As consumer confidence tumbles following the terrorist attacks, US sales in almost all economic categories are falling, increasing fears that America stands on the brink of recession.
The consensus among economists is that the devastation of September 11 guarantees a third-quarter contraction in an already weak economy. Should the decline continue in Q4, the US would find itself in recession.
On Friday, the University of Michigan said its consumer confidence index rose in the initial aftermath of the attack, then plunged faster than at any time since 1990’s invasion of Kuwait by Iraq. “The public’s first reaction was to reassert confidence that the terrorists were not going to win,” revealed the survey’s director Richard T Curtin, “and then in the second week, the reaction set in.”
This response, he added, is affecting sales: “Right now, people tell us they are unsure about their own personal safety, they are concerned about casualties in a military action abroad, and they have decided that this is the moment to be cautious spenders – particularly for major items like homes, autos, appliances, furniture, computers.”
Curtin’s comments are borne out by reports from a host of retailers – among them Saks, Gap, Limited and the Gucci Group – all of which registered a fall in sales last week. Meanwhile, purchases of basics such as toothpaste, packaged food, toilet paper and candles have gone up.
Unsurprisingly, the airline industry is one of the hardest hit, with 100,000 employees laid off since the attacks and passenger traffic averaging less than half capacity.
However, the impact is expected to spread to other areas affected only indirectly by the attacks, including the auto sector and home construction. The latter, which had remained buoyant before the disaster, is now predicted to register a drop in sales of up to 6% by the end of 2001, according to the National Association of Realtors.
News source: New York Times