State gives downturn the slip

Spending remains robust, as do home sales, job outlook

U.S. trends muted here

Further slowdown could reverse state's fortunes

March 18, 2001|By William Patalon III | William Patalon III,SUN STAFF

Despite the many signs of an economic slowdown - the bear market in stocks, the layoff announcements that come almost daily and the slide in consumer confidence - Bruce and Sheridan Herd right now see no reason to prune their spending.

The couple was at Towson Town Center last week, where Sheridan Herd, 58, was getting several of her rings repaired while her husband, Bruce, 62, was picking up a few jazz CDs from the Sam Goody store.

"The economy's slowing, but we're still going pretty strong," said Bruce Herd, a timekeeper for the International Longshoremen's Association in Baltimore. "We keep on buying - we're not saving for anything."

With that sentiment, the Herds may well have more in common with consumers in Maryland then they do with Americans in other parts of the country. Since the beginning of this year, the increasing frequency of worrisome economic news has evolved into a drumbeat of despair that's being heard from Wall Street to Main Street. In fact, the sometimes-contradictory reports on the economy have spawned uncertainty and sparked stock-market gyrations so extreme that the term "March Madness" could end up referring to something besides the college basketball tournament that got under way last week.

Nationwide, the travails of both the stock market and the economy have become water-cooler topics. Consumer confidence has plunged and consumer spending has dropped - a potential one-two knockout in an economy that has historically derived two-thirds of its punching power from consumer spending.

But in Maryland, spending appears to be stronger than it is elsewhere in the country, largely because of the cushion the strong federal government presence provides, and the high wages generated by thousands of newly minted technology sector jobs. Sales tax receipts are up, the Baltimore-area housing market remains healthy, and affluent consumers seem still willing to lay out big bucks for such luxury goods as boats and jewelry.

Some caution may be warranted: The national slowdown's sudden onset surprised many economists, meaning the state's economy could see its fortunes shift just as quickly. For now, however, Maryland continues to enjoy strong spending.

"During the first two months of the year, while retail consumer spending has been moving ahead at a very slow place nationally, it has been jumping ahead in Baltimore and in Maryland," said William F. Ford, senior economic adviser for TeleCheck Services Inc., the check acceptance company and subsidiary of First Data Corp.

"The number of checks passing through the thousands of TeleCheck check acceptance terminals in Maryland has been advancing at two to three times the national rate of growth," Herd added.

After a decade-long, record-run of growth, the U.S. economy appears to be slowing drastically, although contradictory signals continue to surface.

Consider, for instance, the outlook for new jobs. A Labor Department report last week showed that the economy added twice as many jobs as analysts were expecting. At the same time, however, bellwether companies such as Intel Corp., Motorola Inc. and Cisco Systems Inc. are announcing plans to fire thousands of workers, hoping that such draconian measures will bring costs down to help boost sagging profits.

Thanks to such contradictions, just where the economy goes from here remains a puzzle. The uncertainty that puzzle creates has contributed to the erosion in consumer confidence - which has fallen for five straight months and is at its lowest ebb since June 1996, according to a widely followed survey done by the Conference Board.

The sell-off in stocks is another reason consumer confidence has gone flat. The net worth of U.S. households dropped by 2 percent last year, the first such decline in 55 years. That's no doubt part of the reason that retail sales tailed off in February after a strong January, stinging U.S. retailers, said a report released last week. The report said that sales at the country's biggest chains advanced at a 2.6 percent rate in February, which was well below the 6 percent pace in February 2000, according to the Bank of Tokyo-Mitsubishi.

While Maryland hasn't been immune to these powerful economic forces, it doesn't seem to be suffering as much as deeply afflicted states in the South and Midwest, economists say.

For instance, consider the consumer sales tax taken in by the state, which is one way to gauge spending by consumers. Compared to the same months the year before, consumer sales tax receipts were up 4 percent in December, 8.4 percent in January and 13.8 percent in February. What makes the increases noteworthy is that the year-before periods were also strong sales months. They came while stock prices were still on the upswing.

Some maryland retailers are reaping the benefit. Upscale jeweler Dahne & Weinstein enjoyed a tremendous February, said Stephen A. Weinstein, president of the company. "We had the best February in our history," he added.

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