Economy Reeling After Attacks

N E W   Y O R K, Sept. 20 -- Last week's attacks on New York and Washington are already having a devastating effect on the U.S. economy, and some analysts are warning that the worst is yet to come.

Banks, airlines, plane makers, insurance companies, entertainment companies, travel and leisure firms, online travel agencies… the list is dismally long of individual companies and entire industries that are already being affected by an abrupt drop in consumer and business spending — a decline that unexpectedly came in an already shaky economy.

What it all means, say economists, is that the U.S. economy is going to experience some extremely tough times in the months ahead, despite lower interest rates, tax rebates, talk of further tax cuts and now what financial markets are dubbing a "war premium" as efforts to find the culprits behind last week's unspeakable acts goes forward.

Even soothing words from Federal Reserve Chairman Alan Greenspan, testifying before Congress today that any short-term uncertainties will not undo long-term prosperity, did little to instill confidence on Wall Street.

"Consumers are like deer in the headlights. They're just paused and waiting to see what happens next," said Sherry Cooper, chief economist with Harris Bank / Bank of Montreal. Cooper downgraded her firm's forecast after last week's attacks to reflect what she expects will be a much longer time-frame for recovery.

Bad News Abounds

The evidence is almost too far flung to track.

In Manhattan, few are in a shopping mood, and visitors to the city have either left in a scramble or canceled their plans. Flagship department stores such as Barneys, Bloomingdale's and Saks Fifth Avenue are practically empty; the landmark Plaza Hotel is considering closing its famed Oak Room and Oyster Bar because of lack of business.

At the Loews Hotel in Miami Beach, occupancy was at 12 percent Tuesday down from 70 percent last Monday. Convention meetings scheduled for the next few weeks are being canceled.