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Business Chronicle: Falling US stocks, reminder of Great Depression

Things don’t always go as planned! So no one can be sure of a super-sized rally on Wall Street once the uncertainties of war subside.

Maybe that’s what happened in the past. Stocks fell on worries over the Gulf War a decade ago and then started surging soon after the first shots were fired. But the easing of worries over Iraq won’t be enough to spur Wall Street to bounce back. Against a background of depressing economic news, many of the fundamentals that drive the market remain in trouble.

We can see the poor picture. The US economy slowed alarmingly in the final quarter of 2002, growing at an annual rate of just 0.7 percent due to uncertainty caused by talk of war. The preliminary result was below analysts’ expectations of 1 percent growth, after the economy grew by 4 percent in the third quarter. The latest data represents the weakest quarterly growth since the third quarter of 2001. Consumer spending, which accounts for two-thirds of the US economy, rose by 1 percent in the fourth quarter compared with 4.2 percent in the previous one, making it the weakest quarter of consumer spending since the first quarter of 1993. Growth in the US economy is very slow. The employment outlook remains grim. Inflation is inching higher, fueled largely by a big jump in oil prices.

The Dow Jones industrial average, down five percent this year, slipped below the 8000 level again last week. If current trends continue, this would be the fourth straight year of losses, something that hasn’t happened since the first four years of the Great Depression.

So right now there is a weak dollar with consumers less confident about the economy. Business executives are so skittish they won’t invest in their companies’ futures and wary investors are sending stock prices tumbling. This economy has very little maneuvering room left between expansion and recession, and it cannot afford another misstep. n Khair Mikkawi is a financial consultant in Riyadh. He contributed this article to The Star

Amman,03 17 2003
Khair Mikkawi
The Star
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