semi-annual meeting October 30-31, found the majority expecting very little economic growth through the first half of next year, and only slight change in the second half.
Meanwhile other indicators such as the National Retail Federation’s (NRF) 2001 Consumer Holiday Outlook survey suggest that consumers will spend 2.5-3.0% more over this 2001 holiday period than last year. Online shopping also continues to grow at fast rates, albeit from a low base. A study conducted before the terrorist attacks of September 11 carried out by AC Nielsen and Yahoo predicted online spending in the US to grow to $16 billion in the fourth-quarter, but their latest figures, published November 5, put the figure at $17.5 billion. Those questioned were very clear in saying that they weren’t avoiding public places following the terrorist attacks, but it is possible that as more people start to rely on the internet to get information they feel more comfortable spending money there.
The conclusion seems to be that consumer spending can remain robust despite the fact that the US economy is sliding into recession. These surveys provide little more than a snapshot of current mood among consumers and business leaders in the US. Their predictive capacity is small, but the fact remains that confidence is key to maintaining the US economy and escaping the clutches of recession. Which is why, in the run up to Christmas, the US government intends to encourage economic activity and keep Americans spending through tax breaks and stimulus packages that are designed to prop up the world’s largest economy.
