Newspaper article THE JOURNAL RECORD

Some Analysts Think Economy Will Recover without Stimulus

Newspaper article THE JOURNAL RECORD

Some Analysts Think Economy Will Recover without Stimulus

Article excerpt

Congress has departed for its Thanksgiving vacation without sending President Bush legislation to stimulate the slumping U.S. economy.

But as the partisan stalemate stretches into its third month, some economists are saying that a stimulus bill that might pass in December could be too late.

"I don't see that it makes a big difference" whether Congress acts in coming weeks, said Richard Berner, chief economist for Morgan Stanley and immediate past president of the National Association for Business Economics (NABE).

If Congress had acted in the days following the terrorist attacks of Sept. 11, "it may have had an impact on consumer confidence" in the holiday shopping season, he said. But now, help can't arrive before next year, and many economists expect the economy to begin recovering on its own by spring.

Confidence in a springtime recovery, with or without an economic stimulus bill, was reflected in NABE's survey of economic forecasters.

NABE found that more than four out of five surveyed economists see sustained growth coming within the first half of 2002. After more contraction early in the year, the annual growth rate should rise to 1.3 percent, the survey said.

Ninety percent said the economy would return to growth more quickly than in a typical business cycle, primarily because of the swift actions taken by the Federal Reserve Board, which eased borrowing costs three times after the terrorists struck.

While the Bush administration continues to urge Congress to pass a stimulus bill, even Treasury Secretary Paul O'Neill's optimism does not appear to hinge on congressional action. "I'm convinced that the U.S. economy is putting down the basis for a return to a good rate for real growth as we move into next year," he said.

The International Monetary Fund last week released a somewhat gloomier forecast, saying it expects annual U.S. growth of just 0.7 percent in 2002, the weakest performance since the last recession in 1991.

Talk of a cheery spring may ring hollow for the 3.83 million Americans collecting unemployment benefits, especially in hard-hit industries such as airlines, steel and hospitality. In October, the unemployment rate shot to 5.4 percent, up from 4.9 percent in September, and the NABE economists predict it will hit 5.9 percent next year.

Still, even with unemployment lines lengthening and factory output declining, optimism has started to grow amid reports of military victories in Afghanistan and mildly improving economic indicators.

The rebound, when it does come, will occur in an environment of low inflation, cheap loans, declining tax rates, inexpensive fuel and increasing productivity.

The inflation rate is largely tied to the drop in energy prices, which plunged 6.3 percent in October for the biggest one-month decline in 15 years. …

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