Alan Greenspan, the United States Federal Reserve bank#;s chairman, said yesterday that the recession appeared to be ending but that the recovery was likely to be sluggish, according to the New York Times (NYT).
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The NYT said that analysts and economists took Greenspan#;s forecast to mean that the central bank would leave interest rates unchanged at least until the middle of the year, after cutting rates 11 times last year as the economy slipped into the first recession in a decade.
Testifying before the House Financial Services Committee, Greenspan, as reported by the NYT, touched on several subjects of interest to the motor vehicle industry.
For example, he suggested that he had little sympathy for calls from US steel makers for the imposition of big tariffs on imports, the NYT said.
With business conditions improving, the NYT said, the Fed chairman repeated that he saw less of a need for Congress to pass a package of tax cuts and other measures to help the economy, although he supported the administration’s position that such a package could be helpful should the recovery not continue as expected.
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By GlobalDataGreenspan said there were encouraging signs in the recent data, including a stronger-than- expected report yesterday on sales of durable goods that included motor vehicles, the NYT said.
The newspaper said that the US government reported that orders for durable goods in January rose 2.6 percent, well above the 1.5 percent analysts had expected.
But, according to the NYT, Greenspan said the development helping the economy most right now — the gradual completion of a year-long effort by companies to reduce inventories of excess supplies and unsold goods — would be temporary. It remained unclear, he added, whether other forces that typically power an economy out of recession would occur this time.
The NYT said that economic recoveries are usually marked by a surge in consumer spending. But the newspaper cited Greenspan saying that during this recession consumer spending held up remarkably well and was unlikely to increase at a robust pace, especially because upper-income households were still feeling the pinch of stock market losses.
There was no assurance that businesses would again start spending heavily on capital equipment like new factories, computer systems and telecommunications equipment, the NYT said. A high level of capital spending was a main reason for the economic boom of the late 1990s, the newspaper added.
The NYT said that Greenspan forecast the US economy would grow at a 2.5 percent to 3 percent annual rate this year, below what most economists consider to be the rate at which inflation inevitably begins creeping up.
