24 September 2001, 09:23 OUTLOOK US data to show indications of recession, with confidence dropping
WASHINGTON (AFX) - US economic data to be released this week will
show indications of a recession, with confidence dropping sharply in
two closely watched surveys, according to economists surveyed by AFX
News.
"Everybody in the world will be looking at the confidence
indicators to see what impact there is (from the Sept 11 terrorist
attacks)," said Mark Vitner, economist at First Union Corp.
The Conference Board's consumer confidence index, to be released
Tuesday, and Friday's University of Michigan consumer sentiment survey
"are going to be pretty bad -- just how bad we don't know," Vitner
said.
Economists noted that little attention will be paid to indicators
that cover periods before Sept 11, leaving attention focused on the
confidence surveys and jobless claims.
Deteriorating consumer sentiment, along with rising jobless claims,
will indicate an economic contraction in the second half, analysts
concluded, while a revision to second quarter GDP could show that the
US is already in one.
To date this year, consumer spending had been "the thing that was
keeping the economy going," said Mike Carey, economist at Credit
Lyonnais.
With a manufacturing sector already in recession for the past year,
slower retail sales will force a "pencilling in" of an overall
recession for the economy, Carey concluded.
Carl Tannenbaum, chief economist at ABN-Amro LaSalle, explained
that consumers have been hit by a "triple whammy", including the Sept
11 tragedy, the falling stock market, and "what seems to be
accelerating job cuts."
Carey forecast consumption growth to slow to 1.0 pct in the second
half, after growth of 2.5 pct in the second quarter.
In a special survey by National Association of Business Economics
members conducted Sept 20-21, an "overwhelming majority" of economists
concluded that the US had entered a recession, due to the impact of the
attacks.
The primary reason for this is a "drop in consumer confidence,"
they said.
The Conference Board, in a separate survey of 750 US residents
conducted after the attacks, said nearly half of Americans believe the
tragedy will push the US into recession.
On Friday, the Commerce Department will release its final revised
report on second quarter GDP. While most economists expect growth to
have remained positive, observers will be watching closely to ensure it
does not slip into negative territory.
The preliminary estimate of second quarter GDP showed a slight 0.2
pct rise, but larger inventory reductions that initially estimated
could force a downward revision into negative territory.
"The final revision to GDP is often overlooked, as it is old news,
but in this case there is some concern that it may be a small
negative," said Paul Furley, economist at Bank of Montreal.
This would mean that the US is already in recession, given the view
of most economists that the current quarter will also see a drop in GDP
-- thereby fulfilling the traditional definition of a recession.
Two consecutive quarterly declines in GDP traditionally mean a
recession.
Vitner at First Union said the National Bureau of Economic
Research, the official body that labels recessions, could formally
announce a recession as soon as this week.
Analysts said ongoing preparations for a military conflict in
response to the terrorist attacks could continue to weigh on
confidence, as consumers remain uncertain about the future.
However, moves in Washington towards a stimulus package for the
economy could help buoy sentiment, analysts said.
Federal Reserve Chairman Alan Greenspan and Treasury Secretary Paul
O'Neill have cautioned Congress to wait at least another week before
crafting such a package.
But President George W Bush separately has pledged to dip into the
federal budget surplus by "enough to get America going again."
Goldman Sachs economists said in a research note that an eventual
stimulus package could total 100 bln usd, adding that it "probably will
focus on tax reli ef, but may include significant spending
initiatives."
The following are consensus forecasts of Wall Street economists for
indicators to be released this week:
AUGUST LEADING INDICATORS, Monday (10.00 am): The Conference
Board's index of leading economic indicators is expected to show a 0.1
pct drop, after rising by 0.3 pct in July.
AUGUST EXISTING HOME SALES, Tuesday (10.00 am): Existing home sales
are seen rising 0.4 pct in August to a seasonally adjusted annual rate
of 5.19 mln units, from 5.17 mln the previous month.
Low mortgage rates continue to hold up the housing sector, which in
turn is one source of critical support for the overall economy.
"The last thing we need is evidence that (housing strength) is
starting to come off," said Eric Green, economist at BNP Paribas.
SEPTEMBER CONSUMER CONFIDENCE, Tuesday (10.00 am): The Conference
Board's consumer confidence index is forecast to drop sharply to 102
from 114.3 in August, with much of the decline due to the Sept 11
attacks.
David Littman, senior economist at Comerica Bank, cautioned against
too pessimistic a reaction to the decline, which may only prove to be
an "initial response" to the tragedy.
"Confidence can come back quickly," he said, if Washington enacts a
stimulus package which provides a boost to sentiment.
AUGUST DURABLE GOODS ORDERS, Thursday (8.30 am): Advance orders for
durable goods are seen dropping by 0.3 pct in August, after a 0.7 pct
decline in July, on the back of continued recessionary conditions
throughout the manufacturing sector.
Some economists noted that the prospect of higher military spending
should boost durable defence goods in coming months.
WEEKLY JOBLESS CLAIMS, Thursday (8.30 am): Initial claims for
unemployment insurance are seen soaring by 58,000 to 445,000 for the
week ending Sept 22, from a level of 387,000 the previous week.
Bank of America economists warned to "prepare for a spike in
jobless claims propelled by the disruptions of economic activity and
consequent loss of work triggered by" the attacks.
The previous week's claims level was probably artificially low, as
unemployed workers often delay filing their claims in disaster
situations, a Labor Department spokeswoman said last Thursday.
AUGUST NEW HOME SALES, Thursday (10.00 am): New home sales are seen
dropping 3.1 pct in August, after a bigger-than-expected jump in July,
to a seasonally-adjusted annual rate of 921,000 units, from 950,000 in
July.
Q2 GDP FINAL ESTIMATE, Friday (8.30 am): Second-quarter GDP is
forecast to be revised to show a 0.1 pct increase in the Commerce
Department's final revision, down from the 0.2 pct rise in the
preliminary estimate.
In the first quarter, GDP expanded at a 1.3 pct pace.
Economists said GDP will be revised down due to a sharper draw-down
of inventories than previously estimated. This was partially offset by
a smaller trade deficit, according to the consensus forecast.
SEPTEMBER CHICAGO PMI, Friday (10.00 am): The Chicago Purchasing
Managers' Index of business activity is seen declining to 40.9 from
43.5, showing a continued contraction. Any reading below 50 shows
declining activity.
SEPTEMBER MICHIGAN CONSUMER SENTIMENT, Friday (10.00 am): The
University of Michigan's final consumer sentiment index reading for
September is seen at 78.3, down from 83.6 in the initial survey. This
will mirror the drop in the Conference Board's index earlier in the
week.
© 1999-2024 Forex EuroClub
All rights reserved