Newspaper article The Christian Science Monitor

Days of the Roaring US Economy Could Be Running out Last Friday's GDP Report Shows Asia Crisis Is Acting as Speed Bump to the Economy

Newspaper article The Christian Science Monitor

Days of the Roaring US Economy Could Be Running out Last Friday's GDP Report Shows Asia Crisis Is Acting as Speed Bump to the Economy

Article excerpt

Time to stop taking the economy for granted.

That smooth-running jobs machine may be starting to sputter. Big quarterly improvements, economists now say, may be relegated to history. Instead, unemployment may start to tick up, booming exports sales will slow, and business will start to ratchet down its optimism.

One forerunner of this shift may have arrived Friday when the Commerce Department revised downward its estimate of fourth-quarter gross domestic product (GDP), the sum total of the nation's output of goods and services, from an earlier estimate of a 4.3 percent annual rate to a 3.9 percent rate. Economists quickly pointed to the main reason for the revision: a drop in export growth and a spurt in imports. Many exports are expected to sit in the warehouse because of the financial flux in Asia. "Thematically what happened is exactly what we expected, but in terms of magnitude the revisions were huge," says Bob Brusca, chief economist at Nikko Securities Co. in New York. As this trade shift continues, economists expect the United States economy will continue to moderate its growth. The big issue is how quickly it will show up. "The evidence from the Pacific rim is rather scattered - the fingerprints are there but you have to dust for them," says Mr. Brusca. Some of the more pessimistic forecasters believe the economy is now hitting the brakes. Merrill Lynch & Co. forecasts the first-quarter GDP annual growth rate will be cut in half to less than 2 percent. "The US economy is about to slow sharply," warns Cheryl Katz, a senior Merrill Lynch economist in New York. Aside from the export slowdown, Merrill bases its forecast on high inventory levels. These may indicate business has overestimated consumer demand. If so, companies will begin to scale back production. Merrill is predicting a 10 percent reduction in consumer spending this year. …

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