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America's New War: Will Consumers Resume Spending

Aired September 24, 2001 - 05:46   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL LIN, CNN ANCHOR: Maybe this is just a sign of good old- fashioned American optimism but despite a possibility of a long and difficult war against terrorism, many Americans are confident the U.S. economy will in fact bounce back. In a new CNN-USA Today Gallup Poll, 91 percent of those polled say they are confident the U.S. economy will be prosperous in the long term.

Of course in times of uncertainty, confidence in the economy is like a yo-yo, it goes up and down, but some say these uncertain times might actually help the U.S. economy.

(BEGIN VIDEO CLIP)

ROGER ALTMAN, FORMER DEP. TREASURY SECRETARY: Our economy is enormous, nine trillion plus, and the impact of this shift to a wartime priority is going to be pretty small in the early going whether that's airport security or outright military spending and I don't think it's going to have a big effect. But there will be some fiscal stimulus provided by that spending and that's all to the good since we're in a weak situation now.

(END VIDEO CLIP)

LEON HARRIS: So just where is the economy headed in the coming weeks, will we go into recession or are we already there? As CNNfn's Allan Chernoff explains this morning, the answers may depend on you.

(BEGIN VIDEOTAPE)

ALLAN CHERNOFF, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): Potamkin Buick and Chevrolet in midtown Manhattan says vehicles are selling again as low financing rates lure shoppers.

PHILIP LOMBARDO, POTAMKIN SALES MANAGER: People have been showing up again this week as opposed to last week when there was a problem getting in and out of the city and because of the disaster that happened.

CHERNOFF: It is the critical question facing the economy now: to what degree will consumers resume spending, especially on big ticket items like cars?

UNIDENTIFIED FEMALE: I'm still a little anxious about what's happened. I think I'm still suffering from some posttraumatic stress. CHERNOFF: Given the public's concerns about security, declines in the stock market and rising layoffs, no one can know for sure.

ROBERT HORMATS, GOLDMAN SACHS INTERNATIONAL: It's awfully hard to predict how severe the damage to the economy will be because of the terrorist acts. The economy was weakening even before those terrorist acts. It will be considerably weaker as a result of them.

CHERNOFF: Many forecasters do expect a recession. And for some industries, it can already be labeled a virtual depression. Airlines flying near empty planes, slashing schedules and awaiting a $15 billion government bailout package. U.S. carriers have announced 80,000 layoffs since the attacks. In the next few days, Delta plans thousands more. Hotels have seen occupancy rates sink.

J.W. MARRIOTT, MARRIOTT HOTEL GROUP: It's very tough, we rely tremendously on air travel and, as you know, air travel is way down and so we're going to have a very tough September.

CHERNOFF: Aircraft maker Boeing is suffering order cancellations and insurance companies are facing claims in the billions of dollars, yet some industries stand to thrive -- military contractors and security services. Then there are companies whose sales tend to hold up no matter what the economy is doing -- supermarkets, food and drug manufacturers as well as makers of medical products and the hospitals they supply.

(on camera): Increased federal spending and lowered interest rates from the Federal Reserve should help businesses, but most important of all to the future of the economy is the degree to which Americans return to one of their favorite pastimes, shopping.

Allan Chernoff, CNN Financial News, New York.

(END VIDEOTAPE)

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