U.S. Economic Engine May Shift Lower Fast Business-Borrowing Rate Appears Troublesome
NEW YORK -- As much as everyone would like to see an endless economic expansion, there are some unmistakable signs that the business cycle may finally be entering its downward phase.</br></br>No, Asia's currency troubles of recent months are not one of them. Most economists figure the cause and effects of the turmoil in the currency markets may have a modest negative impact on the U.S. economy but won't derail the expansion -- now six and a half years old and the third longest on record.</br></br>More troublesome, they say, is that for the first time since the end of the last recession in early 1991, businesses are borrowing faster than consumers. The longer this trend persists, economists believe, the greater the chances for a supply/demand imbalance that leaves too many goods and services for too few buyers.</br></br>"The risk to the economy now is overproduction," of everything from bagels to athletic shoes to sports utility vehicles, says Merrill Lynch & Co. chief investment strategist Charles Clough. He is concerned that the unusually high debt burden consumers are carrying has finally prompted them to rein in spending. And the combination of weak sales and strong factory output spells trouble for the economy, he said.</br></br>And the potential for a glut could increase, says Mr. Clough, if countries in Southeast Asia decide to solve their financial and economic woes by speeding up production and dumping their output in the U.S.