NYC-WTC_000195490

NYC 9/11 Public Portal Document

Domestic Product) that occurred in REAL GDP AND REAL CONSUMPTION SPENDING Q4 2000, down to just 1.0 percent Economic growth stalls In the first part of 2001, but consumsr spending growth, will continue jn the first half ehould prevent the economy from falling Into a recession. Growth In Real GDP picks up gradually to about trend, 31/2-4 percent, etarting In 2Q02. of 2001, with GDP flit or barely up. Growth picks up, only moderately, to I onetut just above two percent, in the latter is U.S. Real CDP 1 ■ part of this year as the recent 8 Real Consumption Spending | । inventory correction runs its course —m •

and the effects of the Fed's rate cuts on the econoiny beconte more pronounced. Growth is expected to resume at a trend rate of about 3'/a percent in 2002 and then continues to J ST pick up slightly to 4 percent in 2003- 2005.

This forecast of real GDP growth relies heavily on consumption spending to sustain the/economy. Growth; in consumption is expected to hold up at 3.1 percent in 2001, down 0 98 2

ii 99 00 '01 02 03 94 05

S significantly from the five percent NON-RESIDENTIAL FIXED INVESTMENT ■ rate of 1998-2000, but sufficient to AND CORPORATE PROFITS avert a recession. As employment Investment spending eomee to s halt In 2001, ae businaeaee growth resumes in the outyears, remain burdened by oyar-eapacliy and sagging corporate profita. consumption spending picks up, to 25. r—----- --------- —________ __ _ _______ __ about four percent in 200272005; The 20 ________ ________ effect of the sharp drop in the stock 1 I B market and the considerable amount of debt that consumers have 15 ■ Fixed Inyestmenl, Nan-Residential Corporate Profits ( accumulated over the last years (with 110 Bi SS! -- — t-r- liilllilliO .7. consumer installment debt rising to / '| Sy I^IIUI inmiiiinimii over twehty percent of disposable 5 _j

income) i^ill no doubt curb ' 1 consumption spending. So far, 4 0 |r,

' however, low unemployment and ' -5 BZ_____________ inflation have contirtued to sustain V ’ ■ sli consumer spending.

Op the business side, firms are expected to cut back bn capital -10

-15 98 99 00 01 02 l 03 04 05 _ spending purchases after years of double-digit growth rates which in some instances have resulted in over-capacity. In fact, non-residential fixed investment has increased from 10 percent of overall GDP in 1993 to almost 15 percent in 2000. With corporate profits sagging (profits drop six percent in 2001), growth in non-residential fixed investment falls to only 3.2 percent in 2001. In 2002-2005 investment picks up gradually, with growth rising to around six percent on average per year. This is down considerably from the 12 percent rate in 1997-2000, but is in (ine with corporate profits which also average

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