Leaders disagree on impact of scandals, terrorism. (Midyear 2002: What's Ahead?).

YOUR view of how the economy has shaped up since the events of Sept. 11 and the dawn of a new year often depends on which economic forecaster you listen to. Accounting scandals, the threat -- however real -- of terrorist attacks, and the dot-com hangover of 2000 have sent Wall Street into a tailspin. Investors who didn't lose their retirement funds in the Enron debacle have certainly watched their nest eggs shrivel as stocks have fallen on declining consumer confidence in the market. And there is scant indication that the market will stabilize anytime soon.

And yet, because interest rates and inflation remain low, consumers continue to pump revenue into the retail and housing sectors, indicating what many experts predicted early on: that the recession of 2001, however long it lasted, would not be as severe as recessions in the past.

In addition, the value of a weakened U.S. dollar overseas has worked to revive the manufacturing sector, pointing to future growth for export markets, a positive sign for many Valley industries.

Still, economists warn that continued revelations of corporate shenanigans could deflate consumer confidence going forward.

So, has the economic picture turned out to be as bleak as many predicted 10 months ago? Where is the economy headed from here, given all we've been through and all we still don't know? And, most importantly, what sectors of the Valley economy stand to benefit from the defense buildup and the softening of the U.S. dollar?

Politics reporter Jacqueline Fox recently put those questions to four prominent Valley business and economic leaders. For the most part, their confidence in the economy mirrors that of consumers and their predictions going forward remain generally optimistic.

Jacqueline Fox

There is debate over how deeply the events of Sept. 11, the weakened economy and corporate scandals have shaken consumer confidence and the long-term impact they will have on the economy. What have these factors meant to the San Fernando Valley economy?

Ackerman: Actually, I am amazed these major events haven't shaken consumer confidence any more than they have! That speaks highly of the resiliency of the economy and the resolve of Americans. I believe we will continue to move forward with consumer spending increasing back to pre-9/11 levels. As long as we don't suffer more economic downturns that start resulting in massive layoffs, our recovery will be fine.

Barragan: The ongoing revelations of corporate fraud and malfeasance have done more than anything else to shake consumer and investor confidence. In the aftermath of the dot-corn crash, revelations of blue-chip companies like Xerox Corp. have shown them to have over-inflated sales and profitability, striking deep at the heart of the economy. I expect that consumers and investors will be even more cautious in making buying and investing decisions as they wait for the next shoe to drop.

Kyser: We were certainly hit hard in the initial days just after the attacks. Hotel occupancy rates dipped dramatically and, of course, the airlines suffered huge loses. Now, in the wake of the Enron scandal I think consumers have been put off by the stock market and are looking again to see if maybe their homes, if they own one, aren't a better investment right now than stocks. So you have a consumer that actually appears to be somewhat dauntless. They are seeking out alternative forms of investment, but they are at the same time continuing to show high levels of confidence in the economy.

Powers: I have the utmost confidence in the strength and will of the American business community and the American consumer. Our process sometimes benefit in the long term from horrible events like this because we learn how we can become stronger from them and thus make our country better.

With the weakening of the dollar also comes a bright side: the manufacturing sector appears to finally be rebounding. What kind of impact will that have on Valley businesses?

Ackerman: Manufacturing continues to be one of the leading industry clusters in the Valley. We have not seen the job loss that some other areas have. In fact, we are seeing mild expansions due to the increase in demand. The Valley really has held up much better than some of our surrounding communities, and I see no reason for this to change.

Barragan: We are seeing signs o growth as the defense industry builds up and new security investments begin t reach local manufacturers. In addition, there continues to be some growth in bio- medical technologies and device manufacturing. We do expect to see some jo growth in defense-related metal and bio-medical manufacturing. Unfortunately, there may continue to be stagnant consumer product sales and tightening of consumer and business credit.

Kyser: The weakening dollar is ver good news for any exporter, not just the manufacturing sector, but also the entertainment industry because they have bee hurt by the strength of the dollar over the Canadian dollar. I think this will continue and it will bode well for the production industry because, when the price is right, in the end, everyone likes to sleep in their own bed.

Powers: Valley business is a large component of the manufacturing segment of our economy in California. In fact, the San Fernando Valley houses a large percentage of California's industrial manufacturing space, therefore, it's only logical the Valley will benefit from this economic turn of events.

Consumers appear to be shrugging off a fragile economy, borrowing heavily and offering to pay more for houses than the market can support. What's the explanation and could there be a backlash?

Ackerman: The explanation is quite simple. We have far more demand than we do supply. I don't see a backlash so much as I see a leveling off and a possible small slide back. We are already starting to see that appraisals are not coming in high enough to support the prices being paid. That will tend to start curbing the price jumps. As long as the economic recovery continues and we don't lapse into a major downturn, people who need housing will continue to pay a premium for what they want.

Barragan: Everybody is fleeing the stock market in the wake of corporate scandals and international uncertainty. Real estate is perceived as the only safe investment with a reasonable return. Consumers are investing excess cash into residential and commercial real estate at an alarming rate. Higher prices are no longer a reflection of value but of too much cash looking for investment. Limited supply and continued demand are pushing prices higher. Lower interest rates are pushing home dwellers into being first-time homebuyers. We expect to see stabilization in prices by the end of the year and some softening in values early next year. With a continued lack of housing construction, limited supply will keep prices higher.

Kyser: You'd have to look at the people who still have jobs, and we really haven't lost that many in the local economy. But inflation is at a very low, low level and this gives them the confidence to continue to shop. As far as housing, we aren't building nearly enough houses, so if you find what you want, you've got to go for it. In addition, the big auto dealers are dangling those zero-percent loans before everyone's eyes, keeping that market strong.

Regarding a backlash, it depends if something happens that could scare the consumer, like a major Valley company announces layoffs or we have another terrorist attack. But I think we have to look at this thing and recognize that there is a lot of positive movement going on that we aren't giving the economy enough credit for. However, if the Valley does break away, there could be separation pangs due to uncertainty, because consumers and manufacturers hate uncertainty.

Powers: The explanation is supply and demand. There are more people and more people looking for good housing and less good housing available. The backlash is we have to provide more affordable housing to the many people who are out there looking for it. That is a huge challenge in view of the fact that our infrastructure has been ignored for more than 30 years in particular with regard to the traffic infrastructure and we need to solve that problem at the same time.