Is There Room For Optimism

Some experts are nonetheless cautiously optimistic. According to Bank One Chicago economist Diane Swonk, 19 percent of U.S. manufacturers report that inventories have grown “too tight”–setting the stage for new purchases. The Bush administration beefed up its stimulus package even more last week, and the Federal Reserve cut rates by half a point. As a result, some economists have dropped the “R” word (recession), in fact, and are talking “V’s”–as in a sharp economic upswing by spring or summer.

The most hopeful economists are anticipating what they call “comfort points” in the economic hereafter. The currency markets have remained stable, for one thing. A stable dollar gives more room for central bankers to cut interest rates without worrying about inflation. Oil prices have not spiked up. The government plan to pump up to $75 billion into the U.S. economy prompted a mini-rally on the Nasdaq. “There is not a breakdown in the world economic order,” says Joe Rooney, global strategist for Lehman Brothers in London.

In fact, some advisers counsel their big corporate customers to sit tight. BMW says it has made no changes in its six-year plan. Enough time has passed, argues Fritz Kroger, vice president of consultants AT Kearney in Berlin, to appreciate that Washington did not overreact with war games that provoke more trouble. “I tell my clients to go back to business as usual,” he says. Still, the economy depends on confidence. And with U.S. troops and military hardware converging on the Middle East, it’s easy to be a pessimist.