Greenspan gives upbeat assessment of US economy

But freefall continues on NYSE

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

He also told Congress today that corporate executives should be held accountable for the accuracy of statements about the financial condition of their companies.

"The effects of the recent difficulties will linger for a bit longer but as they wear off, and absent significant further adverse shocks, the US economy is poised to resume a pattern of sustainable growth," he told the Senate Banking Committee.

Delivering his semi-annual report on the economy, Mr Greenspan struck a more upbeat and reassuring tone than he had earlier this year.

He said he and his Fed colleagues now expect the economy this year to grow between 3.50 percent and 3.75 percent when measured from the fourth quarter of 2001. That's stronger than the the 2.5 percent to 3 percent pace forecast in February.

But he also sounded a warning, saying: "Financial markets have been notably skittish of late and business managers remain decidedly cautious."

And he said checks and balances on corporate governance that worked well in the past might have been hurt by the go-go mentality of the 1990s that "arguably engendered an outsized increase in opportunities for avarice".

Stocks fell moderately at the beginning of today's trading on Wall Street and carried on falling in the wake of Mr Greenspan's report.

Mr Greenspan said a growing number of economists believe the Fed will keep rates unchanged through the rest of the year. Low interest might motivate consumers to keep spending and businesses to invest, forces that would bolster economic growth.

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

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

Weak stocks have yet to crimp consumer spending because of offsetting boosts from low interest rates, solid appreciation in home values and extra cash from refinancing.

In contrast, business spending has remained weak, he said. Companies whose profits took a hit during the slump are reluctant to make big commitments in hiring and in investment until they are sure the recovery is here to stay.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Are you looking to take your ...

SThree: Trainee Recruitment Consultant

£20000 - £40000 per annum + competitive: SThree: Exciting career prospect for ...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Day In a Page

A groundbreaking study of 'Britain's Atlantis' long buried at the bottom of the North Sea could revolutionise how we see our prehistoric past

Britain's Atlantis

Scientific study beneath North Sea could revolutionise how we see the past
The Queen has 'done and said nothing that anybody will remember,' says Starkey

The Queen has 'done and said nothing that anybody will remember'

David Starkey's assessment
Oliver Sacks said his life has been 'an enormous privilege and adventure'

'An enormous privilege and adventure'

Oliver Sacks writing about his life
'Gibraltar is British, and it is going to stay British forever'

'Gibraltar is British, and it is going to stay British forever'

The Rock's Chief Minister hits back at Spanish government's 'lies'
Britain is still addicted to 'dirty coal'

Britain still addicted to 'dirty' coal

Biggest energy suppliers are more dependent on fossil fuel than a decade ago
Orthorexia nervosa: How becoming obsessed with healthy eating can lead to malnutrition

Orthorexia nervosa

How becoming obsessed with healthy eating can lead to malnutrition
Lady Chatterley is not obscene, says TV director

Lady Chatterley’s Lover

Director Jed Mercurio on why DH Lawrence's novel 'is not an obscene story'
Farmers in tropical forests are training ants to kill off bigger pests

Set a pest to catch a pest

Farmers in tropical forests are training ants to kill off bigger pests
Mexico: A culture that celebrates darkness as an essential part of life

The dark side of Mexico

A culture that celebrates darkness as an essential part of life
Being sexually assaulted was not your fault, Chrissie Hynde. Don't tell other victims it was theirs

Being sexually assaulted was not your fault, Chrissie Hynde

Please don't tell other victims it was theirs
A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935