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US Economist on Economic Impact of Terrorist Attacks
It is impossible right now to assess with any degree of certainty the broad economic impact of Tuesday's terrorist attacks on the United States, an economist said Thursday in a statement.
But given the weakness in the economy in August heading into the negative impacts of the World Trade Center attack, said Gail Fosler, chief economist at the Conference Board, the prospect of a significant recovery in the U.S. economy is pushed farther into the future -- possibly to early next year.
Moreover, added Fosler who had been one of the most optimistic economists, the deterioration in important long-lead indicators, such as corporate profitability, business costs and wage rates, suggest that recession risks remain high.
Prior to the event, she said, there were good reasons to believe that an economic turnaround is occurring even though a number of important indicators suggest that August was weaker than expected. She added that there are likely to be significant distortions in the reported data for September that, while probably on balance negative, will not reflect the underlying direction of the U.S. economy.
"Clearly, consumers' reactions to these events represent an important key," Gail said. Consumers can react swiftly and negatively to heightened uncertainty, she explained, "What seems to be more important is whether the initial reaction is validated by ongoing economic risks." Thus, she said, how financial and labor markets react over the next several weeks and the behavior of gasoline prices, the real estate markets and other economic forces that touch people's lives will drive consumers' reactions.
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