Both consumers and businesses showed signs of caution in their buying last month after Iraq invaded Kuwait and oil prices soared, but there were no sharp cutbacks that signaled a recession, according to two government reports released yesterday.
Several analysts said the latest numbers were consistent with an economy still growing very slowly rather than tumbling into a recession, but they cautioned that it is too early to assess the economic damage from the Middle East situation.
"These numbers are consistent with an economy that is dead in the water," said Samuel Kahan, chief economist at Fuji Securities in Chicago, but one that is not necessarily sinking.
In one report, the Commerce Department said August personal consumption spending dipped 0.1 percent, after adjustment for inflation, because of a decline in purchases of long-lasting goods such as autos. At the same time, real disposable personal income -- essentially inflation adjusted take-home pay -- fell 0.3 percent, primarily because of falling employment.
In the other report, the department said new orders for manufactured goods fell last month by $1 billion, or 0.8 percent, to a level of $127 billion -- about where they have been since April. The decline last month would have been greater except for an increase in defense orders, only a small portion of which likely was related to the military confrontation with Iraq, analysts said.
One reason for concern among analysts is that consumer confidence in the economic outlook dropped significantly immediately after the invasion. The Conference Board, a business research organization in New York, yesterday said its consumer confidence index remained at 84.7 this month after plunging 17 points in August.
In the report on durable goods, the Commerce Department said new orders for non-defense capital goods -- a figure that often is a signal of business investment plans -- fell 11.2 percent last month to $35.4 billion. It was not clear, analysts said, whether businesses were cutting back on spending in that area because of the Middle East situation or in response to the general economic slowdown that began last year.