Spending surge
As quakes from economic and military quarters rattle the planet, Americans are standing firm, on a bedrock of confidence. The series of seismic jolts from the Far East may be discomfiting to those who love globalization, but not to a point of deep pessimism. In fact, it doesn’t seem to be enough to deter some slap-happy spenders from a holiday credit card binge. A fresh test, consumer confidence for November, occurs Tuesday. Economist Tim O’Neill says that, instead of a downturn, it could show a bounce higher.
“Consumers are shrugging off the Asian flu–don’t look for them to utter as much as a sneeze, for now,” said O’Neill, of Harris Bank and Bank of Montreal. He says pocketbook issues outweigh world turmoil in the minds of Americans, “and the fundamentals are solid. Unemployment is at a 24-year low and income growth is the best since 1989. That argues for Americans to keep on spending.”
HOME SALES
Solid construction
One effect of the Asian crisis is to pull long-term interest rates lower, further stimulating the already-robust housing industry. Tuesday’s report on October existing-home sales could show a further advance, above the 4.32 million unit annual pace a month earlier.
Last week’s report on housing starts showed home construction is running 8.6 percent above the level of a year earlier, confounding expectations of a slowdown. Residential home-building is on track to match 1996’s eight-year summit.
GROWTH RATE
Expansion dragging
A revision of third-quarter gross domestic product, due out Wednesday, should be in line with the 3.5 percent annual growth rate reported a month ago, says Chicago economist Samuel Kahan. But the expansion has begun showing signs of losing its punch, even without factoring in Asia, he says.
“Our barometer of the economy shows it is decelerating,” says Kahan, of A.S.K. Financial Research. “Things are becoming a bit less intense.” He sees fourth-quarter expansion slowing to a 2.5 percent rate, as consumer spending loses momentum. For the full year, though, he says, the economy will grow 3.5 percent, the same as last quarter, “a pretty good number, well above the 3.1 percent average for the years since World War II.”
TAKING STOCK
Street will be quiet
Expect a relatively quiet week for the stock market, as trading shuts down Thursday for Thanksgiving. Also closed that day are government offices, banks and many businesses. In the wake of the holiday, watch for a so-called gobbler rally Friday on Wall Street, usually a sleepy session during which traders work off the effects of holiday overindulgence.
Elsewhere, many workers will take Friday off; the Management Association of Illinois says a survey of 400 Chicago area companies says one-third plan to not only have a long weekend for Thanksgiving but also will give workers a four-day weekend for Christmas, and 10 percent will repeat the extra-long weekend for New Year’s.
