As recently as Sept. 10, it seemed the United States was shaking off its slowdown and preparing to lead the global economy back to strong growth. Consumer confidence — though battered — was still high, and a low inflation rate allowed both the federal government and Federal Reserve to take additional steps to promote growth.
That, of course, was before the devastation of Sept. 11.
A U.S. recession is a foregone conclusion at this point. The BBC has reported insurance claims from the disaster could top $30 billion, and Congress has allocated $40 billion in emergency reconstruction aid and a military buildup. So far, 150,000 Manhattan jobs — along with 25 percent of the financial district's office space — are gone, according to the BBC and CNN.
Security concerns hinder economic activity. Additional security precautions kept much of the U.S. airline fleet grounded three days after the attack; the International Air Transport Association estimated damage for the week at more than $10 billion. The $1.3 billion-a-day cross-border trade with Canada and Mexico — America's largest trading partners — was also interrupted as of Sept. 14, leading to manufacturing shutdowns across all three countries as supply routes were disrupted.
A University of Michigan study released Sept. 13 indicated consumer confidence was sliding even before the World Trade Center attack. In the aftermath of the destruction of one of America's cultural icons and financial centers, it is unlikely consumer spending will experience anything but a plunge.
Such a steep drop in confidence is already manifested in the dollar. Three days after the attack, the U.S. dollar was at a six-month low. Though America's underlying economic resiliency and flexibility will prevent a freefall, a moderate devaluation is probably unavoidable. The dollar's decline increases the cost of imports — particularly energy imports — and boosts inflation.
America's military response will further complicate economic matters. The FBI has confirmed that all 18 of the hijacking suspects were of Middle Eastern origin. If the United States chooses a target in the oil-rich region, oil prices are sure to rise sharply. Since energy costs have been the most significant component of America's inflation rate for most of the past year, sharp spikes would retard an American recovery.
These are all things from which the United States can eventually recover. The American economy is large, decentralized, diverse and flexible. But for countries abroad, the message is simple: the United States, for now at least, is unable to spur global growth.
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