US Fed Chairman Says Economy is Growing Stronger

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Last updated at: (Beijing Time) Wednesday, July 17, 2002

US Fed Chairman Says Economy is Growing Stronger

Chairman of the US Federal Reserve Alan Greenspan said Tuesday that the economy is on the road to full recovery but will keep feeling the effects of last year's recession.

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Chairman of the US Federal Reserve Alan Greenspan said Tuesday that the economy is on the road to full recovery but will keep feeling the effects of last year's recession.

Delivering his semiannual report on the economy to the Senate Banking Committee, Greenspan gave a better picture of the economy than he did earlier this year.

He said that the Fed now expected the economy this year to growbetween 3.50 percent and 3.75 percent when measured from the fourth quarter of 2001. That's stronger than the 2.5 percent to 3 percent pace forecast in February.

Greenspan's testimony came as a wave of accounting scandals threaten to cause consumers and businesses to spend and invest less.

Consumers, whose spending accounts for two-thirds of all economic activity, have been holding up despite spotty recovery and sour stock market, Greenspan said.

"Consumers do not appear to have retrenched in the retail markets," he said. "Indeed consumers responded strongly to the newinterest rate incentives of motor vehicle manufacturers this month.Early reports indicate a significant improvement in sales over June."

In contrast, he expressed his worries over the weak business spending. "Financial markets have been notably skittish of late and business managers remain decidedly cautious," he warned.

"Considerable uncertainties -- about the progress of the adjustment of capital spending and the rebound in profitability, about the potential for additional revelations of corporate malfeasance and about possible risks from global political events and terrorism still confront us," Greenspan said.

To restore investor trust shaken by the accounting scandals, Greenspan stressed that CEOs in the US must be held accountable toaccurately report on the financial conditions of their companies and should be penalized for not doing so.

"The effects of the recent difficulties will linger for a bit longer but as they wear off, and absent significant further adverse shocks, the U.S. economy is poised to resume a pattern of sustainable growth," Greenspan said.

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