U.S. businesses see weakness
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October 24, 2001: 9:01 a.m. ET
A survey finds the worst economic conditions since the last recession.
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NEW YORK (CNNmoney) - A new survey of businesses in the United States found the worst economic conditions since the last recession as already weak demand, spending and profits in the third quarter were hurt by the Sept. 11 terrorist attacks.
The National Association for Business Economics, in its latest quarterly survey of 126 U.S. businesses, found demand for goods and services was negative for the first time since the recession of 1990-1991, spending by businesses on capital improvements was the lowest since the survey began in 1982, and profit margins fell for the fifth quarter in a row.
"This survey depicts just about the weakest economic performance and outlook in the 20-year history of the survey," said NABE President Harvey Rosenblum, who also is director of research at the Federal Reserve Bank of Dallas. "It clearly shows the negative impact of the Sept. 11 attack, as economic activity had, on balance, been showing signs of improvement prior to the attack."
Like most economists, 73 percent of the businesses surveyed expect a recession, commonly defined as two consecutive quarters of negative gross domestic product (GDP), in the second half of 2001.
"The only good news in the survey was the near absence of inflationary pressures," Rosenblum said.
With the risk of inflation slight, the Federal Reserve and the U.S. government are free to stimulate the economy in different ways. The Fed has cut its target for short-term interest rates nine times this year in an effort to ease the cost of borrowing and keep consumers spending. President Bush and Congress are hammering out proposals for tax cuts and government spending to encourage consumers and businesses to spend.
But the survey also found that expectations are for an already weak job market to worsen this year, as 14 percent more firms cut jobs than added jobs in the third quarter and 32 percent expect more cuts by the end of the year, compared with only 10 percent that plan to add jobs.
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In a special survey specifically about the impact of the terror attacks on the World Trade Center and the Pentagon, 64 percent of the respondents said they cut sales expectations after the attacks.
Businesses pointed to increased security measures, travel disruptions, increased insurance costs, and worker productivity losses as the major costs or disruptions resulting from the attacks. Still, most of the businesses surveyed thought the attacks' disruptions and cost increases would be temporary.
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