Fed economist sees minimal Asia effect on U.S.
STAMFORD, Conn, Jan 8 (Reuters) - Federal Reserve Bank of New York Senior Economist Rae D. Rosen said on
Thursday that Southeast Asia's financial woes should not greatly hamper U.S. economic growth in 1998.
Rosen told reporters after a speech that New York, New Jersey and Connecticut will be even less affected by Asia than other
regions of the U.S. including the west coast.
''Connecticut and New York are not really driven by exports,'' she said.
''Asia as a whole, including the powerhouses of Japan and China, only account for 22 percent of (U.S.) exports,'' she said.
Rosen said that while U.S. gross domestic product (GDP) growth will likely slow to 2.0-2.5 percent in 1998, ''To say that it's
(because of) Asia is really an oversimplification.''
She said her views on the U.S. economy were personal and did not necessarily reflect official Fed policy or projections.
Rosen said the national economy was "very healthy."
''The state of the economy is far better than anyone would have envisioned two or three years ago,'' said Rosen. ''It's
well-balanced, there's no accumulation of unwanted inventory. The rates of inflation are low, the unemployment rate is low. It's
a very healthy economy today.''
GDP growth of around 2.5 percent this year looked ''very sustainable, given our current supplies of labor and capacity,''
Rosen said.
The slower growth expected in 1998 is due mainly to a slowdown in exports, Rosen said.
''But the slowdown has as its genesis the appreciation of the dollar. The dollar appreciated from June of '96 to June of '97, so
we already had signals that there would be an economic drag due to net exports. Then the Asian problems added to that.''
Asked to comment on concerns over possible U.S. deflation, Rosen said: ''People become concerned about deflation
because they're aware of it in the goods sector. They're aware of what's happening to prices for manufactured items. There is
no doubt that (with) what's happened in terms of world competitiveness, we are seeing pressures to contain prices, and maybe
see prices decline.
''But when you look at how the consumer spends the dollar, it breaks out to about 40 percent goods, and 60 percent
services. So the dominant part of expenditures is the service market, and it's a little bit more difficult to bring international
pressures to bear on (the price) of services.''
She said there was no indication of disinflation or deflation in U.S. service prices.
Rosen said her region -- New York, New Jersey and southwestern Connecticut -- showed ''no sign of slowing'' in 1998. She
gave no specific growth projections.
''Public and private restructurings are mostly over, and services and retail trade are the engines of growth,'' she said.''
Both New York State and Connecticut benefit from ''vibrant'' economies in their downstate regions, she said.
The region has kept inflation in check since 1993, making it easier to attract and retain businesses, Rosen said.
''What's remarkable is that the rate of gain in (personal income) has kept pace with the nation, because we have well-paid,
high-skilled jobs,'' she said.
Connecticut and New Jersey's median household incomes of $42,119 and $47,468 respectively were well above the U.S.
average of $35,492, she said.
She said New York City's burgeoning movie-production industry should have a spillover effect in Connecticut and New
Jersey, creating related jobs such as video editing and other media services. |
