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American Morning

Revised GDP Figures in Layman's Terms

Aired August 29, 2001 - 09:18   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LEON HARRIS, CNN ANCHOR: Economists who make their living analyzing numbers like the gross domestic product figures released this morning, but for many of us talk about the GDP and other economic jargon -- well, it sound like some kind of alphabet soup.

Well, joining us to explain exactly what all this means for you and your finances is Julia Boorstin. She is a reporter with "Fortune" magazine, and, as you can see there, she is in our New York bureau.

Good morning. How are you?

JULIA BOORSTIN, "FORTUNE" MAGAZINE: Good morning, Leon. How are you doing?

HARRIS: No too bad. Not too bad.

First of all, you know, we kind of got an explainer about what's happened with the GDP numbers and what exactly it makes up. But is there any connection between all that and the consumer at the end?

BOORSTIN: Well, I think consumers spending still hasn't lagged, and that's what is holding up domestic spending. What the GDP numbers reflect is a real slowdown in business spending. And though, quantitatively, the 0.2 percent that was announced today is not much larger than the 0 percent that economists expected, psychologically it is really important for the consumer to see that we haven't dipped into the negative numbers that would indicate that we're falling into a recession.

HARRIS: Yes. Now in the end it will affect the consumers to the degree that it affects Wall Street, correct? I mean, Wall Street's going to react to it today somehow, some way?

BOORSTIN: Yes, Wall Street will react today. And though the number have been revised down they are better than expected. So it shouldn't negatively affect Wall Street, though Wall Street has been rather skeptical lately of the various numbers that have come in. So we could potentially see a little boost because the numbers are higher than expected and haven't fallen into negative range.

HARRIS: Yes, and that's the whole thing. I mean, it seems like when we think we know exactly what's going to happen on Wall Street, because the numbers don't look so bad in one area, things go haywire in a totally different direction. You want to hazard a guess on what you think might happen today?

BOORSTIN: I'm sorry?

HARRIS: You want to hazard a guess on what you think might happen today?

BOORSTIN: Well, I think that we're not going to see anything drastic in either direction. I think that if the numbers had been negative, if the GDP growth had been negative, then we would have seen a drastic hit on Wall Street because, just psychologically, seeing negative numbers would be very, very negative.

But I think that because it's just sort of barely teetering in positive growth that we could see a little boost and sort of a sigh of relief, but there wouldn't be any significant huge boost to the market today.

But I think that investors will be relieved that we haven't fallen into recession.

HARRIS: OK. So what about the bottom? Do you think we've seen it, we're close to it, what?

BOORSTIN: Well, it's very hard to predict that. I mean, our growth still is slowing and this is the lowest growth that we've seen since the first quarter of 1993. So to have the lowest growth in eight years, and the last time we had that growth was when we were coming out of a recession, is not a positive sign.

I think right now we can only wait. I think the Bush administration is hoping that in the third and fourth quarter of this year, because the multiple interest rate cuts and also the tax rebates, that we will see a turnaround.

But many economists are still skeptical.

HARRIS: I think that's a safe bet, Julia, that the White House is hoping for better times.

Julia Boorstin, thanks much. We'll talk with you some other time.

BOORSTIN: Thank you very much.

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