Economic Signs Remain Strong

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With his popularity and credibility sinking in public opinion polls, President Bush welcomed some good economic news last week. During the third quarter, the economy expanded at a robust 4.3 percent annual rate. There are new jobs; even the price of gasoline is down. And all of that happened as the economy faced lots of adversity. NPR's Jack Speer examines the current state of the nation's economy and where experts think it's heading.

JACK SPEER reporting:

Consider that the US economy has weathered a run-up in energy prices and two devastating hurricanes that hit the Gulf Coast this year, and yet through all of that, it has continued to grow. And one area where you can see that clearly is in trucking.

Mr. CHRIS LOFGREN (President, Schneider National): Our equipment is moving throughout all of North America. We have about--roughly 12,500 tractors in our fleet.

SPEER: Chris Lofgren is president of Schneider National, one of the nation's largest trucking companies. Around 70 percent of all goods travel by truck, and as a result, he says economists often look at his industry as a good gauge for the broader economy.

Mr. LOFGREN: We're seeing some growth. It isn't skyrocketing by any means, but we're seeing year-over-year growth. And I think those kinds of numbers are indicative of the moderate and steady and stable growth that I think we are seeing in the economy.

SPEER: And steady and stable also seems to be a pretty good way to describe the economy at the moment. Mark Zandi is with Moody's Economy.com. Like many economists, he keeps an eye on trucking, but he has some even more microlevel indicators he likes.

Mr. MARK ZANDI (Economy.com): My favorite is how much titanium dioxide's being produced. That's the chemical that goes into producing white paint which goes on cars and appliances and machine tools. If we're producing a lot of titanium dioxide, we're doing well.

SPEER: And Zandi says at a time there's plenty of white paint being produced, corporate balance sheets these days are awash in another color, black, something he says is also positive for the economy moving forward.

Mr. ZANDI: A principal area of strength is a surging corporate profitability. Businesses are just rolling in cash. And there are exceptions; the airlines, domestic auto manufacturers, some manufacturers that compete head-on with China. But outside of that, businesses are in great financial shape. They have all the wherewithal they need to expand, and they're doing it.

SPEER: Those stronger balance sheets come at a time many companies are starting to add workers. Nariman Behravesh is chief economist at Global Insight. He says the economy's underlying strength has been bolstered by sound policy from the Federal Reserve. Together that has blunted the effect of higher energy prices.

Mr. NARIMAN BEHRAVESH (Global Insight): There are a couple of things going on here. One is the--at this particular period in time, the US economy appears to be extremely resilient and able to sort of shrug off a lot of shocks. The other is, at least going into 2005, even into the middle of 2005, you know, interest rates weren't that high yet.

SPEER: That started to change as the Fed has steadily raised interest rates, something which has had an effect on the housing market and has boosted borrowing costs for millions of people. Most economists aren't expecting the economy to fall into recession anytime soon, but Behravesh says higher interest rates and a cold winter could make consumers feel more pinched.

Mr. BEHRAVESH: A lot of people are worried. They're worried about the high energy prices, which they were seeing every time the went to the gas pump, and they'll probably continue to worry as they see the winter home heating bills, as well. And so in that sense, you know, while they're absorbing these higher costs, they're also worried about them. So you see this disconnect between how they feel about their own finances and how they sort of view the bigger economy.

SPEER: Still, most signs point to solid economic growth in the months ahead. White House economists say they expect for the year the economy will grow at a respectable 3 1/2 percent annual rate. Growth is expected to be only slightly below that next year. Those are pretty good numbers no matter whose economic indicators you favor. Jack Speer, NPR News, Washington.

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