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Katrina, high nergy prices hit pocketbooks
(AP)
Updated: 2005-09-30 22:03
Adding to the decline in consumer spending in August was a falloff in sales
of new cars, which plunged during the month after huge gains in July that
reflected attractive incentive offers.
Before the hurricanes hit and gasoline prices surged above $3 per gallon for
a time, analysts had been predicting that economic growth in the current quarter
would come in at a sizzling 4 percent-plus level. Now analysts have shaved those
forecasts to around 3 percent to reflect the lost jobs and lowered spending
caused by the hurricanes.
Some economists believe that growth in the fourth quarter will dip even lower
to around 2.8 percent as the country continues to struggle with the fallout from
the hurricanes and higher energy bills.
But the Congressional Budget Office said Thursday it believed the impact from
Katrina and Rita probably would be "more modest" than the CBO estimated on Sept.
6 for just Katrina.
The CBO said it now believes the hurricanes will cut growth by one-half of a
percentage point in the second half of this year, with most of that damage in
the July through September period. By the final three months of 2005, spending
on rebuilding will help to offset the economic damage, according to the CBO.
In its earlier report, the CBO said the impact on GDP growth probably would
be from one-half of a percentage point to a full percentage point over the
second half of the year.
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