Current weather

  • Scattered clouds
  • 54°
    Scattered clouds

Slowdown, but recession???

Posted: Friday, February 02, 2001

NEW YORK (AP) -- You can understand why the latest consumer confidence index plunged like an unopened parachute if you just recap some of the big news over the past few months.

Most of it was negative.

It wasn't just the events, such as the billions of dollars lost on stocks, threats of inflation, warnings about recession, massive layoffs and the zapping of the most extreme high-tech hopes. They were bad enough.

Adding to the impact, however, were the preceding 10 years of easy times when little in the business and economic area wasn't just good -- but very, very good. That left people psychologically vulnerable to bad news.

Was the decline in consumer confidence an overreaction?

Maybe, but for now it can't be determined one way or another. American consumers don't always signal mood changes clearly as indicators suggest. They aren't automatons. They think, they reason, they wait and see.

Uncertainty, if that is what they are expressing, is a well reasoned response to a period of economic flux, and as the economic signals become clearer so will the mind of the American consumer.

It takes time to digest the significance of, for example, the news about massive layoffs among large companies and the realization that despite such things the jobless rate remains at all-time lows.

And if their personally chosen stocks sailed higher than the averages before plunging, it is only understandable that they should begin to doubt themselves, lower their expectations and maybe seek help.

A lot of them have done just that. They didn't simply abandon stocks altogether during the great plunge in averages. Much of their remaining money went into mutual funds, a record $309 billion worth last year.

That was last year, but now The Wall Street Journal reports there are indications the flow of money into mutual funds is continuing, suggesting that even after a horrible 2000 they remain committed to investing.

While the situation still might change, you can hardly read fear into the latest housing statistics. They show a sudden, spectacular rise in home purchases, the biggest monthly gain in more than seven years.

A home, as every buyer and potential buyer is aware, generally represents the biggest financial commitment of a consumer's life, the sort of action nobody is inclined to make if they've given up on the economy.

There is little question that slowdowns hurt, and this slowdown already has inflicted real pain in some heavy industrial centers and high-tech areas. A slowdown, however, is no surprise. It was to be expected.

American producers made an extreme effort for a decade, longer than any other period this century, flooding this country and others with an unprecedented supply of stuff from toys to automobiles, straining all the devices of marketing and advertising to do so.

A slowdown from such a rugged pace means an adjustment, but the plunging consumer confidence index of The Conference Board still leaves it at the same level as in 1996, when such a level was viewed as very high.

The consumer has sent a message, but it isn't necessarily about a recession.

Perhaps it just indicates a reasonable, defensive economic position, an intelligent hiatus to see how low the Fed will push interest rates -- it chopped it another half point on Wednesday -- and if, when and by how much the White House and Congress might cut taxes.



CONTACT US

  • 150 Trading Bay Rd, Kenai, AK 99611
  • Switchboard: 907-283-7551
  • Circulation and Delivery: 907-283-3584
  • Newsroom Fax: 907-283-3299
  • Business Fax: 907-283-3299
  • Accounts Receivable: 907-335-1257
  • View the Staff Directory
  • or Send feedback

ADVERTISING

SUBSCRIBER SERVICES

SOCIAL NETWORKING

MORRIS ALASKA NEWS