What Will Pull the Economy's Socks Up?
N E W Y O R K, Oct. 31 -- It's official: the U.S. economy is in reverse.
For the first time in more than eight years, the economy backed up in the third quarter, contracting at a 0.4 percent pace. It was the biggest quarterly contraction since the beginning of 1991 when the U.S. economy was in the throes of its last recession. The economy also back-pedaled briefly in the first quarter of 1993.
And according to forecasts, it isn't expected to move forward in the fourth quarter, effectively ending the longest economic expansion in the country's history.
So what sector will jumpstart the U.S. economy and get it moving again? Will it once again be technology, where routers and drivers and broadband stuff take off? Will it be consumer goods and services, where demand for PCs and Gap denim picks up again? Perhaps defense stocks? Financials? Information technology?
Not exactly.
"The real driver will be psychology," said Barry Hyman, chief market strategist with Ehrenkrantz King Nussbaum. "There are a number of different sectors that stand to benefit from low rates and tax breaks but what you really need to see is a rebound in confidence on both the consumer and corporate side."
Bush Urges For Stimulus
While almost all economists are expecting recession in the short-term, they are also anticipating a sharp turnaround next year. A massive stimulus package from the government and near record-low interest rates from the Federal Reserve should foster an economic recovery sooner rather than later, they say.
"The Congress needs to pass a stimulus package and get it to my desk before the end of November," President Bush told the National Association of Manufacturers today. "My call to Congress is, get to work and get something done. Time is of the essence. I hope the bill writers get moving. That is what the American people expect."
Bush also said today's third-quarter GDP report confirmed "that the events of Sept. 11 have really shocked the nation."
But the president, along with many economists, suggests that what may reverse that shock is good ol' human nature, which more so than in previous times of economic uncertainty will be the cart that pulls the economic horse back onto the road.
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