Signs of a Shopping Slowdown Are Already On The Horizon
Thursday, September 18, 2008SUSIE GHARIB: Investors may be in a far better mood today, but many economists are downright gloomy. There are fresh concerns now that the turmoil in the financial markets could push the U.S. economy in to a prolonged contraction. But, as Suzanne Pratt reports, experts say America will not go it alone.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: It's becoming increasingly clear that Wall Street's nightmare will spread to Main Street. As the availability of credit declines throughout the economy, experts say spending will slow on everything from new cars to holiday gifts. Economist Josh Feinman says that pullback is already happening.
JOSHUA FEINMAN, CHIEF ECONOMIST, DEUTSCHE ASSET MANAGEMENT: It's tougher to get a loan. It's tougher to get a mortgage. You need more of a down payment, those sorts of things. And that has an impact on -- a direct impact on consumers and business ability to borrow and to spend. There's also a psychological impact.
PRATT: Most experts say the full effect of the credit crisis on the real economy is still a question mark. While many agree we're probably already in a mild recession, some now predict the escalating financial turmoil will result in a longer and deeper one. Economist Brian Fabbri expects GDP growth will be stagnant at best for many quarters.
BRIAN FABBRI, CHIEF ECONOMIST, BNP PARIBAS: We may really be at the crisis point in terms of financial activity in the financial meltdown. But its ramifications to the real economy will take quarters to unravel.
PRATT: And there's growing evidence that the credit crisis is moving far beyond our backyard.
FABBRI: This is not just a U.S. thing anymore. The rest of the advanced country economies in the world are going into recession or are already in recession.
PRATT: That's particularly troubling because exports have been the one area keeping U.S. GDP in positive territory this year, partly a function of real demand, but also aided by the weak dollar. Experts are now concerned America's only bright economic light will soon dim.
FEINMAN: The worry is that, you know, in the not-too-distant future, the impact of slower growth outside the U.S. will wash back onto to U.S. shores and start to weaken U.S. exports.
PRATT: Economists say when the dust settles and the financial crisis is finally over, U.S. households and businesses will have far less debt than they've been in years. And, that's the silver lining to this very dark cloud. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
