President Bill Clinton went so far in mid-September as to suggest that high oil prices might trigger a recession, at least somewhere in the world. He subsequently added that a recession was not very likely in the United States. That clarification was important, not just to avoid torpedoing the presidential campaign of Vice President Al Gore, but to keep up positive feelings about the economy among American consumers. Many economists maintain that the psychological effect of rising oil prices, leading to cutbacks in consumer spending, can pose as great a threat to the economy as the rise in oil prices itself. So far consumer confidence has stood up well despite the signs of slackening growth and the prospect of heavy increases in fuel bills this winter.
Some observers even contest whether there are signs of a slowdown.
The evidence can be confusing. Two widely watched monthly surveys published early this month by the National Association of Purchasing Management appeared to contradict one another. One showed that manufacturing activity shrank in August, the first such drop since January 1999. The other showed a surge of increased activity in the service sector in the same period. Further evidence to support claims that growth is not yet slackening very much came when the Labor Department revised its second-quarter figures upward to show a remarkable 5.7 percent increase in the growth of nonfarm productivity.