Greenspan: Economy is Looking Up
WASHINGTON-The American economy is on the uphill swing Federal Reserve Board Chairman Alan Greenspan told the House Financial Services and Senate Banking Committees last week. In his semiannual Monetary Policy Report to Congress, Greenspan reminded the committee that when he testified this spring stocks were rising, oil prices were dropping, and consumer confidence was creeping back up. However, that data did not demonstrate a quickening in the economic recovery at the time and recovery would only come gradually. "In the months since, some of the residual war-related uncertainties have abated further and financial conditions have turned decidedly more accommodative, supported, in part, by the Federal Reserve's commitment to foster sustainable growth and to guard against a substantial further disinflation," Greenspan's written testimony read. "Yields across maturities and risk classes have posted marked declines, which together with improved profits boosted stock prices and household wealth. If the past is any guide, these domestic financial developments, apart from the heavy dose of fiscal stimulus now in train, should bolster economic activity over coming quarters." In fact, he pointed out that industrial production seems to have stabilized following months of declines, consumer spending is holding its own, and housing remains strong. However, employment and aggregate output data is mixed. "A pervasive sense of caution reflecting, in part, the aftermath of corporate governance scandals appears to have left businesses focused on strengthening their balance sheets and, to date, reluctant to ramp up significantly their hiring and spending. Continued global uncertainties and economic weakness abroad, particularly among some of our major trading partners, also have extended the ongoing softness in the demand for U.S. goods and services,' Greenspan told the committee.