Military

DATE=10/31/01

TYPE=CORRESPONDENT REPORT

TITLE=U-S ECONOMY (L)

NUMBER=2-282492

BYLINE=BARRY WOOD

DATELINE=WASHINGTON

INTERNET=YES

CONTENT=

VOICED AT:

INTRO: The U-S economy contracted in the just completed July-to-September quarter of the year. But V-O-A's Barry Woods reports the decline -- four tenths of one percent -- was less severe than expected.

TEXT: Battered by a year-long slowdown, the economy actually shrank in the third quarter, the first such quarterly decline in eight years. The Commerce Department reported that the gross domestic product -- the nation's output of goods and services -- fell at an annual rate of four-tenths-of-one-percent. Financial markets reacted calmly to the news since many forecasters had anticipated a much bigger one percent decline.

Steven East, chief economist at Friedman Billings, a brokerage firm in Arlington, Virginia, says he has no doubt that after a record ten year advance the U-S economy has entered recession.

/// EAST ACT 1 ///

The layman's definition of recession is two consecutive quarters of negative G-D-P growth. And I think you've already seen one quarter of decline and I think the fourth quarter is probably going to be worse than the third quarter.

/// END ACT ///

The U-S industrial sector has been in recession for a year as industrial output has fallen for 12 consecutive months. The Commerce department figures show that business investment and consumer spending were both weak in the third quarter.

Economist Steven East says he believes the recession will be deep but short.

/// EAST ACT 2 ///

I think the recession could be relatively deep. Consumers have kept the economic boat afloat. Consumer spending is two-thirds of the economy. The trend in consumption is down. Consumers have still continued to spend more each month but the rate of growth is down. And I think with a rising unemployment rate, it is going to be hard for consumers to shoulder the burden of economic growth alone. I don't think the recession is going to be long. My own prediction is that it will be over by March 2002.

/// END ACT ///

Other economists agree. They point to aggressive easing of monetary policy as the Federal Reserve has cut interest rates nine times this year. Emergency government spending and tax cuts to stimulate the economy are working their way through Congress. Altogether the stimulus package should total 100 billion dollars or one percent of G-D-P. (Signed)

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