Follow gut, not economists, on spending
Saturday, November 24, 2001
The genius economists of this country keep pounding the point so that everybody can understand it and agree with them:
We are in a recession. It's bad. Hang onto your money.
Luckily, consumers don't seem to be listening. Nationwide, retail sales surged 7.1 percent in October, a month after terrorist attacks seemed to drive the final nail in the United States' financial coffin. It was the biggest jump on record since 1968.
The gain was triple what economists predicted, and it was unexpected after the retail standstill immediately following the terrorist attacks. September retail sales declined 2.2 percent.
A record 26.4 percent surge in auto sales pushed the figure higher. The 0 percent interest rates were too much for consumers to resist.
"What recession? We're busy," one local car dealer said last month, apparently echoing many others.
So here are the new predictions following the release of these figures:
The one-month surge in retail sales won't be enough to put the total figures for the quarter in black ink because too many other forces are dragging down the economy.
The National Association for Business Economics released a new forecast last week that showed the gross domestic product declining by 2 percent in the current quarter. The GDP fell 0.4 percent in the third quarter.
The country is in a mild recession, but the recession will likely end early next year.
The chief economist of Wells Fargo, Sung Won Sohn, made an interesting observation.
"It looks like consumers are already learning to live with terrorism at home and abroad," he said.
Maybe, but the reason the economy marches on is probably more noble than that.
Of course we are haunted by images of Sept. 11. Of course it is tempting to shut ourselves and our families inside and hope that the specter of terrorism stays away.
But President Bush and other leaders of this country have asked us to keep our lives as normal as possible, keeping the economy afloat by spending money as we would at any other time. We're doing so.
What could be more American than that?
It would be foolish to ignore some signs locally of a troubled economy, including layoffs at car-parts maker Dana Corp. and food-supplement producer BioKyowa Inc.
But it is best that we in Southeast Missouri follow our president and our guts when it comes to consumer spending, not changing predictions of this nation's economists.