THE TIMES POLL : Economic Gains Seen in Wake of Gulf War Victory

After U.S. bombs began bursting over Baghdad in January, one in 10 Americans put off plans to buy cars, houses and other items, dramatizing the link between turmoil in the Middle East and hard times on the home front, according to the Los Angeles Times Poll.

War anxiety was not the only thing inhibiting consumers: Larger numbers cited the state of the economy and their own finances as reasons they have avoided auto showrooms, real estate offices and retail stores in the past three months.

But, now that the Persian Gulf War has ended with a U.S. victory, many Americans expect economic gains to follow, the poll suggests.

“I would assume that with the war over, oil prices down and interest rates still falling, that you’d get a fairly nice (economic) kick back up,” said Michael Drury, an economist with the Boston Co. But, he said cautiously: “We haven’t seen it yet.”

Public expectations may already be on the mend: Seven out of 10 responded that the U.S. economy will improve as a result of America’s victory, although people’s expectations for the job market are guarded.

Almost half of the respondents expect the employment situation nationwide to improve; the same number said such gains are not likely.

“Is the glass half full or half empty?” asks Irwin L. Kellner, chief economist at Manufacturers Hanover in New York. “Now more people are willing to say the glass is half full.”

The new economic findings come at a time when the nation remains in a recession, yet cautious hopes are appearing that the recovery is not far off. Many analysts predict that the slump will peter out by the summer or soon after. Some hints of new economic vitality have started to emerge, including gauges of consumer and business confidence. Yet other signs, such as the latest auto purchase statistics, are downbeat.

The mixed picture is underscored by The Times’ national telephone survey of 1,518 adults conducted March 9 through 11. The poll has a margin of error of plus or minus 3 percentage points.

“On the one hand you’ve got a lot of people telling you they expect an improved economy because of the war’s successful outcome,” Times Poll Director John Brennan said. “But most still think few jobs are available in their own area, and most still think we’re in a recession.”

Indeed, nine out of 10 respondents said the nation is in a slump, with 29% describing it as mild and 21% as serious.

Just how victory in the Gulf War will affect the U.S. economy has been a topic of keen interest to those who are tracking the recession. The intangible of confidence--an attitude that influences important spending decisions by consumers and business executives--plummeted in the first few months after Iraq invaded Kuwait, according to surveys; many experts believe that the crisis pushed the country into a recession.

The onset of fighting further inhibited the economy, the poll suggests. Altogether, one in four Americans said they delayed plans to make a major purchase during the three months before the survey was taken in March. Of those who held off spending, 43% blamed the national economy, 41% cited their personal finances and 38%--or one in 10 Americans--specifically pointed to war jitters.

The poll pointed to homes, cars and appliances as examples of major purchases, although respondents were not limited to those examples. Women and lower- and middle-income people appeared to be somewhat more likely to refrain from such purchases because of the war.

The findings are “consistent with an environment of great uncertainty--and people not buying because of the uncertainty,” Drury said.

The question of public attitudes toward spending money is considered so vital that analysts have been closely monitoring consumer behavior for clues to the length and severity of the recession. The signs have been mixed.

Auto sales dropped during the first 10 days of March, for example, despite many anecdotes about people crowding into auto showrooms after the cease-fire.

“Sales are fine--not tremendous, but fine,” said Jim Dunning, new-car sales manager at Pacific Honda in San Diego. “Right after the war ended, for about a week or so, business was excellent. Now it’s just down to good.”

Similarly, reports of a pickup in home buying have yet to find their way into reliable, national statistics. One tentative sign that consumers are reawakening: U.S. retail sales crept upward in February, marking the first increase in four months, the Commerce Department reported earlier this week.

Although the hints of recovery are preliminary and few, a variety of forces may be setting the stage for improvement within several months, analysts say.

Lower interest rates, for example, have recently brought mortgage payments into the reach of many buyers who otherwise could not afford home loans. Similarly, a decline in oil prices during the course of the Gulf crisis has had the effect of boosting consumer income.

In another positive trend, the threat of inflation has abated in recent months. Some manufacturers also report improving business conditions. Two out of three small manufacturing companies said profits have been steady or improving, a survey of 2,284 firms by the National Assn. of Manufacturers found.

“The combination of lower interest rates, the reduction in oil prices and the resolution of the situation in the Gulf continue, on balance, to suggest an upturn in real activity later this year,” Federal Reserve Chairman Alan Greenspan testified this week before Congress’ Joint Economic Committee.

One optimistic forecaster said the lower inflation, interest rates and oil prices fundamentally improve the economic outlook and are more important than any “feel-good” reaction to peace in the Middle East.

“I’d be much more cautious if the forecast all were based on postwar sentiment,” said Larry J. Kimbell, a senior vice president at the WEFA Group of economic forecasters in Bala-Cynwyd, Pa., who expects the recession to end within three months. “The fundamentals are much better than they were just a few weeks ago.”

Staff writer Amy Harmon in Detroit contributed to this story.

VIEWS ON THE POSTWAR ECONOMY The results are based on 1,518 adults interviewed nationwide March 9 through March 11 by the Los Angeles Times Poll. Comparisons are to earlier Los Angeles Times Polls. Thinking about the next five years, what do you think will be the most important problem facing this country?

Economy: 31%

Environment: 9%

Budget deficit: 8%

Unemployment: 8%

Drugs: 7%

Mideast: 4%

Inflation: 2%

Crime: 2%

Do you think we are in an economic recession, or not? If yes, do you think we are in a mild recession, or a moderate recession, or a serious recession?

NOW FEB.,1991 Mild recession 29% 28% Moderate recession 38% 33% Serious recession 21% 23% No recession 9% 13% Don’t know 3% 3%

Did your reactions to the war against Iraq figure at all in your decision to postpone making your purchase, or not?

Postponed because of war: 9%

Postponed for other reasons: 15%

Did not postpone: 76%

All things considered, would you say there are many jobs available in your area, or about the normal amount, or few jobs available?

NOW AUG.,1982 Many jobs 6% 8% Normal amount 30% 16% Few jobs 63% 74% Don’t know 1% 2%

How about twelve months from now? Do you think there will be more jobs available in your area, or about the same amount, or fewer jobs available?

NOW AUG.,1982 More jobs 35% 31% Same amount 37% 32% Fewer jobs 22% 26% Don’t know 6% 11%

Source: Los Angeles Times Poll