12 January 2001, 10:11  Clinton's chief economist says U.S. not headed into recession

WASHINGTON (AFX) - The U.S. economy is slowing but is not sinking into a recession, according to President Bill Clinton's chief economist Martin Bailey.
"Clearly growth has slowed more rapidly than we anticipated. But we think this is a temporary phenomenon. We expect to see some modest growth in the fourth quarter and continued modest growth in the first half of 2001" with a strong rebound after that, Bailey told reporters at a press conference prior to the release of the last Clinton Economic Report of the President.
Bailey said the manufacturing sector, primarily auto and steel, have experienced sharp weakness.
But consumer confidence remains at historical highs despite declining over the past two months, he said.
In addition, the latest unemployment report - for December - "remained pretty solid ... and was not a report that should cause anybody to panic or start prematurely talking about recession," he said.
The shift by businesses over the past decade to keep inventories lean should also help the economy pass through a period of slower growth "without getting into the excesses of an inventory cycle," he said.
"An important reason why we do not see the ingredients for a recession are that the fundamentals are strong, inflation remains moderate, (and) trend productivity growth should remain strong," he said.
"None of the things that historically have gotten us into trouble are (present), so we're optimistic about the future," Bailey said. The official White House economic forecast, completed in November, projects a 3.2 pct GDP growth in 2001, on a fourth quarter over fourth quarter basis, down from a 4.1 pct growth rate in 2000. Bailey said the signs of a steadily weakening economy since November would cause the forecast to be lowered to about a 2.7 pct growth rate next year.
According to the White House, the economy will grow at a 3.2 pct rate over the next five years, before declining slightly to a 2.9 pct growth rate by 2011.
The White House projects CPI to fall to a 2.5 pct growth rate in 2001, down from about 3.4 pct rate in 2000. The CPI will steady out at a 2.7 pct rate over the next ten years.
The unemployment rate should slowly rise to a 5.1 pct rate over the same 10 year period, according to the forecast.

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