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Americans Cut Spending After Attacks

News, 19 September 2001

Last week’s devastation in the US had an adverse effect on spending by American consumers.

The Redbook retail sales average for chain stores dropped 3.2% over the first two weeks of the month, below the target of flat growth. Such findings were echoed by the Bank of Tokyo-Mitsubishi and UBS Warburg’s chain store sales index, which registered a drop of 1.4% in the week to September 15, far greater than the 0.1% fall the week before.

Commented Mike Niemera, a senior economist at BT-M: “Clearly the week took a hit on sales and took a hit on traffic. It probably means the month is going to come in a lot weaker than previously anticipated.”

Consumer spending makes up around two-thirds of US economic growth, and has been the major factor in keeping a weak economy out of recession in recent months [WAMN: 11-Sep-01]. However, some analysts fear retail sales will remain weak for the next four quarters due to deflationary pressure on retailers.

Another concern is that the effects of the $38 billion in tax rebates issued since July – which analysts hoped would boost the economy – may be lost if Americans spend more cautiously following last week’s attacks.

BT-M now forecasts a 1.5%–2% year-on-year growth in sales for September as a whole, much less than previous predictions of 3%.

News source: New York Times