As severe and devastating as the September 11th terrorist attacks on New York and Washington are, financial information service company Standard & Poor’s says they will not stop the U.S. economy or collapse the U.S. financial markets. Even though Standard & Poor’s says a short and moderate recession in the U.S. appears likely, it is positive news for both the manufacturing and carrier sectors of the trucking industry, which have seen tough financial times over the past year.

Standard & Poor’s says the initial response in financial markets is likely to be a flight to safety and a sharp fall in prices of a wide range of securities, currencies and commodities; this is a normal pattern in markets in times of stress. Reports from European and Asian markets, the foreign exchange markets and the U.S. bond markets show some stability and a rebound from the worst levels seen immediately after the attacks.

"While some pause in consumer spending and business investment is likely, the efforts of all levels of governments to return to normality and response of people and officials in New York and Washington strongly suggest that economic effects will be limited duration and scope," said David M. Blitzer, managing director and chief investment strategist for Standard & Poor's. "The largest factor in the economy's recent weakness was weak investment spending after the 1990's technology boom; consumers have been a positive factor in the economy."

Over the next several weeks, Blitzer said to expect the U.S. equity markets to establish a trading range close to the levels markets closed at on Monday, September 10. The big question facing the economy, he said, is consumer and business confidence. Standard & Poor’s expects modest declines in GDP of ½ to 1% in the third and fourth quarters of 2001 with a recovery beginning in the first quarter of 2002.

"The response and the coming together we have seen among the people of New York, Washington and elsewhere in the country together with the cooperation among all levels of government is a good leading indicator for the future of the economy,” Blitzer said. “One concern in recent weeks was that Congressional arguments over deficits and Social Security funds would curtail government spending or tax programs that could, if rapidly enacted, support the economy.”

Blitzer said one result of the tragedies will be a redoubled effort to make all necessary government resources available immediately. A budget deficit in fiscal 2002, which begins October 1, is more likely, but he said this is the right policy for a sluggish economy which is growing at less than its potential.

Clifford Griep, chief credit officer for Standard & Poor's Credit Market Services, says the U.S. financial system is stable in the wake of recent events because liquidity is ample, and the creditworthiness of major financial institutions is unimpaired.

“Market disruptions and the consequent potential for price dislocation and settlement problems has increased risk, but within manageable levels,” Griep said.

Further interest rate reductions by the Federal Reserve Board, which may take place as early next week, should help mitigate market disruption and support financial sector creditworthiness, in addition to mitigating the liquidity stress occasioned by an expected market shift to a more conservative investment posture, Griep said.

“In addition, we believe that the impact on the global financial system will be minimal,” Griep said.