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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