Post-Attack Consumer Confidence Critical To U.S. Economy

By John S. McClenahen Nearly a week after the terrorist attacks on New York and Washington it's still too early for a reliable reading of their precise impact on the U.S. economy. But it's clear that consumer confidence will be a major determinant -- perhaps the major determinant -- of the U.S. economy's immediate future. "The question is, if Americans don't feel safe, will they be willing to spend on gifts during the holiday season?" states Jeremy Siegel a finance professor at the University of Pennsylvania's Wharton School of Business in Philadelphia. "That will affect the timing of the recovery." Consumer spending accounts for about two-thirds of all U.S. economic activity. Gail Fosler, senior vice president and chief economist at the Conference Board, a New York-based business research group, believes that how financial and labor markets react over the next several weeks as well as the behavior of gasoline prices, real estate, and "other economic forces that touch peoples' lives" will determine consumers' responses. "We have seen that when critical events are not followed by tangible adverse economic events, consumers' reactions may be quite muted -- as was the case with the October 1987 stock-market crisis," she notes. The Conference Board is slated to release its next Consumer Confidence Index report on Sept. 25. Fosler says it will contain an analysis of consumers' economic confidence derived from surveys taken both before and after the attacks of Sept. 11.

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