Airborne terrorist attacks that toppled New York's World Trade Center now threaten to deal a powerful blow to the tottering US and world economies, experts said Wednesday, September 12. In a US economy that generates $25 billion in activity per day, the attacks wrought hundreds of millions of dollars worth of destruction as they demolished New York's towering symbol of US financial might.
They also led to the total shutdown of the US stock markets, which are to remain closed Thursday for the third day in the row. Banks remained open, however. And the Federal Reserve said it would provide liquidity as needed for the financial system.
Analysts said the greatest impact would be on consumer confidence, until now the strongest pillar of the US economy, which grew by just 0.2 percent in the second quarter. "A full-blown global recession is highly likely," said Wells Fargo and Son economist Sung Won Sohn.
The best comparison would be with the 1990 Gulf War when consumer confidence plunged, retail sales suffered, the dollar fell and crude oil prices jumped, he said in a report. US consumer spending accounts for two thirds of US economic activity and sentiment had already taken a hit from figures last week showing the jobless rate surged to a four-year 4.9 percent in August from 4.5 percent in July.
The terrorist attack could aggravate their fears. "This is almost certain to affect consumer confidence for several months into the future," said Ray Stone, economist at Stone and McCarthy Research Associates. "It raises the likelihood greatly that we will have at least a couple of quarters of negative growth."
Most of US business was defiant in the face of the attacks. National Association of Manufacturers president Jerry Jasinowski said the assault must not be allowed to trigger a recession. "The national business community must, in addition to helping the victims and repairing the damage, move aggressively to foster confidence in New York and throughout the country that our economy and financial markets remain sound and are able to withstand the challenge," he said.
But theme parks in Florida alone lost an estimated $20 million from early closing, just a fraction of what is likely to be a big impact on tourism across the United States. "We're going to see people not willing to fly. The question will be for how long," said Rich Maladecki, president of the Central Florida Hotel and Lodging Association. "Is this going to be an issue that will take the nation three or four weeks to heal? Or will it continue?"
The US Treasury stressed that the economy was still working. "With some exceptions, finance, commerce and banking systems have worked effectively and continuously," US Deputy Treasury Secretary Ken Dam said in a statement. "Acts of evil will not cripple the markets. Our financial system is, and remains, strong. The American economy is open for business."
The New York Stock Exchange and Nasdaq exchanges alone had a combined average daily turnover of 1.89 billion shares in 1999, with a value for the whole year of $19.9 trillion. The terrorist attacks would be the costliest man-made disaster in US history, the Insurance Information Institute said.
The French insurance magazine Argus des Assurances reported on Wednesday that British insurance giant Lloyds of London expected the global cost of the attacks to be from $20 billion to $40 billion (€22 billion to €44 billion).
But Sherman Katz, a scholar at the Center for Strategic and International Studies, said the events "may accelerate the advent of an economic slowdown (but) there may be a silver lining — they might spur Congress to give the president trade promotion authority" that would help rekindle global growth. ― (AFP, Washington)
by Pascal Reynard
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)
