Bush urges lawmakers to act after dismal economic report

  • Wednesday, October 31, 2001 9:00pm
  • Business

Associated Press

WASHINGTON — The U.S. economy, weak from a yearlong slowdown and battered by the terrorist attacks, declined in the July-September quarter in the strongest signal yet the country has slipped into a recession.

The Bush administration insisted that quick congressional passage of a stimulus package could avoid a full-blown downturn.

Private economists said the real worry now is whether a mild recession will become something much worse as a result of more threats of terrorist attacks.

"I think the economy is going to continue to struggle until a sense of personal safety has been re-established," said Mark Zandi, chief economist at Economy.com. "Right now the economic clouds are thick and growing darker."

The Commerce Department report Wednesday showed that the gross domestic product — the country’s total output of goods and services — declined at an annual rate of 0.4 percent in the third quarter.

A recession is usually defined as at least two consecutive quarters of falling GDP. Economists predicted a bigger drop in the current October-December quarter as continued fallout from the Sept. 11 attacks and new worries about anthrax in the mail deepen consumer gloom.

Consumer spending, which accounts for two-thirds of GDP activity, is likely to be depressed even more in the coming months as incomes suffer from the rising toll of layoffs.

"While the government is doing its part to boost demand, my belief is that this will be overwhelmed for a while by the events of Sept. 11," said Stuart Hoffman, chief economist at PNC Financial Services in Pittsburgh.

Other economists said the downturn could be mild and over by early next year, given the aggressive interest rate cuts by the Federal Reserve, increased government spending for reconstruction and further tax relief pending before Congress.

President Bush used the release of the GDP figures to increase pressure on Congress to pass "before the end of November" a stimulus package along the lines he has outlined.

He said the decline in GDP was no surprise.

"After all, we’re at war, and … part of the battlefront is here at home," Bush said.

Treasury Secretary Paul O’Neill told reporters that prompt action by Congress on the stimulus package presented a "plausible argument" that the fourth quarter GDP could be "mildly positive."

But private economists said the downturn, which would be the country’s first in more than a decade, will likely be dated back to April or May, when a variety of indicators in addition to the GDP peaked and began to turn down.

The GDP was barely positive in the spring quarter, at an annual rate of just 0.3 percent.

Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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