HONG KONG (AFX-ASIA) - The US economy is likely to improve over the rest of this year, although risks of a sharp slowdown in consumption, volatile energy prices and a deteriorating international environment still cloud the outlook, said Michaeil Moskow, president of the Federal Reserve Bank of Chicago.
Moskow told the Financial Times in an interview that inflation appears to be "contained" and personal income looks "pretty good" but most reports in his Chicago region indicate that manufacturing is "bumping along the bottom."
In terms of the near term prospects for the economy, Moskow said: "I don't really think the outlook has changed in the last month and between May and June it had not changed significantly." At the same time, the latest PPI figures released Friday confirm the benign trend in inflation, he said.
"If you look at the numbers you'd have to say inflation is contained. The producer price index was another positive sign. We've been operating below potential for a year now so that has to relieve quite a bit of any inflationary pressures that were building up prior to that," he said.
"Personal income looks pretty good. It's not a guaranteed measure of how consumer spending is going to perform but certainly it's moving up quite well and that's a positive sign."
Moskow said the regional economy of the Chicago Fed area had been among the first to experience the sharp slowdown that began a year ago because of the preponderance of manufacturing in the area. "As I talk to people in manufacturing, I'd say the majority would say we're bumping along the bottom. It's not getting any worse but it's not getting any better. A small minority would say things are still deteriorating."
Construction, especially residential construction, remains strong but business services have slipped a little while the district has also suffered from the problems in the high technology sector. As for the international outlook, it remains cloudy with weakness in many parts of the world while it is hard to gauge how much impact the strong dollar is having on US industry.
Moskow said the strength of the US currency is a reflection of the abiding political stability of the US and the continuing strong outlook for US productivity.