FOR MORE INFORMATION:Contact Harriet K. Goodheart, 215-204-7476[email protected]
OUT OF THE WOODS? STILL A LOT OF ECONOMIC THORNS UNDERFOOT, TEMPLE UNIVERSITY FINANCE PROFESSOR SAYS
The release of the second quarter GDP shows the slower growth of the U.S. economy is persisting, notes Jonathan Scott, associate professor of finance in Temple University's Fox School of Business and Management.
"The 'growth recession' that began last fall continues," says Scott. "We may not technically be in a recession, but don't tell that to all the people losing their jobs."
Job cuts are likely to continue, he adds. "Business investment has declined for four straight quarters, the first time since the early 1980s, and equipment and software spending continued in a downward spiral. A capital spending recovery, which creates new jobs, may be in the distant future."
Any good news? Not much, says Scott, who spent seven years managing all financial operations at the Federal Home Loan Bank of Dallas from 1984 through 1990.
"With the latest GDP showing no improvement in the economy's slowed growth, there's not much to cheer about.
"For the last year, the U.S economy has grown at a 1.3 percent rate, far below the 3.3 percent average of the past 30 years. Consumer spending slowed down, as did the growth of personal income. Unlike previous slowdowns, consumer spending has been buoying the economy, through spending and housing. But how much longer can spending and new housing (or refinancing) take place if job cuts continue?"
The news from abroad is equally bleak, according to Scott, who notes that imports continued to exceed exports from the first quarter.
"Not much hope for the rest of the world leading us out of the woods."
How about inflation? Here the news is actually good, he points out, with the personal consumption expenditure rate--a favorite of Fed chief Alan Greenspan--up 1.7 percent, compared to 3.2 percent in the first quarter.
"If you are out of a job, however, lower inflation provides little comfort," he adds.
Tax rebate checks may provide some stimulus to the stalled economy, he predicts, unless consumers use it to reduce their rapidly growing debt burden, and business investment will remain on hold until the profit outlook improves and the excess capacity in telecommunications is worked off.
"Overall, it looks like it's probably going to be a long walk, perhaps until early next year, to that clearing at the end of the forest."
Reach Dr. Scott at his office, 215-204-7605, by email at [email protected] or through the Office of News and Media Relations.
hkg-96 ***July 27, 2001
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