Signs of economic rebound growing - East Valley Tribune: Business

Signs of economic rebound growing

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Posted: Tuesday, July 29, 2003 10:07 am | Updated: 1:51 pm, Thu Oct 6, 2011.

WASHINGTON - The economy may at last be pulling out of a three-year slump that began with a bursting stock market bubble and was intensified by recession, terrorist attacks, corporate scandals and war.

Analysts hope that spotty signals of a rebound will intensify in coming weeks into a convincing set of statistics that will show the economy is indeed picking up.

‘‘The economy seems to be shifting into a higher gear and we should start seeing that in the numbers,’’ said Lynn Reaser, chief economist at Banc of America Capital Management.

Some of that better news is expected this week, starting today with the Conference Board’s report on consumer confidence, which Reaser said is likely to rise to its highest level since last fall.

That confidence is expected to get a further boost as Americans start benefiting from a new $330 billion tax cut package passed in May. This month some Americans started seeing fatter paychecks and some families got checks in the mail from a $400 per child increase in the child tax credit.

For the economy to mount a sustainable rebound, Americans will need to turn around and start spending that money. Most economists believe that will happen, giving a good boost to retail sales in coming months.

‘‘We think almost all of the child tax credit payments will get spent,’’ said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis. ‘‘Those checks will be arriving just when families will need the money for back-to-school items.’’

By giving Americans more disposable income, the tax cuts are also expected to help lift consumer confidence. Analysts believe that today’s report on consumer confidence could show a gain to around 85 for June, up from 83.5 in May. That would be the highest reading since last fall and an indication that consumer optimism is rebounding from the jittery days before the Iraq war.

Three members of President Bush’s Cabinet — Treasury Secretary John Snow, Commerce Secretary Don Evans and Labor Secretary Elaine Chao — will take a bus tour through Wisconsin and Minnesota today and Wednesday, meeting with factory workers, small business owners and families to promote the benefits of the new tax cuts.

It is part of the administration’s campaign to blunt Democratic charges that Bush’s three rounds of tax cuts have gone primarily to the wealthy and have done little to boost the economy.

There is no doubt that economy has been lagging, with the gross domestic product, the economy’s total output of goods and services, growing at very anemic rates.

Analysts believe that the GDP in the April-June quarter, which the Commerce Department will report on Thursday, grew at a sluggish rate of 1.8 percent, almost as weak as the 1.4 percent rates turned in during the fourth quarter last year and the first three months of this year.

The sluggish GDP has pushed the unemployment rate to a nine-year high of 6.4 percent in June, as businesses slashed payrolls for a fifth straight month.

Democrats point to the rising unemployment rate and soaring budget deficits as evidence that Bush has bungled the economy.

But many forecasters believe the July unemployment report, to be released Friday, will show that the jobless rate dipped slightly to 6.3 percent last month as businesses stopped cutting jobs and actually added as many as 15,000 workers to their payrolls.

Not all analysts believe the turnaround in employment will be that quick. Some are forecasting the unemployment rate will stay stuck at 6.4 percent and could go as high as 6.6 percent in coming months before the expected faster growth finally convinces businesses it is safe to begin rehiring workers.

David Wyss, chief economist at Standard & Poor’s in New York, said he expected the sub-par GDP growth of the past nine months will be replaced with much stronger growth of around 4 percent in the second half of this year. Many analysts believe that growth in the first half of next year will hit 4.5 percent or better, given the kick expected from the new tax cuts.

Even with growth improving, it will still take time to make much of a dent in unemployment rate. Mark Zandi, chief economist at Economy.com, said the country isn’t likely to see a significant rebound in employment until next year. But the improvement should still come in time to give Bush a boost in his 2004 reelection campaign.

‘‘It is much easier to run a campaign when you are creating jobs than when you are losing them,’’ said Zandi. ‘‘If everything sticks according to script, we should be getting some substantive job growth by next spring.’’

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