Economists mull economic cost of US terror strikes

PUBLISHED : Wednesday, 12 September, 2001, 12:00am
UPDATED : Wednesday, 12 September, 2001, 12:00am

Updated at 8.33pm:
Recession in the United States loomed large after Tuesday's terrorist attack as economists expected it to decimate consumer confidence.

Strong consumer sentiment was the only thing holding up the faltering US economy in the first quarter, even though it was already showing signs of weakness in the second quarter.

Economists predicted export-oriented economies like Hong Kong would suffer as international trade and investment further destabilised.

''Last week...we said we didn't think the US was going to have recession, but we thought it was all going to hinge on consumer confidence,'' said Economist Corporate Network regional economist David O'Rear. ''Now consumer confidence has taken a huge hit, so I think it's time to say yes there will be a recession,'' Mr O'Rear said.

''The World Trade Centre had 19 Japanese financial institutions, the top five or six Taiwanese institutions, Sinochem. My God, Morgan Stanley had more than 3000 people there. If these companies have been decapitated, they're not going to be making decisions,'' Mr O'Rear said.

Economist Intelligence Unit chief China economist Ken Davies said from London that if the attack - as well as the high rate of job lay-offs in August - combined to stop consumers spending, the US would not recover this year.

''Yes the markets tanked, but you would expect them to do that temporarily...and yes oil prices spiked, but it's probably too soon to know whether that is an immediate panic reaction or whether it will have long-term impact,'' Mr Davies said.