America’s economy struggled to continue its upward trend in the final quarter of 2002, managing only a scant 0.7% growth according to the Commerce Department.
Although the data showed the first positive gain for business investment in two years, this was negated by a downturn in consumer spending on new autos and trucks – down by $25 billion.
Opined a senior economist at Ernst & Young, William T Wilson: “[Consumers] have been borrowing from the future for a year or two. Even with aggressive discounting, you're still looking at another down year for auto sales.”
Overall, the fourth quarter saw the resilience of the US consumer slipping. Although Joe Public’s spending increased marginally by 1 percent (adjusted for inflation and seasonal change), this was the lowest gain since 1993. Economists attribute this to heightened uncertainty about a war in Iraq and insecurity over the continuing high level of unemployment.
Throughout the period from late 2001 to late 2002, quarterly performance fluctuated as the economy moved out of recession, reaching a high in Q3 with robust growth of 4%.
Commented another observer, Paul A McCulley of Pacific Investment Management Company: “In the areas where you had a recession, you can't get a recovery given the levels of overcapacity and risk aversion.”
Data sourced from: New York Times; additional content by WARC staff