'Full Blown Global Recession
Likely' Following
WTC Catastrophe

WASHINGTON (AFP) - Unprecedented air-borne 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.

The attacks caused billions of dollars in destruction as they demolished the towering symbol of US financial might.

They also led to the total shutdown Tuesday and Wednesday of the US financial markets, which generated 314 billion dollars in revenue for the US economy last year.

Banks remained open, however. And the US Treasury said it would provide liquidity as needed for the financial system.

But analysts said the greatest impact would be on consumer confidence, until now the strongest pillar of the US economy. The US economy 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.

The economy at that time was in better shape, the report said.

"Recently, the economy has been on a high wire act straddling between a recession and anemic growth; the damage to confidence will push us into a recession," the exert added.

"The rest of the world, which has been in a recession, will suffer more."

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".

Richard Curtin, director of the University of Michigan's consumer sentiment survey, agreed that confidence would take a pounding.

"One might expect confidence will plunge much like it did when the Gulf crisis began in August of 1990," he said. "The weakness might be more severe because this impacts Americans more directly, it is on our soil

Not all economists were so gloomy.

"There is always speculation that these disasters have extreme economic consequences, but they rarely do," said University of California professor Edward Leamer.

Securities and Exchange Commission (SEC) chairman Harvey Pitt said in a television interview that he expected the stock markets to reopen Thursday. An SEC official said no final decision had been taken.

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 dollars

The terrorist attacks would be the costliest man-made disaster in US history, the Insurance Information Institute said.

According to the institute, the 1993 World Trade Center bombing caused 510 million dollars in insured losses; the 1995 Oklahoma City bombing resulted in insured losses of 125 million and the Los Angeles riots of 1992 resulted in insured losses of 775 million, the costliest man-made disaster until now.



This Site Served by TheHostPros