Economic News
New York State Assembly
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Sheldon Silver
Speaker of the Assembly
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Herman D. Farrell, Jr.
Chairman of the Ways and Means Committee
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Revised Edition
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October 1, 2001
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Edward M. Cupoli, Chief Economist
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View of Major Economic Forecasters on World Trade Center Impact
- A large majority of economists (over 80 percent) surveyed
by both Blue Chip and the National Association for Business
Economics (NABE) expect at least a mild recession. Most of these
economists did not expect a recession before the World Trade
Center attack.
- U. S. Real Gross Domestic Product (GDP) growth forecasts
have declined across-the-board since the World Trade Center
attack. Forecasts for 2001 growth are down close to a half a
percentage point, with declines ranging from 0.3 percent to 0.5
percent from the prior forecast for the same period.
- Forecasts for 2002 GDP growth are also down. Declines range
between 0.8 percent and 1.2 percent compared to the prior
forecast.
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U. S. GDP Growth Forecasts Before and After September 11, 2001
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2001
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2002
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Date of Last Forecast
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Before
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After
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Before
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After
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Blue Chip Consensus
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September 19, 2001
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1.6
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1.1*
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2.7
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--
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NABE Panel
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September 21, 2001
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1.6
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1.2*
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2.7
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1.5*
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DRI-WEFA
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September 19, 2001
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1.5
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1.1
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2.4
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1.6
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Economy.com
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September 26, 2001
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1.5
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1.2
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2.4
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1.4
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* Annual numbers calculated based on quarterly data.
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- In terms of quarterly pattern, the GDP forecasts show general
agreement. Although there will be some drop in GDP growth for the
third quarter of 2001, by far the biggest drop will be in the fourth
quarter of 2001. The impact according to these forecasts will
probably quickly fade in 2002, possibly not lasting beyond the
first quarter. Growth in third quarter 2002 rebounds even higher
than previously anticipated in some forecasts due in part to
increased government spending.
- According to these forecasters, consumption is expected to
be particularly hard hit by the attack due to declining consumer
confidence and therefore decreased spending. Investment is expected
to be hit hard due to uncertainty in the business environment.
- These forecasters anticipate some offsetting economic impacts.
In particular, increased government spending will offset some of the
decreased consumer spending.
- It is important to note that most of the post-WTC economic
forecasts currently available were produced quickly and with limited
information and, therefore, generally assume that any international
military action is resolved quickly (or at least that any major
uncertainty from such action is resolved quickly even if there is
an ongoing "War on Terrorism"). Other assumptions include no
significant impact on oil prices, and that no other major terrorist
attack takes place. According to at least one forecaster, a second
terrorist attack would drive the United States into a long-term
recession.
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