Economic gains still in question

In the midst of pessimistic economic expectations, rising unemployment rates and sluggish capital spending, the government is trying to find ways to boost consumer expenditure and investment in business. Republicans and Democrats are wrangling over the details of the fiscal stimulus package. But since the federal government has a major budget surplus, the stimulus package is expected to be relatively large and would have a huge impact on the economy. Analysts expect the amount of money that the government spends could top $200 billion in 2001.\nConsumer spending and consumers' general economic expectations have further declined in recent weeks.\nRichard Curtin, the director of the Institute for Social Research, a social science research laboratory at the University of Michigan, said on the insititution's Web site, "The majority of consumers still expect bad times in the economy as a whole during the year ahead."\nSixty percent of consumers expect the unemployment rate to increase within a year, according to an October ISR survey. The current unemployment rate is 5.4 percent, up from 4.9 percent in September.\nAccording to the institution, during the last 50 years, there were two occasions when more than 60 percent of consumers expected the unemployment rate to increase during the year ahead. In both cases, the expectation came true with an increase in actual unemployment rates. \nThe overall consumer sentiment index stood at 82.7 in October, compared to 105.8 last year. The consumer expectation index, which analyzes leading economic indicators that measure how people think or feel about the future of the economy and their personal finances, was down 25.1 percent from last year. The two indicators are at their lowest levels since the early 1990s.\nThe Conference Board's consumer confidence index for October stood at 85.5, a 12 percent decrease and a fall from September's 97 points. The index is at its lowest level since 1994. \nLynn Franco, one of the directors of the Conference Board, said on the network's Web site, "The economic outlook is becoming increasingly pessimistic, with consumer sentiment continuing to fall." \nThe main reason for the increasing pessimism is the result of widespread layoffs and rising unemployment. \nThe public's confidence in improving economic conditions is much weaker than a month before. The ISR survey's report reveals, "While consumers expected the pace of growth to improve after the start of 2002, the majority did not anticipate that the pace of growth would be sufficiently strong to restore good times in the economy as a whole." \nA month ago, Bruce Steinberg, the chief economist at Merrill Lynch, said on the Merrill Lynch Web site, "The current combination of fiscal and monetary stimulus is unprecedented. It should an inevitable lead to a very strong rebound in economic growth." \nBut last week he said, "It will be a more muted recovery"